Affiliate Marketing Vs. Dropshipping – How to Choose the Best Option

Online businesses are now becoming the norm, and we imagine the industry will only grow further – especially considering recent events, we’re now more aware of how easy it can be to work from home, or better yet work from anywhere.

If you’re looking to start a new online venture, dropshipping and affiliate marketing are two of the most popular and easier ways to enter the market.

KPMG reports that 55% of people search online to get recommendations and read reviews on products before making a purchase, meaning that affiliate marketing is a prime opportunity to share some of that purchase revenue.

For those with big eCommerce dreams, who don’t have a lot of startup funding or infrastructure, dropshipping is a great alternative that can make those dreams become reality.

So which is the best option for budding online entrepreneurs? Read on to find out!

What is Dropshipping?

In very simple terms, dropshipping is a method of selling products online, without having to actually hold any of the stock yourself. As a dropshipper, you’re an online shop owner who markets a product and then purchases it directly from the wholesaler, who then ships it directly to the customer for a pre-arranged fee.

When executed correctly, dropshipping can be a very profitable business as you’re not paying for excess shipping and storage costs.

Advantages of Dropshipping

• There’s minimal monetary risk compared to traditional business startups. You don’t need to stock inventory meaning that if a product doesn’t sell you’re not stuck with it.

• There are low initial startup costs in comparison to starting up a regular eCommerce business.

• Your website can be set up pretty quickly once you’ve sourced your product. Thanks to premium themes they can look just as professional as any other eCommerce site.

• You get to work from anywhere.

Downsides of Dropshipping

• Dropshipping has been popular for years now and so is heavily saturated, especially in certain product niches so you may have to spend a lot of time and effort into finding a product that isn’t too popular yet that will still sell.

• Sourcing a quality yet affordable manufacturer can be difficult. The process of ordering items yourself initially to check the product quality and shipping times can be time-consuming and costly.

• You have little to no control over customer service. You’ll be bearing the brunt of any customer service complaints without much influence on changing future processes.

• Many people are making money from promoting the dream of dropshipping to people on the pretense that it’s a bit of a get rich quick with little effort type scheme, which can be misleading.

Dropshipping Product and Niche Ideas

Although picking a product that you’re passionate about is a great bonus of dropshipping, you also need to be smart about it and pick a profitable niche that isn’t too oversaturated. Sometimes you just need a bit of blind luck too; like if you see a big celeb or influencer suddenly wearing your product, you could see a huge surge in sales. This detailed article from Oberlo will help you to understand more about picking the perfect niche. Here are a few great ideas though:

Fashion items – items like those 90s style chokers and small gold chains personalized with your name were a big hit a couple of years ago and dropshippers jumped on this.

Travel trinkets – Who doesn’t love travel?! It’s a pretty broad niche and you could sell anything from luggage tags to passport holders, even suitcases or backpacks.

Personalized items – People like purchasing items that are unique to them, so dropshipping products that can be customized by the buyer is a great niche.

Ideas to Make Dropshipping More Profitable for You.

When done right, dropshipping can be considered more profitable than traditional eCommerce businesses thanks to the low overheads. Nevertheless, my biggest piece of advice for making dropshipping more profitable is to really spend some time researching to find a desirable niche that has low competition and allows a decent markup so you’re boosting your profits.

Putting more effort into the planning stage will pay off later down the line.

Finding a good dropshipping supplier will also help you to be more profitable in the long run as you’ll have fewer returns of your product.

You also need to stay on top of fees. Some wholesalers charge more than others, so shop around for the best deal.

Payment processing is also a huge area where your business can save some cash and up the profits. Dropshipping is an international business and you don’t want to see your profits dwindle due to unnecessary high foreign exchange fees. By using a Wise borderless account, you can exchange currencies at mid-market rates and possess local banking details for 30 countries. Teamed with a processing software like Stripe, you’ll lose very little money on your sales.

If you’re looking for a more in-depth look into what dropshipping is, check out this article.

What is Affiliate Marketing?

Now that we’ve discussed exactly what dropshipping is alongside its advantages and disadvantages, it’s time to talk about affiliate marketing.

Affiliate marketing works on the concept of revenue share. Essentially, companies will pay you for leads you refer to their site if it results in a sale.

For example, you may have a travel blog and write an article on the best backpacks. In the article, you could link out to several products using affiliate links. Then if the reader purchases that product (or usually any other product on that website) within a certain period, the company will send you a percentage of a sale – kind of like a referral fee.

Advantages of Affiliate Marketing

• Affiliate marketing is a pretty simple way for you to monetize an existing content-based site, especially if you’re well established. You just need to create more great content and have a solid keyword strategy.

• Because many businesses have affiliate programs, you can promote products in a niche you’re already knowledgeable and passionate about. There’s usually some kind of affiliate program for everyone and creative ways to cross varying niches.

Downsides of Affiliate Marketing

• Affiliate marketing has become heavily saturated and even the most authoritative websites out there now use it as a revenue stream; think Tech Radar, The Guardian, etc. which makes it very hard to outrank these kinds of sites. They naturally get a lot of links back to them and their page and domain authority usually see them landing on the first page of Google with minimal effort.

• Some niches can be heavily regulated so you need to be careful; like with financial products, for example, you need to be clear you’re not giving financial advice, especially if you’re based in a country like the UK.

Affiliate Marketing Niche Ideas

Just as you do with dropshipping, you need to really put in some effort to find yourself a good niche that’s both profitable and relatively easy to rank for. The time you spend on this stage will definitely affect the outcome of your business endeavor. Affiliate marketing can be done for pretty much any niche, product or service, here are a couple of profitable ones though:

Health and fitness – people care a lot about their health and the product range for this niche is vast. Fashion bloggers could promote gym clothes or food bloggers could promote subscription boxes. You can also just create a niche site specifically designed to talk about a specific product/service.

Money and finance – Finance is a great niche idea because it pays very well and everyone needs financial services at some point in their life. People could be looking for a credit card, a mortgage, or even a loan. Here at Wise, we offer our own affiliate program for those who wish to promote our multi-currency account, you can learn more about that here.

How to Earn More as an Affiliate Marketer

SEO is one of the best ways to earn more as an affiliate marketer. By targeting specific keywords and phrases, you can skyrocket your traffic and begin to earn commissions passively.

Researching your niche is also the key to success, which is why it’s great if you’re already passionate about it or experienced in it because you’ll likely know some insider tips and tricks that others don’t.

Affiliate Marketing vs. Dropshipping – Which One to Choose

So, with everything in mind we’ve discussed today, which is the better option? Affiliate marketing or dropshipping? Let’s consider the factors…

What Skills and Resources Do You Need for Both?

Becoming either a dropshipper or an affiliate marketer requires some skillset, but the great thing is that there’s a wealth of information available online to help you develop those skills and once you do, you’ll have something transferable that could help you with other online side ventures too. Some of the skills you need to dropship are also skills that’d be useful for affiliate marketers too. We’ve compiled a list of some of the key skills you’ll need:

Which is More Profitable?

This is a difficult question because it has so many variables that could affect the outcome, although I do think that with both dropshipping and affiliate marketing you get out what you put into it.

With dropshipping, you may earn more on the face of each sale because your markup maybe $10 for example. Whereas, as an affiliate marketer, your commission could be 5% and someone could buy a $100 product netting you $5.

However, as an affiliate marketer, you may generate 10x more sales than you would from your dropshipping product and vice versa.

Both require a low initial investment in comparison to traditional businesses and you could get started for as little as a couple of hundred bucks depending on whether or not you outsource any work.

Can You Combine Affiliate Marketing and Dropshipping to Earn More?

This is a great question and isn’t something I’d recommend to beginners. However, if you’ve got experience in both then there’s no reason why you couldn’t do this.

Many eCommerce stores now have blogs as part of their site and this is an easy way for you to add some affiliate marketing into your dropshipping site.

For example, let’s say you’re a dropshipping site for travel goods. You could then have a blog that has articles on the X best hotels in [City], or, the best luggage to take on a three-day vacation. This adds value for the visitors to your store but also can help you earn a little extra cash too.

Conclusion

Both dropshipping and affiliate marketing offer very viable ways to make a great income online, giving you the flexibility to choose your own hours and work from anywhere.

There are pros and cons for each, but generally speaking, both income streams are relatively easy to set up and require a minimal investment on your side initially.

Being active on social media or just in tune with digital marketing and the way targeted ads work are great skills to possess if you’re looking at the dropshipping route, whereas a strong passion for a particular niche and an established blogger fan base makes it much easier to succeed with affiliate marketing.

As both dropshipping and affiliate marketing become more popular over time, there will be some limitations and higher barriers to entry as you compete with others, nevertheless, they’re both solid options to kickstart your online career if you want to get started today.