Affiliate Marketing vs Dropshipping: Which is More Profitable?

Affiliate Marketing and Dropshipping have often been termed as two of the best ways to earn money online. On the outside, both of these models look similar since both of them involve promoting someone else’s products to earn money. However, while there are some similarities, there are also some big differences between Affiliate marketing and Dropshipping. Let us get into the details of both these models and give you a clear picture of which one you should choose to make money. Let us begin!

Affiliate Marketing vs Dropshipping

Basis	Affiliate Marketing	Dropshipping
Meaning	Affiliate marketing is the process of earning a commission for promoting an online retailer’s products.	Dropshipping is the practice of selling someone else’s products for a margin.
Income Model	Commission Based	Margin Based
Decision Making	Limited decision-making freedom	Higher level of decision-making authority
Payout	Based on minimum thresholds and requires waiting time	Paid after every sale without any waiting period
Customer Support	Affiliate marketers do not generally interact directly with customers	Dropshippers might have to cater to customer needs

What is Affiliate Marketing?

Affiliate marketing is the practice of earning a commission for promoting the sales of an online retailer. Affiliate marketers make money based on different payment models which include Cost-per-Lead, Cost-per-Sale, etc. Different social media platforms can be leveraged by affiliate marketers to attract an audience and ultimately drive growth for their affiliate partners. Let us take an example. ‘A’ promotes an electronic item through his affiliate link on his Instagram account. ‘B’ finds the deal lucrative and makes a purchase through A’s affiliate link. As soon as the sale is confirmed, A’s commission will get tracked to his dashboard and will become eligible for final confirmation and payout in a set amount of time.

What is Dropshipping?

Dropshipping is the process of selling someone else’s goods with a markup on the original price. Dropshippers usually add a certain amount as their margin which is their main source of income. Just like Affiliate marketers, Dropshippers also use different social channels to promote their partner’s products. For example, ‘P’ finds a wholesaler who sells an article for ₹1,000. P finds a customer for the product through different promotion techniques. ‘P’ adds his margin, let’s say, ₹500, before selling the product. Now, the customer buys the product at ₹1,500 while the wholesaler only gets ₹1,000. So, ‘P’ makes a clear profit of ₹500. That is basically how the Dropshipping model works.

Differences between Affiliate marketing and Dropshipping

While there may not be some startling differences between affiliate marketing and dropshipping visible right at the onset, there is in fact one big difference between the two matched with some small ones.

1. Meaning

Affiliate marketing is the process of promoting an online retailer’s products and services in return for a commission for every effective sale. Dropshipping is the process of selling a supplier/manufacturer’s products after adding margins to the cost price of the product.

2. Income Model

Affiliate marketers run their businesses on the basis of commissions from online retailers. They earn a percentage of the sale amount that they generate. However, dropshippers can decide their own margins. It could be as high as 100%. Their income model involves putting affordable markups on the products they sell.

3. Decision Making

Affiliate marketers generally have to get in line with the instructions, terms, and conditions, and commission rates already established by the online retailer. They do not have much flexibility in this matter. However, dropshippers are free to set their own margins on each product they promote.

4. Payout

Dropshippers make instant money as soon as a customer completes their purchase. Affiliate marketers on the other hand might have to consider different things like payment methods, minimum payout, commission confirmation time, etc.

5. Customer Support

Affiliate marketers are generally free from any kind of personal interaction with customers. They simply redirect the potential consumer to a real eCommerce store. However, dropshippers generally carry out their business through professional-looking websites that emulate the look of an eCommerce store. Dropshippers become responsible to be in touch with customers and solve their queries.

Similarities between Affiliate Marketing and Dropshipping

1. Marketing

Both dropshippers and Affiliate Marketers are responsible for marketing their partner’s products to generate sales. The more sales, the higher the income in both models.

2. Product

Both dropshippers and affiliate marketers are free from the burden of keeping an inventory or worrying about the packaging, delivery, or quality of a product. All of that is taken care of by the third-party seller.

3. Low-Risk

Since there is no requirement for keeping an inventory, both affiliate marketers and dropshippers can start their businesses with minimal investment and risk. All they need is the internet, a working laptop, and good content creation skills.

4. Endless Income

Once they get the hang of it, both affiliate marketers and dropshippers can make big bucks from their respective marketing models. Constant focus on building an audience helps both affiliates and dropshippers to build a recurring income stream for their business.

5. Client Satisfaction

Both Affiliate marketers and dropshippers have to keep customer satisfaction as their top priority. Several unknown factors like shipping delays, bad-quality products, wrong items, etc. may lead to lower trust for both affiliates and dropshippers which may lead to loss of revenue in the future.

Affiliate Marketing vs Dropshipping – Which one should you choose?

This question’s answer is influenced by a number of variables, such as your budget, the kind of product you are selling, your target market, and your personal preferences.

Since there is normally no initial investment to join an affiliate network, affiliate marketing is typically a low-cost option to launch your internet business. Also, since the affiliate program manages product storage, shipping, and customer service, you don’t need to do any of those things yourself.

Dropshipping is an excellent option to launch an online store without having to spend money on inventory upfront. It also enables you to rapidly and easily test new product concepts without having to buy a sizable quantity of stock and run the risk of it not selling.

In the end, it largely depends on your unique needs. Affiliate marketing is a fantastic choice if you want to get started quickly and affordably. Dropshipping can be a better choice if you want to be able to swiftly and simply test out new products.

Conclusion

Now that you have a clear picture of the basics of both affiliate marketing and dropshipping, their similarities and differences, we are sure you will be able to make an informed decision about which model suits you best.

If you choose to try affiliate marketing, we recommend you try EarnKaro to become an affiliate partner of more than 150 online retailers including big names like Flipkart, Ajio, Myntra, Nykaa etc. Best of luck!

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