Affiliate Marketing and Dropshipping — The Pros and Cons
Can you make more money online with affiliate marketing or with dropshipping? This is the dilemma that most entrepreneurs encounter when they look for profitable opportunities online. Affiliate marketing and drop shipping are two of the most favored means of generating profit online nowadays. They are both low-risk, high-profit business models that are easy to set up immediately. The two models operate without inventory and do not require the shipping of goods to their customers. Although they have similarities, there are also notable differences that you have to consider as they may affect your daily life. For you to determine which one is the best fit, learn the pros and cons of affiliate marketing and dropshipping.
What are the Pros and Cons of Affiliate Marketing?
First, let’s define affiliate marketing. Affiliate marketing is a business model in which you as an affiliate earns a certain percentage of each sale that you made. You can get a commission for every customer that you drive to the merchant’s website through your content. The merchant who offers the affiliate program will pay you for linking the consumer to them depending on the affiliate structure that they offer: Pay per sale, pay per click, or pay per lead.
Through pay per sale, you’ll get a commission for every product that the consumer buys as a result of your marketing strategies. Meanwhile, pay per click incentivizes you for redirecting your traffic from your site to the merchant’s website. The more people you drive to their website, the higher the compensation. The third program, pay per lead is more complex than the other two programs. You must persuade the consumer to visit the merchant’s website complete an action like subscribing to a newsletter, signing up for a product trial, downloading software, and so on.
The Pros:
Becoming an affiliate is free. Most affiliate networks like Amazon Associates or Clickbank takes care of the administrative fees. You will only spend a little on your website and server as well as the marketing costs for driving traffic from your site or social media pages to the merchant’s website.
No need for customer support from your end. In affiliate marketing, you’ll only handle the marketing of the product to supply leads to the merchant. They will take care of the rest from selling to providing after-sales support. You will not handle customer inquiries at all.
Low cost, high-profit business model. The startup cost is low. Basic setup for web hosting and an email autoresponder can range between $25 — $40 per month only.
Very good source of passive income. All the hard work is done upfront like producing high-converting content, setting up ads, and so on. Once everything is up and running smoothly, you just wait for the money to come in.
The Cons:
You will only get a certain percentage of each sale you make. It matters not if you spent more money on ads than what you receive in commission. The arrangement will always be on a commission basis. Even if you’ll receive several hundred dollars for each product, chances are the price is too high. You cannot set the price of your earnings because you will settle only on the commission fee rate specified in the affiliate program.
Some merchants do not pay on time. There are affiliate marketing businesses that are not updated with their payment deposits. This can cause a delay in the processing of your payment as an affiliate. Worse are those merchants that do not divulge their real financial status to their affiliates. They might be already in the process of declaring bankruptcy or closing down their business while you are still working hard to earn your commissions. When the time comes that they declare bankruptcy, you will lose all the money they owe you.
You will have no control over the products you’re promoting. As an affiliate marketer, you have no control over the products that you must promote to generate commission. You will only rely on the photos that the merchants have. There will be limitations as to what features you can mention in your content and this hinders your strategies to effectively market the products.
People can choose to directly go to the merchant’s website, not via the affiliate link. Consumers usually assume that buying through the affiliate link will cost them more money than going directly to the merchant website. If you don’t use a link shortener, they can simply hover over the linked text and get the merchant’s link. Rather thank clicking the affiliate link, they may choose to go directly to the merchant’s website to purchase their products. When this happens, the merchant will get the full profit and your marketing efforts will be for naught.
What are the Pros and Cons of Dropshipping?
Dropshipping allows you to sell products from local and overseas suppliers in your website without inventory. When a customer buys a product from you that’s the only time that you make an order with the supplier. The dropshipping supplier, in turn, will package the product and ship it to the customer’s mailing address. It is a great business model for startups who have full-time jobs or still studying to graduate from their schools. Learn how you can be successful in dropshipping in this article.
The Pros:
A low-risk business model with high potentials for profit. Dropshipping products enable you to get 100% of the sales and cash in the funds every week.
You have control over the pricing of products that you carry in your store. With drop shipping, you can set the price on the products that you’re selling. Let’s say, for example, you buy a $3 product and sell it for $23.99, you can still get a bigger chunk of the profit even if you deduct the marketing costs.
The Cons:
You have to sell more to stay afloat. You may have low overhead as you don’t manage your inventory but the returns are low too. Your profit depends on your traffic. This you have to build for a long time before you can get a steady source of the traffic to your online store.
Dropshipping is a highly competitive industry. The low overhead, no inventory, and easy to start advantages of drop shipping make it very popular to optimistic entrepreneurs. This means you’ll not only compete with bigger brands, but you will also go head to head with drop shippers that carry the same products as yours.
You’re at the mercy of your suppliers. Since you have no authority in the supply chain, the probability of getting dropshipping problems is high. There may be complaints about the quality of products, missing items, lost packages, delayed deliveries, and return policies. It will be you who directly talk to customers about something that is out of your control. The supplier will try to fix the problem by sending a replacement product but it will take weeks before it reaches the customers. It may be too late to stop the customers from filing a chargeback with their banks to get refunds on their payments. When this happens, you will lose more than what you initially earned.
You can get sued for dropshipping trademarked products. Some suppliers are deceptive and can get you in trouble with the law. Many suppliers particularly from China use logo and markings owned by a trademark brand. If you make the mistake of selling them in your store you’re automatically be associated with their illegal activities. Before you decide to dropship a product make sure that you made your research to avoid legality issues in the future. Find out more about dropshipping trademarked products in this post.
Final Thoughts
Affiliate marketing and drop shipping are proven methods of generating income with low capital. Both have the potential of getting more profits if executed effectively. What may work for other entrepreneurs may not efficiently work with you. Consider your lifestyle and present responsibilities when selecting the business model for you. It should be something that you can effectively operate as you juggle other roles you already have right now. If you can do both affiliate marketing and dropshipping products, why not? You’ll earn more profits if you will be able to run them successfully.
