Which is Better Affiliate Marketing or Dropshipping?
Hey what’s up Kevin here and in today’s post we’re going to talk about Drop Shipping and affiliate marketing. So which is better affiliate marketing or droppshiping? Which business should you start?
Read this post to the end and the answer might surprise you.
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Now affiliate marketing vs Drop Shipping, which one is better? These are some of the biggest business models online.
I’ve had both businesses. I’ve Had A Drop Shipping business and affiliate marketing business so I can talk about them with a lot of conviction and with a lot of knowledge because I’ve run both and they have their pros and cons, so let’s see which one wins.
Affiliate marketing or Drop Shipping?
So if you’re not very sure exactly what they are let’s define them a little bit more.
Drop Shipping is when you’re selling mainly physical items from your own store online like Shopify for example, so it could be a kitty lamp or it could be a mug, it could be a pair of sunglasses, it could be a fidget spinner, anything like that you’re selling on your own website.
If the source for the products from another cheaper e-commerce website and resell the products, that’s a really good way of doing it and then you have to drive a lot of leads to your website.
So that is essentially Drop Shipping. That’s kind of how it works.
Affiliate marketing is when you’re selling other people’s products so you’re not selling your own products. All you’re doing is you’re getting a link and you’re recommending that link to people when they click on that link they buy.
Everything happens in the background and the Creator of the product who is the official owner of the actual product will do all the shipping and handling and all that stuff so all you’re doing is you’re being the marketer you’re being the middle person you’re just dropping a link and you’re just recommending people to these products. You can sell physical or digital but the way to make a lot of money in affiliate marketing is selling more digital focused stuff because it’s instant downloads and the profit margins are bigger and that is really the main difference between Drop Shipping and affiliate marketing.
Let’s take a look at Drop Shipping, first, the pros and the cons and then we’ll look at affiliate marketing.
Now dropshipping is a great business. I mean you could literally become a multi-millionaire growing A Drop Shipping business. There’s nothing wrong with it!
Now the pros are that you own a business that’s a great thing right your 100% online which means that you can sell to the world. When you get it right you can create a lot of Leverage and you can generate a lot of profits and you can literally again become a millionaire and it can change your life.
These are all the pros of a Drop Shipping business and I should also say that you own the products 100% so that means you have a lot of control over what you decide to sell, so if you decide to sell a fidget spinner over a walkie-talkie for example, you have full control of your brand and your products and that’s a really cool thing because you can move from one product to another product.
If you know product a for example isn’t selling so well, you can sell product “b” or you can sell product “c”.
So these are all the pros of a Drop Shipping business. Once you understand that product “a” sells really well, you can just scale with ads and that’s how you generate a lot of income. Those are all the pros.
Now these are the cons of Drop Shipping and this is what a lot of people don’t realize. First of all the cost of starting a Drop Shipping business is actually very high
Now the reason why the cost is so high is because just like any online business, first of all you have to pay for all the tools so you have to pay for websites like your Shopify store. You have to pay for all the traffic because with Drop Shipping you need to spend money on paid ads, so if you don’t have enough money for Facebook ads or Google search ads or Bing ads which can cost in the tens of thousands of dollars every single month, then you’re not going to have the budget to run a successful Drop Shipping business.
Another thing is with Drop Shipping you need cash flow. You need a lot of cash flow because the way that it works is not only do you have to pay for your tools and your ad spend but you need to cash flow the products that people buy from your website. For example, if you’re selling a kitty lamp on your Shopify store,when somebody buys that kitty lamp you’re going to have to buy that kitty lamp from another cheaper e-commerce website store and that’s the money that you have to spend on your own.
You have to buy it put your buyer’s address so that that e-commerce store can send it directly to your buyer but if you’re getting lots of sales every single day you have to cash flow all of those sales because you have to buy those products with your own credit card.
If you’re getting a lot of sales and you don’t have the cash flow to first float the other products to your customers then you’re going to be in trouble because you know it takes a while for the merchant accounts and the money to kind of come to you, so you need a bit of sort of a buffer for you to buy those products
If you don’t have a lot of cash flow then it’s difficult for you to get into the Drop Shipping game. Another big problem with Drop Shipping is that the profit margins are very small. This is because you are selling physical products.
You can only charge so much for a physical product so for example, if you’re selling a kitty lamp right or you’re selling a fidget spinner you can’t charge someone a hundred dollars for a fidget spinner because people know that fidget Spinners only cost maybe five dollars or ten dollars at the most.
You can’t charge someone 100 bucks for a fidget spinner, so that’s a problem therefore there is an invisible ceiling on how much you can charge someone for your physical product.
So what you’re making in profit is the cost of you acquiring that product from a cheap e-commerce website. Maybe it’s three dollars and the price that you’re actually pricing it on your Shopify store. Maybe you price it at eight bucks!
So, if you bought it at three dollars and you’re getting it at eight your profit is five dollars. So the five dollar profit is not that much profit if you think about it!
Yes it’s profit but in order for you to make a lot of money on a five dollar profit remember that’s not ultimate profit because you still have to spend money on paid ads and your websites and all that kind of stuff and maybe staff in the future therefore, Drop Shipping becomes a volume game that means that if you’re only making five dollar profits on most of your products how many five dollar products do you have to sell every day in order for you to make ten thousand twenty thousand thirty thousand dollars of profit a month.
Well it’s a lot, it’s hundreds of units per day, so the Drop Shipping game requires you to make hundreds of sales a day in order for you to hit those big income goals and that’s kind of the problem, you have to make a lot of sales.
The other problem with Drop Shipping is that you have to handle all the customer service okay because you technically own the products and the store.
yes “you” are getting it from somebody else but people are buying it from your store when they have problems they will be emailing you.
That means that you have to handle all the customer service. Now think about this for a second…… If you’re selling hundreds of products a day you will definitely have a lot of customer service issues people want refunds maybe your product arrives broken, maybe they don’t want the product anymore, maybe they want to change the color or whatever it is maybe it doesn’t fit because maybe you’re selling a jumper or a cap or something like that. A t-shirt that doesn’t fit and they want a different size for example, you are going to handle all that customer service.
Now initially if you’re a solopreneur or one person you’re gonna have to do everything you possibly can to set up the website. when a transaction comes through you’re gonna have to buy that actual transaction from another website you’re gonna have to put all the details in, you will have to put your credit card details in and then when they do the customer service you have to respond to them.
So it’s a lot of work.
With a Drop Shipping business, if you want to “scale” that means you want to grow from, let’s just say five thousand dollars in Revenue to ten thousand to twenty thousand dollars in revenue or whatever it is you will need to hire staff that’s the only way that you can grow otherwise you’re going to be working at your computer 20 hours a day.
Drop Shipping is a volume game it’s a low profit volume game style business so that means you have to make a lot of sales and you have to handle a lot of customer service and handle a lot of transactions for you to grow into a big business.
That means that you need a big team now when you have a big team not only do you have to manage stuff but you have to pay salaries as well. Whether you decide to do that in your home country and have people sitting in your office physically, or you have a digital team, you still have to pay them salaries or you have to pay them some sort of you know fee every single month. So again, it increases the cost so it’s not that Drop Shipping won’t allow you to build a big business, you can, but there are a lot of caveats and there are a lot of moving parts and the costs can be very time. So ultimately, to grow and start a successful Drop Shipping business, you need a minimum of 10 000 US dollars to start.
If you don’t even have 10 grand, I wouldn’t even bother starting a Drop Shipping business because you are going to run out of money very very quickly. That’s just the way that drop shipping went based on experience.
Can you grow a big big business with Drop Shipping?
yeah absolutely there are people that have million you know multi-million dollar Drop Shipping businesses out there so that’s Drop Shipping in a nutshell okay let’s take a look at affiliate marketing now the great thing about affiliate marketing is that the cost is very low to start the reason why the cost is very low is because similar to drop shipping yes you need the tools you need a page builder, you need website, you need an autoresponder, you need a Tracker, and you need traffic.
The thing is this, because you’re selling other people’s products the cost goes down significantly. You don’t have to handle the product yourself, you don’t have to do any of the shipping or handling, so there’s no customer service. Zero customer service.
Mainly, you’re gonna be focusing on selling digital stuff so when you sell digital products, the profit margins are very very high because when you sell digital training courses for example there is no cost involved in creating that item because it’s digital. When you buy a weight training program or a crypto training program or a gardening training program or a singing or guitar training program for example, there’s no cost involved in creating a product only the Creator’s time therefore, when the product costs a few hundred dollars, the profit margins are very high for example Drop Shipping, the profit margins are like 10 to 15 as for affiliate marketing, the profit margins are 40 to 70 percent.
Affiliate marketing often pay out very very high commissions because there is zero cost in creating that product, that’s why affiliate marketing is so cool.
The other thing is that because again you’re selling other people’s stuff you don’t have any customer service, so whenever someone buys a product even if you sold 10 products a day, for example and there is a customer service problem, you handle zero of it because you’re selling somebody else’s stuff so the emails will go directly to the product Creator not you you. You’re just a marketer, you’re just recommending people that product. That’s why I find affiliate marketing so cool.
Another thing with affiliate marketing which is cool is that the cost to get started is very low because all you need are your tools which only will cost you a few hundred bucks a month and then the other amazing benefit of affiliate marketing is you can either use paid traffic or free traffic.
It doesn’t really matter which method of traffic you use. You can use free strategies if you don’t have a budget, or if you need a budget, you know if you have a little bit more money, you can spend money on paid ads but if you don’t want to invest any money in the beginning of your affiliate marketing journey then it reduces the cost significantly, so you can do stuff like all the free stuff such as YouTube organic, Tick Tock organic, Instagram organic, search engine optimization.
I mean, this is all free stuff right so it reduces your cost significantly therefore to get started in affiliate marketing you don’t really need that much money at all. you only need probably a few hundred dollars you .If you have a few thousand dollars, one, two thousand dollars as a buffer that’s even better because you’re in the game longer.
You don’t have to do any of the customer service so you could be a solo entrepreneur and very easily get to between ten and fifty thousand US dollars in profit and you can still be one person. You don’t ever need to hire any staff or anything like that because you don’t handle any of the customer service.
You don’t have to handle any of the transactions. Everything is automated because everything is digital and that’s the cool thing about affiliate marketing compared to drop shipping. Now let’s talk about some of the cons of affiliate marketing.
Well, if I really think about it the only con is that because you don’t handle the product 100%, if something happens to the product that you’re selling let’s just say the Creator changes something that’s the only downside because you don’t own the product, you don’t have full control over it.
That means that if the Creator decides they want to get rid of the product or they want to change the price point, unfortunately you don’t have any control but the great thing about affiliate marketing is because you are recommending somebody else’s product, if that product doesn’t work anymore, you can just choose another Creator’s product and just kind of sub it in.
It’s kind of like a Lego style business and that’s why it is a problem but it’s not really a problem if you understand how to set up your affiliate marketing business correctly. Now both businesses can get you to hundreds of thousands to multiple Millions tens of millions hundreds of millions of dollars a year. It just depends on how big you want the business to grow so in that respect Drop Shipping and affiliate marketing are very equal, but which one is easier to get you to those big numbers with less work and less hours?
It’s definitely affiliate marketing, because again, you’re selling other people’s products the profit margins are higher you don’t have to handle any customer service. it’s just a much easier business to run and because of that, I closed my Drop Shipping business down because I got my affiliate marketing business to a point where I was like wow it’s doing really well. I thought it was a very similar industry.
You’re selling products online anyway. I thought I’m just going to start a Drop Shipping business and that’s why I did it in 2020 and then I realized that Drop Shipping has a lot more moving Parts than I expected. I didn’t expect it to have that many moving Parts. I didn’t expect it to require so many an hours and so much customer service but actually it does and the the profit margins are super small so after a few months I was like screw this I’m gonna shut down my Drop Shipping business and I’m just gonna Focus 100 on affiliate marketing and everything digital nothing physical and that’s kind of where my business is right now and that’s why I do mainly my own products which are 100 digital and selling other people’s affiliate marketing products online and that’s the way I’ve grown my wealth and that’s what I recommend for you as well.
Is dropshipping a bad business model?
Not necessarily it’s just a lot more restrictive it’s more expensive to get started you need a bigger budget. You need a lot more man hours and you’re going to have to grow a team physically and pay salaries, that’s the only way you can scale with affiliate marketing because everything is digital. You can get to big numbers just by yourself. You know you will never really have to hire a team unless you want to get into like the hundreds of thousands of dollars per month range then you might have to hire some people but initially, because of paid ads because of webinars because of Leverage bridge, and systems, and software, and tools and It’s All Digital and you don’t have to handle all the minuscule transactions and customer service like you do have to in Drop Shipping.
With affiliate marketing, you can scale massive just by being one person and that is a very attractive thing if you really think about it and it’s affordable so most people can get started in affiliate marketing. If you’re reading this post and you’re wondering affiliate marketing Drop Shipping? if I were you, I would just focus on affiliate marketing. It’s the lowest barrier entry online business model that you can start but the upside potential is huge it’s ginormous I recommend everybody should start in affiliate marketing honestly.
Even if you started making only three thousand dollars a month I mean that’s more than most people earn if you think about it in a full-time job and then you can scale it slowly starting on the side and get it to some decent numbers and then scale it and then quit your full-time job and then focus on affiliate marketing full time. That’s what I recommend 100% so I hope you enjoyed this post today.
A lot of detail right there again this is coming from my personal experience. I have run both businesses before
I focus is mainly on affiliate marketing now and use the 100k Alliance platform in which I am a top affiliate earner. One thing about the 100k Alliance is this. You get a ready made affiliate marketing online business built for you which included full coacthing until you are earning 10k + per month! it is a powerful business model.
I shut down my Drop Shipping business because I thought again just high costs and a lot of man hours. who wants to do that! Not me. if you’re going to start a business let’s start something that is profitable, that’s hugely scalable, that has a lot of Automation and doesn’t require you you know require a super duper amount of man hours because who wants to be at that computer 18 hours a day right.
Makes sense. Hope you got some value from this Post.
If you would like to learn exactly how I built my multiple six figure affiliate marketing business I would love to show you how to do that in detail I’m going to show you how to do everything correctly because there’s a lot of ways to do affiliate marketing. And if you would like to model exactly what I did in my business you can just register below and I look forward to seeing you on the inside…
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