For new digital entrepreneurs, deciding which online business model to start usually leads to two options: affiliate marketing and dropshipping.
Naturally, both models have their unique advantages and disadvantages …
But for beginners who are looking for a low-cost side hustle, affiliate marketing could be the better option for you.
Why is affiliate marketing the better option?
The main reason is its lower startup cost.
Unlike dropshipping, you're not required to invest in shopping carts or e-commerce platforms like Shopify …
And you don’t have to hire customer service reps (because you DEFINITELY don't want to do that yourself).
Plus...
As an affiliate marketer, you don't have to create sales pages, write compelling copy, or deal with complicated tech integrations.
These daunting tasks are already taken care of by the product creators or merchants.
Instead...
You get to focus 100% of your energy on driving traffic, growing your list, and promoting or recommending great products from affiliate programs that have already proven they can convert clicks into customers.
Now, if you want to learn affiliate marketing for free, here are two options I've created for you.
The first is on YouTube...
The full "how to make money with affiliate marketing" training is over one hour of step-by-step training available for you.
Second is the free 11-step affiliate marketing crash course that took my niche site from $0 to $100,000, fast.
One thing you'll notice with my trainings that teach the affiliate marketing route...
There are no upsells or courses being sold in them like you’ll see with the greedy gurus who often try to pull a “bait and switch” where they promise free training …
And you end up on a webinar getting a pitch for a $1997 affiliate course.
Not here!
I've already made my fortune online, so I've decided to put a stop to those greedy gurus by giving away everything you need for 100% free in those courses linked above.
So, let’s talk about affiliate marketing …
Understanding Affiliate Marketing
Affiliate marketing is an online business model where you promote niche products or services from other businesses to your visitors and subscribers.
In practice, you join the affiliate programs of the products you want to promote...
Then you get personalized affiliate links that track visitors after they click on your links to attribute any sales to you.
Simply stated:
When someone clicks through your affiliate link and makes a purchase based on your recommendation, you earn a commission.
On digital products and software, your commissions are usually 30% - 65%.
For physical products, your commissions are usually between 3% and 30%.
On the Amazon Associates Program, commission rates can be as low as 1% for certain product categories.
The key to success as an affiliate is to choose a profitable niche for affiliate marketing which is covered here.
One of the biggest advantages of affiliate marketing is the low cost to start and the fact that it requires less tech skills to build a brand that can generate passive income.
In affiliate marketing, you also have less physical work compared to running a dropshipping business.
Since the companies you promote handle the product creation, sales pages, copywriting, shopping cart management, and customer support, your main responsibility is simply driving traffic to their offers through your marketing efforts.
This can lead to a streamlined and efficient business model that allows you to enjoy more lifestyle freedom without sacrificing how much money you can make.
Furthermore, affiliate marketers don't have to handle many of the typical business tasks that come with operating a dropshipping store.
For example, shipping, returns, inventory management, and customer inquiries are 100% taken care of by the affiliate program's vendor.
This is what makes affiliate marketing a better business model for new marketers looking to start a side hustle online.
Okay, let’s look at dropshipping next …
Understanding Dropshipping
Dropshipping is also a popular online business model because you don't have to deal with the product design or creation.
You get to sell products in your online store without keeping inventory.
Instead, when a customer places an order, you forward that customer's order details to the product supplier, who then ships the product directly to the customer.
As a dropshipper, you are basically a middleman between the manufacturer and the customer.
You pay wholesale price for the product and your customer pays full retail price on your ecommerce store...
So, you have better control over your profit margins since you have control over your selling price, which isn't the case with affiliate products.
Plus, you don't have to worry about warehousing, packaging, storage costs, or shipping the products to customers yourself...
The dropshipping suppliers handle all this for you.
These are major benefits of the dropshipping business model.
While dropshipping has its advantages, it also comes with certain challenges.
One of the most significant differences between affiliate marketing and dropshipping is the amount of work and responsibility you must take on.
In a dropshipping business, you need to create sales pages, write compelling copy, manage a shopping cart, and handle customer support.
These tasks can be time-consuming and may require a considerable amount of effort to maintain and grow your dropshipping store.
Additionally, competition in the dropshipping market can be fierce, making it difficult to stand out from the crowd.
To succeed in dropshipping, you need to find a niche with high demand and low competition.
You will probably find that you want to focus on high-ticket products...
But finding a niche that checks all those boxes can be challenging.
Also, you have to manage supplier relationships and ensure that products are delivered on time, which can negatively impact your business's reputation if there are any delays or issues.
To summarize, dropshipping can be a viable business option, but it comes with unique challenges and increased responsibilities compared to affiliate marketing.
Consider these factors when choosing the right online business model for you, taking into account your own preferences, goals, and available resources.
Cost Comparison
Start-Up Costs
As I touched on briefly, one of the most significant advantages of affiliate marketing is the low start-up costs involved.
To launch an affiliate marketing business, all you need is a website or a platform to promote products and services.
In my free “How To Start Your Blog” tutorial here, you learn how to get everything going for as little as $2.99/mo.
On the other hand, dropshipping requires more investment upfront.
Although you might not have to purchase your inventory, droppshipping does have costs:
- Setting up an online store
- Creating product listings
- Developing a brand
Additionally, you may need to spend money on advertising to attract customers to your store.
Operational Expenses
Affiliate marketing operational costs tend to be lower than dropshipping.
There's no need for you to create sales pages, manage shopping carts, or handle customer support, as these tasks are taken care of by the companies you're promoting.
So, you can focus on things that are important to your business, such as:
- Content marketing
- Email list building
- Increasing your traffic
With dropshipping, maintaining an online store involves expenses such as website hosting, domain registration, and potential eCommerce platform fees.
Plus...
If you're responsible for 100% of the customer service, you'll probably want to outsource that to a virtual support rep, adding to your operational costs and the amount of time it takes hiring and managing teammates.
In summary, affiliate marketing is a more cost-effective model for starting an online business.
With lower start-up and operational expenses, it offers a greater potential for earning profit while requiring less work on your part.
Workload Comparison
Okay, let’s compare the workloads of starting and managing an affiliate marketing business versus a dropshipping business.
We'll analyze the tasks you'll need to handle in each business model, such as:
- Creating sales pages and copywriting
- Managing shopping carts
- Handling customer support
Creating Sales Pages and Copywriting
In affiliate marketing, you mainly focus on recommending products or services to your audience.
The product owners take care of creating compelling sales pages and materials.
As an affiliate marketer, your responsibility lies in creating valuable content, such as blog posts or videos, that encourage your audience to click on your affiliate links.
Affiliate marketing is a performance-based approach to marketing, as you are basically “rewarded” with a commission for each sale made through your affiliate marketing efforts.
With dropshipping, your efforts will need to be more in the realm of creating sales pages and product descriptions for the items you offer, investing time and effort in copywriting and designing sales pages and building sales funnels.
All this can be challenging for beginners.
Managing Shopping Carts
One significant advantage affiliate marketers have over dropshippers is that they don't need to worry about managing shopping carts, processing orders, or tracking inventory.
Instead, you can focus on promoting products … and earning the affiliate commissions that come as a result.
As a dropshipper, you're responsible for managing your website's shopping cart, processing orders, and ensuring products are in stock from your suppliers.
This can be time-consuming and may require additional tools and resources to manage effectively.
Handling Customer Support
With affiliate marketing, you avoid the hassle of dealing with customer support, returns, or refunds as these responsibilities lie with the company providing the product or service.
You can instead focus on growing your audience and building your online presence.
However, when running a dropshipping business, handling customer support is a top priority.
You'll need to handle all of the product questions, complaints, returns, and refunds directly.
This can be overwhelming, especially if you don't have prior experience in this area …
Or you'll need to add on extra expenses staffing and training a dedicated customer support rep.
Pros and Cons
So, what are the pros and cons of affiliate marketing and dropshipping?
Affiliate Marketing
Affiliate marketing is advantageous because of the flexibility it offers.
As an affiliate, you can promote products in a variety of ways, such as through blog posts, social media, email marketing, and more.
Some additional key benefits of affiliate marketing, as mentioned throughout this post, include:
- Low start-up costs
- No need to manage inventory or shipping
- Wide range of products and niches to choose from
- Flexibility in promoting different products
On the other hand, affiliate marketing also has its drawbacks:
- Lower commissions compared to dropshipping
- No control over product pricing or quality
- Dependency on the product's seller for customer support
- Competition with other affiliates promoting the same product
Dropshipping
Although dropshipping involves more work, as you have to create and manage sales pages, handle customer support, and maintain a shopping cart, it also has its perks:
- Higher profit margins compared to affiliate marketing
- More control over product pricing
- Ability to build a brand and a loyal customer base
- No need to manage inventory or warehousing
However, dropshipping does present some challenges, especially for beginners:
- Higher start-up costs due to platform fees and advertisements
- Managing customer support and returns
- Dependency on suppliers for product quality and timely shipments
- Competition with other dropshippers selling the same product
Which Model is Right for You?
As an aspiring entrepreneur, it can be hard to decide between affiliate marketing and dropshipping.
But the pros and cons listed above should at least indicate which one is a better fit for you and your intended business model.
Personally, my recommendation is that you start with affiliate marketing.
Why?
So you can learn the art and science of driving traffic and growing an email list!
You can always add on a dropshipping product or brand to sell to your audience, but first you should work to build that audience through affiliate marketing.
The lower cost of starting and maintaining an affiliate business means there's a lower barrier of entry for new marketers.
In summary, with affiliate marketing, you can focus on promoting products without having to worry about creating sales pages, copywriting, or managing a shopping cart.
Additionally, you don't need to handle customer support, which can save you a significant amount of time and energy. This allows you to dedicate more time to building your audience, generating traffic, and creating high-quality content.
Here are some more reasons why affiliate marketing might be the better choice for you:
- Flexibility: You can promote a wider variety of products from different companies, giving you the freedom to focus on your personal interests and passions.
- Passive Income: Once you establish your online presence and create helpful content, you can earn commissions even when you're not actively working.
- Less risk: Unlike dropshipping, with affiliate marketing, you don't have to worry about inventory or shipping issues. You also don't need to directly deal with returns or refunds, making it a more hassle-free business model.
On the other hand, if you're interested in building your own online store and have the time, resources, and motivation to tackle the challenges that come with it, dropshipping might be the better option for you.
Just keep in mind that it requires more initial investment and involves greater responsibility in managing various aspects of the business.
Ultimately, your decision should be based on your goals, interests, and commitment to the online business world.
Take the time to weigh the pros and cons of each model, and choose the one that best aligns with your vision of success.
