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Affiliate Marketing and Drop Shipping: The Difference, Pros and Cons

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I get a few inquiries about the difference between affiliate marketing and drop shipping. So in this article, I'll share to you the mechanics of each model, the pros, and cons as well as what's the model is better than the remainder in my opinion.

Affiliate Marketing 

Affiliate Marketing is a way of promoting products or services on the internet where Merchants have products or services that they need to advertise through the affiliate or publisher network to the end user. 

Online advertising partners earn compensation when users visit ads and generate results such as shopping, membership registration, event participation from affiliate sites.

Affiliate marketing is the most effective way to advertising, marketing and generates attractive income for referrals, this form originated from the Amazon site in 1996

Here are some of reputation affiliate networks you can join

  • Amazon
  • Click bank
  • Commission Junction
  • eBay
  • Rakuten
  • Share a sale

Drop Shipping

Drop shipping is a method where the retail store does not keep products in the warehouse.

When you sell a particular product, there is no inventory instead they'll buy the product from a third party and ship it directly to the customer. As a result, those sellers never see the product or handle the product.

In essence, drop shipping is simply buying low prices and selling at high prices

The biggest difference between Dropshipping and other retail models is that merchants do not need warehouses or inventory. Instead, these merchants purchase the product when needed from a third party - commonly wholesalers or manufacturers - to complete their orders.

Here ‘re some of drop shipping companies that allow you access to their items

  • Doba
  • Dropship 
  • Direct Ali
  • Salehoo 
  • Sunrise Wholesale
  • Investory Source

The Pros and Cons of Each Model

1. Affiliate Marketing

Pros

There're some of the main benefits of affiliate marketing

Low Investment Cost

You don't need to make your own product, that often takes a lot of money for customer research, materials, and other resources, you also do not have to buy or rent a warehouse for existing products or deliver products to your customers, because the merchant make it for you, in other words, your job is simply promoting the products you like and if someone purchases from you, you will get commissions.

Variety of Commission.

There're many reputation affiliate network with different commission levels that depend on the type of product you promote. For Example, Amazon has the variety commission for each category as the listed below:

Kết quả hình ảnh cho amazon commission category

With some people, that's too low commission they can choose another affiliate program that has the higher commissions like Click Bank or Muncheye 

Click Bank focus on the information product, this helps them avoid renting a warehouse and sale space, hence that allow the merchant share the large of profit often 50% or more.

Muncheye is a big site on the launching products, Because these are not well-known products, thus they are willing to pay high commission to affiliate.


                   

No Customer Care and Shipping

If the customer has any trouble with your product the product. The customer supporting team of the merchant solve it for you. 

However, some of the affiliate programs require consulting clients from you. So make sure you read the policy of each network to avoid lost the commission.

 As I said above most of them don't require consulting clients from you and that is not your duty. But if you write the article about the product, make sure you replay all the comment of your audiences. 

Because sometimes they desire to hear feedback from users rather than companies. That is why they come to your blog to read your opinion and buy the product from you instead of buying directly from the official site.

Passive Income

Another great thing about affiliate marketing that everything things will still work without you.

Because as I said above the problems such as shipping, warehousing, logistics, or customer care are all dealt with by the merchant.

So if you have a website that attracts a lot of traffic, It will automatically generate passive income whether you promote it or not.

Cons

Although affiliate marketing has many of pros points, there're a some of the cons you need to be noticed

You cannot adjust the product

That’s not your own product so you cannot modify the product as you or your customer want, in many cases, you can send feedback to the merchant to request a change or add some functionality.

Some manufacturers will probably notice that and they change the product in your opinion but this rarely happens so the high ability is your requirement may be ignored.

Hard to Make Customer Repurchase

People may be curious about your site or even be excited about the product you offer, you can attain the peak sale during this period but after that, you will see the sale began to decline.

There are many things to explain this and one of the main reasons is that when customers need to buy the product you refer, they usually go directly to the official site rather than to your blog and continue to purchase through the link you referenced.

In other words, you will always have to look for new customers to offset, but for most businesses repurchase customers is their main income source.

No Graduate Commission

If you get the customer buy your affiliate product, you win, but that's not the end!

If your customer doesn't satisfy with your product and what you say don't match with what they desired, they can return the product and then you'll lose the commission.

In Clickbank that display the Average Rebill total and Avg%/Rebill and that say somewhat of that product quality.


So make sure you give the honest review of the product such as functions and benefits, pros and cons. Do not be afraid customers do not buy your products, honest reviews are all that your customers are looking for and they are willing to pay for it.

The other thing is that some audiences can remove your affiliate link or buy directly from the official page. Some will buy through your link as a thank you for what you spend, but others do not.

2. Dropshipping

Pros

Low Investing Cost

One of the most benefits of drop-shipping is that you don't need to invest money in inventory. 

You only have to make purchases when someone has agreed to buy or pay for you. That helps you save a large of money compared to starting a traditional business. 

Sometimes with $100 and wifi connected laptop are enough for you to operate it

Easy to Run

When you jump a drop shipping business. You do not need to know a lot about management skills. Not only inventory problems have been resolved, but you also do not have to worry about:

  • Manage the warehouse
  • Packing and shipping orders
  • Track inventory on books
  • Processing declarations and shipments in domestic and abroad
  • Constantly ordering products and managing inventory levels

So your job is just to find the right partner and customer to earn the spread between the price you buy and sell.

Easy to Expand Your Items:

With traditional businesses, it is very risky if they launch new items. 

But in dropshipping, it is almost risk-free, because you don't need to hire resources to build new products, manufacturing or storage them.

There're a lot of suppliers from many different markets in Inventory Source



So You can add as many items as you want on your site and it's completely free.

Flexible

You can do anywhere in anytime. Sometimes all you need is a laptop with a wifi connection. Many people carry their own businesses at home or while traveling.

Cons

As affiliate marketing, it's not a perfect model, there're some of the negative points of it:

Low Profits

Drop shipping is a highly competitive environment. Due to low the investment cost, then a lot of traders are willing to lower the selling price to compete with other competitors. And this quickly destroys the appropriate profit for each item.

On the other hand, with the evolution of technology, customers have more information to compare and this is clearly a disadvantage for you.

You are Responsible for Errors that are Not Yours

Although packing, shipping is not your responsibility and that is the job of the supplier.

But look back when there are shipping problems like delivery not on time, or do not have enough goods to provide to the customers, your business will be most affected because you work directly with customers, not the companies behind.

So if you want to avoid this problem, let choose reputable third-party suppliers to avoid the negative impact on your business reputation

Inventory Problem

Dropshipping solved inventory problem for you, that's great but sometimes it also creates the problem as you can not track the item existing or not.

If a certain item stops production or runs out overnight. Of course, you can not provide that as agreed, This not only causes you to lose profits but also badly affects your business

What's The Best Model When You just Start an Online Business

Both are legit models and has been proven effective over time, all of them have both pros and cons, but in my opinion, if you just start an online business you should choose affiliate marketing. 

Because in terms of profitability and accountability it is easier than drop-shipping, you don't need to find the supplier partner and it does not have any problems out of your control such as shipping or inventory issues as drop shopping.

Another factor that makes me rank affiliate marketing higher than drop shipping is that it does not cost you to join. If you want to join the drop-shipping network you will have to pay the fee before access to their items. 

Don't make me wrong I don't say that you shouldn't join drop shipping, it's also a great model to start because of the benefit it brings. 

But I personally get more benefits from affiliate marketing and I hope it also brings so many benefits to you.

Are you doing affiliate marketing or drop shipping? which model makes you more profitable, please comment it below.



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