Entering the world of digital marketing to employ the most profitable way of making money can be challenging. Especially if you don’t know which style is the most effective. As of the year 2019, the most profitable way of earning money in the e-commerce industry is affiliate marketing and dropshipping.
Although the two ways of earning money are the most profitable, they’re also not easy to utilize. Several marketers enter the e-commerce industry to complete in the online market without knowing how they work, thus, having a risk of failure. Remember, any business can fail without putting in consistent effort to ensure success.
Affiliate marketing and dropshipping have similar processes, but they also have advantages and disadvantages that significantly sets the two types of business apart. Deciding which of the two are the most profitable can only be possible by comparing their benefits and drawbacks. Thus, here is the truth of dropshipping versus affiliate marketing.
Table of Contents
What is Dropshipping?
Dropshipping is a type of online business where you’re not responsible for shipping products or having store inventory. Instead, you’re collecting money through the online store similar to how a regular store operates. When a customer places an order on your website, they’re placing an order with the distributor or supplier.
The mechanics of dropshipping is that you are contacting distributors to place the same orders of the customer at a wholesale price. Further, the supplier will also be left with the responsibility of shipping the product to the customer, thus, leaving your hassle-free.
The way of generating profit through the dropshipping business is by subtracting the selling price of your online store with the wholesale price of the distributor.
What is Affiliate Marketing?
Affiliate marketing is another type of online business where you’re only referring the customers to the supplier or another business. Your website is responsible for promoting the products and services of another business. Once a customer wants to buy a product or services, your website will automatically redirect them to the supplier’s online store.
One vital factor you have to keep in mind is that you’re not responsible for selling products. You’re merely marketing the products and services of another in exchange for a commission. Further, you also won’t be receiving the commission directly. Instead, you’ll receive your commission from the business you’re marketing monthly.
The business or online store will also know that you’re responsible for referring the customer to their website with the use of a tracking cookie. Tracking cookies automatically installs itself on the customer’s computer once they click the link from your site to buy the products of the business you’re marketing.
What Makes Dropshipping and Affiliate Marketing Different?
Advantages and disadvantages will always exist in every business process. But, what makes dropshipping the most convenient and effective way of generating profit to earn money is because there are more pros than cons.
Low-Risk Business Model
Dropshipping businesses have lower risks of not being able to generate profit compared to affiliate marketing. The reason for this is because dropshipping marketers aren’t handling the stocks and the delivery of goods. Following this, you have your online store that almost everyone can go to and buy products at their convenience.
However, in affiliate marketing, businesses tend to set thresholds for affiliates to reach before they get their paycheck. Further, you also have a lower chance of gaining traffic and lead conversions if your marketing website has poor content that doesn’t influence call-to-action.
High Margins
Having high margins in terms of generating profit helps you understand which of the two business models are the most effective way of earning money. Keep in mind that when you’re doing a dropshipping business, you can set own your price points for each product so that you can gain more profit.
For instance, you can order an identical product from the supplier for a dollar and sell it for 20 times higher than the original price. Having the freedom to utilize pricing strategy provides you the comfort of gaining a substantial amount of profit as you cover the costs for the wholesale price.
However, in affiliate marketing, the commissions you get from another business’ products you’re marketing are only a small percentage of the product’s price. Thus, leaving you with bad financial security unless you have quality content that can drive a lot of traffic to your website.
Customer Support
One of the most vital aspects of businesses is having the chance to interact with your customers through feedback and reviews. Dropshipping online stores have customer support sections that help customers reach out to online store owners whenever they’re in search of products or have problems.
You can also automate your customer service by having artificially intelligent chatbots do all the work for you. Visiting robots.net can help you utilize machine learning in chatbots that’ll learn from the customers they’re conversing with. Doing so will make it seem like they’re interacting with a human and a mere chatbot.
Interacting with your customers can help you improve how you operate your online store as well as to set target audiences for new, on-trend products. In affiliate marketing, however, there’s no chance for after-sale service because you’re only promoting for another business. You can only act base on the terms and conditions you’re affiliating for.
Takeaway
Knowing the truth about which business model is the most effective way of generating profit to earn money can only be possible if you differentiate them. Given that dropshipping allows you to have more control of almost all elements of running a business, you have more chance of having a higher profit margin.
Although affiliate marketing can also earn you money, you can only receive them by increasing your efforts using effective digital marketing strategies. Also, keep in mind that you’re only gaining a small percentage of the product’s price.
