If you're looking into starting an eCommerce business, you'll no doubt come across articles about dropshipping. You may have read about what is drop shipping, how to dropship, how dropshipping works, and more.
But, have you read about affiliate marketing? It’s one of the fastest-growing industries with new businesses being created every day.
Keep reading to learn about affiliate marketing, how it compares to dropshipping, and how Amazon FBA works to combine the two.
What Is Affiliate Marketing?
Affiliate marketing is a commission-based form of eCommerce where you receive a percentage of another company's product sales. Your role is to market the products via eCommerce content marketing, social media, eCommerce PPC, and more. When customers click through a link you supply, this data is tracked by the seller, and you'll receive a portion of the sale if one is made.
Affiliate Marketing Business Pros & Cons
Affiliate marketing continues to be one of the fastest-growing types of eCommerce businesses year after year. However, that doesn't mean that it's all upside. Let's take a look at both the pros and cons of affiliate marketing.
Affiliate Marketing Pros
- Costs are minimal. If you're wondering, is dropshipping worth it, know that affiliate marketing requires very little capital to start. Since you never deal with products at all, the only costs you have are related to overhead expenses, your website, and the technology you use. Your only other cost is whatever you choose to invest in eCommerce marketing and dropshipping ads to help drive traffic to the best dropshipping products you're helping sell.
- It's a great source of passive income. One of the biggest benefits of affiliate marketing is that you don't need to work constantly to make money. Once you create your content or advertising materials, you can put them up to sell online and sit back. They will continue to pull in traffic and send potential customers to the products you're marketing. The only effort you need to make is to check on the content and make some changes occasionally to help drive more conversions. This makes affiliate marketing a great option for a side business.
- You don't need to work with customers. With affiliate marketing, you're a product evangelist, not a seller. Your role is just to drive customers to make purchases. Any issues they have with order fulfillment, returns (see RMA meaning), or product questions are handled by the seller. This means you don't have to deal with a lot of the stress that normally comes with running a business. You'll also save money on hiring a customer service for dropshipping team.
Affiliate Marketing Cons
- Commissions can be low. Since you only make a small percentage for every sale you help make, you need to drive a lot of sales to make a decent amount of money. Unfortunately, even if you're sending a lot of traffic to sellers' sites, if they can't make the sale, you get nothing. Make sure you work with sellers that you know can be as successful as you want to be.
- You get paid on a schedule, not when sales are made. Affiliate marketers are paid by the seller for a predetermined period of time, usually on a net 30 schedule. Even worse, if sellers are having financial issues or aren't great at eCommerce accounting, you may be waiting even longer. This means you may not want to rely on the model as your sole income source.
- No control over products or pricing. The ability to control what products are being sold at and at what markup (see markup vs margin) is a key component in maximizing revenue. However, affiliate marketers are not involved in these decisions, so they may actually make smaller profits based on actions made by the sellers.
- Can miss out on revenue. Affiliate revenue only comes through when someone makes a purchase after clicking the particular link you supplied. However, if they leave and come back later before making a purchase, or modify the link in any way, you make nothing. Some customers may also worry that your link is a scam. Make sure you're upfront and clear about your role as an affiliate and that you'll benefit from people clicking on your links. This will alleviate some skepticism and help limit losses.
Affiliate Marketing vs Dropshipping
Affiliate marketing and dropshipping both offer a number of benefits for new and existing businesses alike. First, seeking out new suppliers and finding high demand products is key in how to make money dropshipping. However, it takes a lot of time and effort to learn how to find dropshipping suppliers, and this can limit the speed that you grow your business. Affiliate marketers don't have to worry about this as they make a percentage of each sale without having to do much work. However, this also means they make a little less money for each sale.
One benefit that affiliate marketing has over dropshipping is that the products themselves have little impact on your business. Many dropshippers who choose to sell low-quality products have damaged their reputation and lost their businesses. They fell victim to one of the biggest dropshipping beginner mistakes. They even caused many to ask "is dropshipping dead?" and "is dropshipping legal"? As an affiliate marketer, your reputation isn't directly tied to the products you're helping sell. This means you can keep going when issues arise with a given product or seller.
There are also many advantages of dropshipping that affiliate marketers don't see. First, when you learn how to start a dropshipping business, you'll see they are able to scale much more quickly. Since they actively sell products themselves, the work put in directly correlates with the return they see. Affiliate marketers are reliant on the sellers they work with being able to convert traffic into customers. Second, dropshippers can make use of an eCommerce marketplace to make more sales and connect with suppliers. This means they can increase sales by accessing existing markets.
For dropshippers, the BlueCart Marketplace is a great choice to find suppliers or sell your own products direct to consumer, B2B, or both. With over 92,000 buyers, BlueCart offers one of the dropshipping websites on the market and can take your business to the next level.
Amazon FBA vs Dropshipping
Two of the most common ways that eCommerce businesses handle order fulfillment are through dropshipping and Amazon FBA. With Amazon FBA, or Fulfillment By Amazon, you have your product offerings stored in an Amazon-owned warehouse. When an order is placed, the Amazon order fulfillment team will pick, pack, and deal with the shipping and handling of your products. In this way, FBA is similar to a 3PL fulfillment company (see what is 3PL). This can help you grow you business without needing to fill any dropshipping jobs.
It's important to note that Amazon FBA has strict rules regarding the products and methods you can use for your business. For example, you cannot participate in drop surfing or ship products that include a packing slip with another company's logo on it. This means dropshippers who use FBA need to use private label dropshipping, where their own branding is added to all products prior to shipping. Even the use of certain automated dropshipping tools may be discouraged. You can, however, pay for affiliate marketing of your products.
Who Do You Affiliate With?
Affiliate marketing and dropshipping business ideas are both viable eCommerce business ideas. You could also choose to use Amazon FBA and combine the two for a range of dropshipping niches. Pick the one that you know you have the time and skills to invest in, and get to work growing your business and dropshipping profit margin. Working with affiliate marketers is also a great choice for reverse dropshipping businesses. Just make sure to outline all of this in your drop shipping business plan.
Frequently Asked Questions About Affiliate Marketing vs Dropshipping
What is Affiliate Marketing?
Affiliate marketing is when affiliates earn a commission for their advertising and marketing other company products.
What is Dropshipping?
Dropshipping is a kind of retail business that involves sellers managing customer orders without actually keeping those items in stock.
What is Amazon FBA vs dropshipping?
The main difference between Amazon FBA and dropshipping is stock possession. With dropshipping, you don't actually own merchandise. Instead, you are considered the middleman between the suppliers or wholesalers and customers. With Amazon FBA, you invest in the merchandise and keep it in Amazon's warehouse.