28Dec
By: Nicole Martins Ferreira December 28, 2016

Most entrepreneurs fall into two key categories: dropshipping vs affiliate marketing. Dropshipping is when the manufacturer carries the inventory and ships it to the customer on your behalf. In dropshipping, you set your own product prices and are responsible for marketing. Similarly, in affiliate marketing the merchant also carries inventory and ships the product. However, while you’re still responsible for marketing, you don’t get to set the product price and only receive a commission. In this article, we’ll explain the pros and cons of dropshipping and affiliate marketing to help you determine which is more profitable.

Drop shipping Vs Affiliate Marketing: Similarities

While dropshipping vs affiliate marketing have many differences, they also have quite a few similarities.

  • Both allow you to start a business without requiring inventory or shipping goods
  • Both are relatively low risk business models
  • Both have high earning potentials
  • Both are easy to start working on immediately
  • Both require similar skillsets such as the ability to create ads, drive traffic to a landing page and other marketing skills
  • Both businesses can be started for a relatively low price

Let’s look at the pros and cons of both starting a dropshipping and affiliate marketing business.

Dropshipping Vs Affiliate Marketing: Affiliate Marketing Business Pros

No cost for being an affiliate – When running an affiliate marketing business, the costs are generally quite low. There’s usually no fee for the affiliate to pay as the merchant usually covers administrative fees on affiliate networks like Clickbank or Amazon Associates. The only costs that an affiliate typically pays for are their own website and server keeping costs low. However, as an affiliate marketer, you’re required to pay for the marketing costs as you’re the person driving traffic to the merchant’s website. Yet, as it is a business expense, you’ll likely be able to write it off during tax season. Overall, the costs for being an affiliate marketer is quite low.

Excellent source of passive income – An affiliate marketing business is an excellent source of passive income. There’s a bit of upfront work to figure out your ads or produce content to help convert the sale. However, once that’s done you can have ads running in the background while you make money. You don’t have to worry about creating a product. You don’t have to worry about shipping a product. All you need to do is make sure you’re sending highly targeted traffic to the merchant’s landing page to ensure a conversion.

No customer support to worry about – In an affiliate marketing business, the affiliate supplies the merchant with their leads. Thus, you’re not necessarily the product expert. As a result, the merchant handles all customer support issues. If the customer isn’t satisfied with their product, the merchant handles the refund. If a customer needs help with a specific aspect, the merchant is responsible for helping them. Thus, when it comes to customer inquiries all you need to do is direct customers to the merchant.

Dropshipping Vs Affiliate Marketing: Affiliate Marketing Business Cons

You only make a percentage of every sale – When doing a comparison between dropshipping vs affiliate marketing, the biggest disadvantage of affiliate marketing is that you’re paid in commissions. You might’ve just spend $100 in ads only to make $50 back in commission fees. The payout for affiliate commissions is generally a lot lower than dropshipping. Even if your commissions are several hundred dollars, odds are the cost of the product is higher which means finding the right people will cost more as well. Also, you don’t have the opportunity to set the price. For example, if people are interested in the product but feel the cost is too high, you can’t lower it to meet the demand of your audience. In addition, since you can’t set the price of your earnings, you’ll likely make a lot less than if you were the merchant yourself.

Payments may be delayed – In the battle between dropshipping vs affiliate marketing, an affiliate marketing business may have difficulty managing finances as some merchants may be unreliable with their payment deposits. There are many great affiliate programs that make payments on time. Yet, sometimes, one of the companies you’ve chosen to be an affiliate for doesn’t pay on time. Also, sometimes merchants are in the process of closing down or declaring bankruptcy while an affiliate is hard at work trying to make their commissions. In the event that a merchant declares bankruptcy, the affiliate marketing business loses the money spent on ads while also not receiving their commissions.

People can remove the affiliate link – Sometimes, if you don’t use a link shortener, people can hover over the link and see that it’s an affiliate link. As a result, they may assume that it costs more to buy through the link not understanding that you only receive a commission. Thus, people may choose to manually go to the website you’re recommending directly without clicking your affiliate link. Since they didn’t click on the link, the merchant gets to make 100% of the profit. Thus, making your marketing efforts less successful. Many people are skeptical or dislike affiliate marketers. They feel like they’re being scammed, even when the truth is they’re not. It can be hard to convince people to trust trust you and have them to click your link. In some countries, you need to disclose to your audience that the links you’re providing are affiliate links. Thus, making it even easier for a person to avoid clicking the actual link.

Dropshipping Vs Affiliate Marketing: Dropshipping Pros

Dropshipping is a low risk business model – When comparing dropshipping vs affiliate marketing, dropshipping tends to be a little less risky in various ways. First, like an affiliate marketing business, dropshipping doesn’t carry inventory nor does it ship goods. This makes both models pretty low risk. However, with dropshipping, the risk is even lower as your funds become available each week. With an affiliate marketing business, there may be thresholds you need to reach before you can cash out your first cheque. For example, if you’re an Amazon affiliate outside of the US, you can only be paid by cheque or gift card. However, to receive the cheque you must have made at least $100. Yet, not everyone succeeds at making $100, when the percentages are really low. With dropshipping, you get paid what you made.

Dropshipping allows you to have high margins – When deciding between dropshipping vs affiliate marketing consider how much money you can actually make. The commissions in an affiliate marketing business can often be low in comparison to a dropshipping model. When dropshipping on AliExpress you can buy a product that costs $1 and sell it for $19.99 allowing you to keep a substantial portion after marketing costs. With affiliate marketing, commissions are a percentage of the product. Yet, when you factor your percentage, marketing costs and any other expenses, you’re left with a much smaller percentage. When comparing affiliate marketing vs dropshipping, you’ll likely be better off financially as a dropshipper.

You’re building an asset – When you dropship goods, you’re building an asset – your brand. With dropshipping, you’ll have your own professional website. You’ll make enough money to invest in advertising, content and other traffic and money generating techniques. In a year from now, if you decide you want to move onto another niche, you can sell your business to someone else. However, not all affiliates have their own assets. Some affiliates make their money by creating YouTube videos. Yet, you’re not allowed to sell your YouTube channel. Between dropshipping vs affiliate marketing, you’re better off with dropshipping.

You have multiple chances to lure in a customer – When dropshipping products, you can easily retarget your audience to help convert the sale. With affiliate marketing, since you’re sending the traffic to another website, you have no control over retargeting. With dropshipping, the traffic comes to your own website. Also, you have control over the optimization of your landing pages, product copy, website design and more. The checkout will also match your website’s branding. As you have more control, you better your odds of attracting a customer and converting them.

Dropshipping Vs Affiliate Marketing: Dropshipping Cons

You need to manage customer support – The main downside to dropshipping is that as the store owner, you’re responsible for customer support. Fortunately, you can easily outsource the customer support to someone who specializes in it on Upwork.com for an affordable price. All you need to do is provide guidelines and general responses for the customer support representative to follow. By outsourcing this component, you free your time up to focus on marketing and optimization which allows you to grow your business faster.

How can I boost my income as an affiliate marketer?

While we’ve been comparing the differences between dropshipping vs affiliate marketing, they share a very similar skillset. Both dropshippers and affiliate marketers excel at generating traffic and marketing.

If you’re great at affiliate marketing, there’s no need to stop doing it. It’s about taking your efforts to the next level. The most profitable way to grow as an affiliate marketer is to add a store to your website. For example, if you’re an Amazon affiliate promoting fashion you can add integrate dropshipped goods to your store.

Since you already have an audience, adding a store is an easy way to monetize them. In addition, the amount of work required for a store is mostly upfront work of adding products and writing product descriptions. Afterwards, all you need to manage are your orders, marketing and customer service. You can even outsource some of the work to make the workload even lighter.

If you’re skeptical about whether or not dropshipping is for you, test it. You can slowly introduce dropshipped goods to your audience by choosing relevant products with high reviews and order volume to ensure best results.

Dropshipping vs Affiliate Marketing: Why will running a store will make you more money?

Running an online store makes you more money for the following reasons:

  • You set your own product prices which is higher than affiliate commissions
  • Dropshippers earn far more from physical goods than affiliates do
  • You have a better chance of going viral or having a really successful ad campaign
  • You can have affiliates send YOU traffic when running a store
  • Customers will be more likely to come back to your website to buy more when dropshipping whereas when customers of an affiliate tend to go to the website you referred them to
  • The cost of goods is low (allowing you to set affordable pricing for customers while having high margins)
  • The everyday workload is light saving you time (time is money, of course)
  • You can build a bigger audience as you’ll be your own brand
  • You know through high order volume and reviews if the product will be an easy sell

How to start dropshipping?

Starting a dropshipping business has never been easier, or cheaper. You can dropship any of the millions of AliExpress products through Oberlo. Oberlo offers a forever free Starter Plan that allows you to start a dropshipping business at no cost.

With the Starter Plan, you’ll be able to:

  • Import each product with only 1-click
  • Process orders in only a couple clicks
  • Generate a sustainable income for yourself
  • Set your own product prices to increase your margins
  • Get free advice from other entrepreneurs in the community forum
  • And more!

Start your dropshipping business for free today!


  • Chris Laymon

    Nicole, I’ve looked into affiliate marketing, but never really thought about a drop-shipping business.
    Thanks for making me think!

  • Nicole

    Hey Chris, no problem! I started out as an affiliate marketer years ago and made the switch about a year ago. If you have any questions, let me know!

  • Chris Laymon

    Thank you!

  • Hi Nicole,

    I am having the dilemma of not knowing which business model to choose! I have done Affiliate Marketing before but my sites got whacked by Google as they were a bit thin and he got demoted to the 5th page never to return no matter what I tried. The landscape seems a bit different now and I am considering having another try but now Dropshipping with Aliexpress seems he flavour of the month so not sure which to try.

    Reading your post there doesn’t appear a clear winner!

    Kind regards
    Brian

  • Nicole

    Hey Brian,
    I actually started out as an Amazon affiliate several years ago. I got penalized for the same reason on one of my websites – a board game site. I didn’t make a lot of money – it was really early in my career and the margins were bad. It’s a hard lesson to learn but it does make you a better entrepreneur. I found that the margins as an affiliate weren’t really sustainable for me. I got into dropshipping by doing print on demand but once again ran into the same issue. I currently do AliExpress dropshipping and I find that the margins are way better. I’m also making much more money since my ads are more profitable. I also have room to reinvest my profits into more ads to make even more money. For me the clear winner is AliExpress dropshipping. Dropshipping with AliExpress has been better in terms of order volume, revenue, profit, conversions. That’s my personal experience.

  • Hi Nicole,

    Thanks for that!

    Did you follow a course or did you just learn it on your own? One of my reservations with the Aliexpress model is the shipping time and the issue that sometimes products don’t turn up! How do you get around that, do you just state that right up front that is can take up to 60 days for delivery?

    Kind regards
    Brian

  • Nicole

    Hey Brian,

    I went to school for PR (type of marketing) so AliExpress dropshipping seemed like a natural progression. I’ve taken courses in the past for sure though. All of our products (on my personal store) are ePacket which has arrived to customers in as little as a week and as late as a month. You can be upfront about how long shipping takes. The issue with products not turning up isn’t an AliExpress issue. I recently returned a BeachBody product to another city in my province and they never got the package. It happens. The number of missing packages is actually low in the grand scheme of things.

  • OK, thank you for your reply!

  • christian

    Hi Nicole ,

    I’ve been thinking about both affiliate marketing and drop-ship but just not sure where to start

  • Nicole

    When I first became an entrepreneur I started as an affiliate marketer with Amazon. I didn’t make much money and I couldn’t reach the threshold to cash out. It was mostly due to marketing inexperience back then. But also had to do with really thin margins. Eventually, I transitioned into dropshipping via print on demand with Printful – again margins were bad. For the past 5 months, I’ve been dropshipping via Oberlo and our sales skyrocketed because we had enough profit for us to reinvest back into the business.

  • christian

    Nicole,
    Thanks for commenting back. What would you recommend be my first step too starting

  • Bobby Chahal

    Hi Nicole. First of all, thanks for the detailed article.
    I have been in blogging since 2015. As 2 years have been passed , I am looking for something different. Actually I am an adsense niche blogger and not happy till now as the income is not stable. It is all about relying on google everytime. So I started to explore the affiliate thing but that too didn’t work for me. (May be lack of knowledge or strategy).
    I have been thinking for a drop shipping store. Do you think that it can yield some positive results.
    I am hard worker too so I can Invest my time in everything (money too no doubt).
    Can you share the guides which I should before I start for something?

  • Nicole

    Figuring out which niche you want to work in. Maybe looking at some stores in the niche to figure out it’s scalable and profitable. Then, opening up a store on Shopify and installing Oberlo. When it comes to setting up a store this is a good article – https://www.oberlo.com/blog/how-i-launched-my-ecommerce-store-in-less-than-30-minutes/

  • Nicole

    Are you looking for a new niche? Or are you looking for a new stream of revenue? If you have a two year old blog with great traffic it might be a good idea to keep it but change your revenue stream. Does your niche relate to certain products? You don’t have to share your niche with me btw. When it comes to commissions whether from Amazon, Google or other affiliate network, they’re often quite small. Keep in mind marketing is one of the biggest costs so as an affiliate marketer you’re paying for their traffic but only receiving a small percentage back. For me personally, my business started taking off for the first time in three years after I started dropshipping with Oberlo. I know from first hand experience that it is possible to make money with it. I’ve tried making money in every way prior to this too – Amazon affiliate, writing ebooks, starting blogs, print on demand. But none of them really made much money. If you’re still passionate about your niche and can turn it into a dropshipping store, you’re evolving your business instead of starting from scratch. I would keep your old content if you’re getting organic traffic. I might change the blog layout to make it look more like a store.

  • christian

    Thank you so much Nicole,
    Great info. If you could give any advice on how to use Ali-Express.
    And in your opinion would you use Amazon or Shopify

  • Nicole

    What specifically do you need help with in terms of AliExpress? Right now I’m using Shopify. However, Shopify and Amazon recently partnered and you can add Amazon as a sales channel so I’m testing that right now.

  • Nice article. I’m interested to use Oberlo. Is there any Oberlo plugins that works on WordPress using WooCommerce platform?

  • Jerry D Prevatt

    Nicole; I’m very interested in dropshipping, however, I find that a lot of products listed by AliExpress are less expensive on eBay. Also, AliExpress has lots of negative feedback in their Facebook comments. I’m wondering why you’re promoting this company with all this negativity?

  • Nicole

    Hey Jerry, for your first point. Sometimes the ebay prices are lower because the AliExpress seller is also selling on those channels. Often times, AliExpress sellers (the manufacturers) post their products on multiple marketplaces like Amazon, ebay, and of course AliExpress because they can obviously offer the best prices so it works well for them. For your second point, it’s true that there are a lot of negative articles about AliExpress. But you can find negative articles on everything. While I do write for Oberlo, I also own my own Oberlo store where I dropship products from AliExpress. Our refund rate is about 1-1.5% which is actually pretty standard in business. And for the most part, my customers are happy with their products. AliExpress is one of the biggest ecommerce marketplaces and of course there are gonna be bad apples. But for the most part they’re actively trying to remove knockoffs from their marketplace. Also, and I’ve experienced this first hand, as a dropshipper on more than one occasion AliExpress has actually taken my side when having issues with suppliers not delivering ePacket when they say they’re going to. So as a store owner, I geniunely see effort on AliExpress’ part to run an ethical and legal business.

  • DOMENICO PUPILLO

    Hello, thank you for your very informative article Nicole, i cant wait to start my dropshipping ws. I only have a doubt: When supplier send the article ordred they will have theyr own pakege. So the costumer will see the chines label and the supplier prize. How to avoid this please?

  • Sulis Hartati

    Hi…thanks for your nice article Nicole…I am just looking for such information regarding the dropshipping business…I was just starting this business model by Shopify running in 6 month. I use Oberlo also…But til now I got only 7 sales….I used Pinterest as the marketing model even use Buyable Pin…but wondered why I have only little sales…Can you please review my website…what’s happened with my website almost the last 3 weeks I got no sales…thanks for your support

  • Wes Grasty

    You might want to consider moving to Shopify. If you have any pain points with WooCommerce, most of them will go away!

  • Jamila

    Hi Nicole.. fantastic read. I have been meaning to dropship for a couple years now but havr been afraid that the packaging from China will not match my brand image.. is there any way to het past this and offer my own labels, thank you notes etc. In your experience have u worked with a supplier who will custom package or private label niche products for me? I own an eco friendly products estore. I assume with high sales i may be able to negotiate this but can it be done with a new business? Thx again. JM

  • Darrell H

    Hello NMF , are you in Toronto ? Awesome . Great Info , Great Info..Im with it now. I Need You by my side (business of course:) We can move mountains (dropshipping and helping others, of course). thx again , Darrell Hollinquest …new ideas brewing constantly,,,Love it