It’s no wonder so many of us are eager to join the eCommerce industry with the growing trends in profitability. According to Statista, e-commerce sales worldwide are expected to reach 7.4 trillion U.S. dollars in 2025.
Since the industry is booming, the opportunities are endless. With this in mind, the two leading eCommerce methods are dropshipping and affiliate marketing.
When it comes to choosing a successful eCommerce business model, most people can be indecisive about affiliate marketing vs. dropshipping. In this article, we’ll learn what each model is, how they work and which one is the better model among the two.
What Is Affiliate Marketing?
As we now know, affiliate marketing is one of the most popular eCommerce methods. As an affiliate marketer, we earn money by promoting other companies’ products and services.
When we participate in affiliate marketing, we don’t need to worry about having a store, processing orders and payments, or providing customer service. Ultimately, we must have a blog or website that receives lots of traffic to be able to promote various products and services.
With this in mind, the first step to affiliate marketing is finding and working with a third party to promote their product. Let’s take an electric toothbrush as an example. We can promote this product by writing reviews and highlighting unique features to attract our customers to click on the promotional link.
To elaborate, we provide an affiliate link to our audience and persuade them to click on it. When our viewers click on the link, the conversions are tracked to us, and we earn a commission on a per-click basis.
Overall, we can earn money quickly and easily with affiliate marketing. With this information in mind, let’s look at the pros and cons of affiliate marketing.
Pros
- Passive income
- Low-cost startup
- Low risk
As an affiliate marketer, a company pays us a percentage of its earnings from the promotional link we advertise to our audience. As such, affiliate marketing provides us with a passive income. In general, it requires little to no starting capital as we do not need to pay for any standard overhead fees like operating a store.
Since the startup and operational costs are low, affiliate marketing is a low-risk business model. As we do not need to run a traditional type of business, we can focus on promoting products and increasing website clicks.
Cons
- High level of competition
- Commission based payment
- Requires patience and planning
While affiliate marketing comes with great benefits, there are drawbacks. The most significant one is the high level of competition. As affiliate marketing is easy to start and low-risk, many people can become affiliate marketers. Thus, we must always fight for the top spot amongst the competitors.
Moreover, as affiliate marketing is commission-based, we only receive an income if our audience clicks on the promotional links. Although affiliate marketing can be a great source of passive income, it can be difficult to attain higher profit margins with a commission-based salary.
Similarly, affiliate marketing requires patience and planning. As such, we need to continuously test and optimize our content to ensure our click rate is through the roof! Otherwise, we will struggle to earn our money. However, if we dedicate time and planning to it, we can achieve our goals.
What Is Dropshipping?
Another eCommerce method that brings in significant profits is dropshipping. Dropshipping is an eCommerce business model where we fulfill customers’ orders without holding inventory. Instead, we partner with a dropshipping supplier who keeps the inventory in their warehouse and delivers the order to our customers.
In other words, as dropshippers, we act as a middleman between the customer and the supplier. The best part is that we only have to pay the supplier after selling the product.
With that said, the first step of dropshipping is to find trending products to sell in our store. Let’s assume a dropshipping supplier sells a computer table that costs $100. As a dropshipper, we list the computer table for $150 in our store and market the product.
Then a customer orders from our store, and our dropshipping supplier delivers the product to our customer. Finally, the customer pays us $150, and we pay the dropshipping supplier $100 to make a $50 profit.
Now that we know how dropshipping works, let’s look at the pros and cons of the business model:
Pros
- Low startup budget
- No need to hold inventory
- Low risk
- Scalability
Dropshipping is a low-cost business model that allows us to start with little to no initial capital. In fact, we can sell without holding inventory of the product beforehand. Thus, we get to keep most of our profit without overhead fees.
Additionally, we only pay for the products once we sell them. As we do not have to pay for products in advance, the risks are minimal. Gradually, we can scale our business quickly by listing and fulfilling more orders to increase our profit margins.
As a rule of thumb, we must ensure that we add products similar to our best sellers when listing products. In the same way, marketing, providing excellent customer service, and optimizing product pages help us increase sales even more.
Cons
- Highly competitive
- No control over stock availability and shipping times
- No control over product quality
On the downside, the dropshipping industry is highly competitive, with many people selling similar products. However, we need to research products and find a unique niche to beat the competition.
Since we are dropshipping, we depend on our suppliers’ stock availability and shipping times. In the same way, there is no control over the quality of products sold in our stores. After all, we never get to see or check them. That is why we must research dropshipping suppliers before we begin to work with them.
Affiliate Marketing vs. Dropshipping
As two of the best eCommerce methods, affiliate marketing and dropshipping both have pros and cons, but which is superior? To get a better idea, let’s look at their main similarities and critical differences.
Key Similarities
- Low effort
- Requires a third party
- Low-risk
The first similarity between affiliate marketing and dropshipping is that both models require low effort. In addition, we need a third party because we are marketing and selling other’s products in both cases.
Lastly, the two methods don’t require us to pay for products in advance. Instead, they require us to drive website traffic and ultimately increase our profit potential. Therefore, both of them are low-risk business models.
Key Differences
- Profit margins
- Generated traffic
- Order fulfillment
- Customer service
- Business automation
While affiliate marketers earn a fixed commission, dropshippers can set their profit margins. In most cases, dropshippers earn much more than affiliate marketers. Moreover, affiliate marketers generate traffic on others’ websites while dropshippers generate traffic for themselves.
Another key difference is that dropshipping requires order fulfillment, whereas affiliate marketing doesn’t. Also, dropshippers have to handle customers, whereas an affiliate marketer doesn’t deal with customers at all.
Unlike affiliate marketing, we can automate a dropshipping business with automation software. For instance, AutoDS is a dropshipping automation software that helps automate our business operations. Its features include product importing, price and stock monitoring, order fulfillment, and more. With the use of these automated tools, we can easily scale a dropshipping business.
Which Is Better – Affiliate Marketing Or Dropshipping?
Now that we know the key differences and similarities between affiliate marketing and dropshipping let’s see which is better. While these eCommerce methods can create a generous passive income, dropshipping is the clear winner. And here’s why:
- Branding
- Higher profit margins
- Scalability
- More website traffic
- Loyal customers
The first advantage of dropshipping over affiliate marketing is the ability to build a brand. Although we are selling a third-party supplier’s products, we can use various branding techniques to stay ahead of the competition. For example, we can utilize private label dropshipping, which increases our brand awareness.
Furthermore, we have more control over our profitability. We choose our profit margins instead of getting a small fixed profit on every sale. For example, high-ticket dropshipping is much more profitable than earning a small percentage commission from affiliate marketing.
Correspondingly, dropshipping allows for more scalability than affiliate marketing. With the help of automation tools for product imports and price/stock monitoring, we can automate our day-to-day operations.
For instance, AutoDS Products Importing allows us to import thousands of products from our suppliers’ page in a few clicks.
As such, we can dedicate the time we save from not having to manually operate our business to marketing and providing exceptional customer service.
With this in mind, marketing ultimately increases our website traffic. Rather than driving traffic to a third-party website as an affiliate marketer does, we can focus on increasing our dropshipping store’s traffic and thus, generating higher sales.
Finally, we can work towards building a loyal customer base. Instead of redirecting customers to another company’s website, as an affiliate marketer would, we can convert them into loyal customers by providing valuable items and customer support.
While affiliate marketing is great for generating passive income, dropshipping is much more lucrative over the long term.
Can We Combine Affiliate Marketing And Dropshipping?
Undoubtedly, running a dropshipping store is more profitable than affiliate marketing. But can we combine both models to our advantage? The answer is yes.
Both affiliate marketing and dropshipping are excellent eCommerce methods, and combining them can help increase profits. Let’s find out how.
When customers purchase products from our stores, we retrieve their contact information for tracking purposes, such as their email addresses. With this information, we can utilize email marketing.
With the help of email marketing, we can retarget the customers and send them email promotions with our product reviews coupled with affiliate links. This requires a lot of work and knowledge in the eCommerce field. Therefore, it’s better to start with a dropshipping store and gradually build an affiliate marketing section once you start getting sales.
While combining affiliate marketing and dropshipping can undoubtedly increase profits, doing so requires experience and expertise in the eCommerce field.
Final Thoughts
Now we know all about affiliate marketing and the dropshipping business model. Plus, we can stay ahead of our competition by combining the two eCommerce methods.
So, if we want to start earning high-profit margins, dropshipping is the best option to do so today. Once we build our store, we can automate it with dropshipping automation software to continuously scale our business.
To sum up, if you want to acquire more dropshipping techniques, tips, and strategies, these articles will help take your store to the next level:
