Which is better – affiliate marketing or dropshipping? Answer: neither, but there’s always one right for you. Here’s 3 ‘deal-breaking’ questions to help you decide.
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If there’s one thing we hate, it’s being in a dilemma.
- “Should I take my card or risk losing money?”
- “What am I watching on Netflix today — Suits or 13 Reasons Why?”
- “Should I take my jacket out tonight — even though I look this good?”
We answer 101 dilemmas every day, so it’s no surprise when we get a question from a subscriber like this:
“Which online business is better – affiliate marketing or dropshipping?”
This is the topic of today’s blog. And to answer this, I’ll be answering 3 ‘deal-breaking’ questions:
- Which is easiest for beginners?
- What makes the most money?
- Which is the most passive?
Once you’ve answered all three, you’ll have a clearer idea on whether affiliate marketing or dropshipping is “better” for you.
Notice how I quoted the word “better”? I did that for a reason…
Question: Is there really a “better” online business?
If you’ve read our previous blog on choosing the right online business, you’re already aware that there’s no “better” online business. Each online business has its strength and weaknesses — and so do you.
For example, let’s say Mark, 25, who works as a freelance graphic designer, wants to take the leap to start his online business.
He knows there’s several online business ideas he can choose, but he can only pick one. After reading several blogs and binge watching YouTube videos, he finds two ideas he could possibly start: print on demand or digital courses. Which one does he pick?
Pondering over this dilemma, something “clicks” in his mind: he’s good at making designs. A huge, HUGE skill needed in print on demand. From here, you can probably guess the option he eventually chooses in the end (print on demand) – but can you see WHY?
It’s because Mark already had a skill suited for his idea. This drew him closer to print on demand and allowed him to build a business around his passion.
Although Mark was drawn closer, the exact same dilemma could’ve repelled Cathy — who sucks at art.
Unlike Mark, Cathy works for a local corporate firm as an SEO expert, so LOVES writing and having it read by thousands of people (a big piece needed in creating a successful digital course). As you can tell, she ends up choosing digital courses as her main idea.
Both Mark and Cathy chose different businesses based on their STRENGTHS, not because one was “better.” The same applies to you. Any online business you choose is only “better” based on YOUR perception, skills and personality.
That being said, it’s worth seeing all of the moving parts in both affiliate marketing and dropshipping, for a clearer picture of how each model works and which one resonates with you.
What is affiliate marketing?
Affiliate marketing is making money promoting other people’s products.
And that’s it — a super, simple concept.
Many blogs and websites use affiliate marketing as a way of making money through ads, articles and promotions. And the way it works is:
Step 1: You find a $200 product offering a commission — say, 50% per sale — to affiliates who promote it.
Step 2: You join their affiliate program, then head on over to YouTube and create an honest video review about the product.
During this step, you’ll also add an ‘affiliate link’ to your description.
This is a unique URL the vendor created for you while signing up – and tracks whether a customer has been referred from you. (Basically, it’s how you get paid)
Step 3: When someone sees, and most importantly, gains real value from your video – they reward you as a ‘thank you’ for the value provided, by purchasing the product you promoted through your affiliate link.
Unlike other models, affiliate marketing lets you build a business even without a product or service to offer making it super beginner friendly.
In fact, here at Wholesale Ted, a sum of our earnings is made by promoting products we’ve personally used and love. One of these products is Shopify – a beginner friendly eCommerce website builder we recommend our subscribers use when building an online store.
There’re many ways to promote a product — email marketing, paid ads, a blog article — but we choose something different, and 10x more powerful: video.
Instead of just promoting Shopify, we built a tutorial around how to use it. A strategy 10x more powerful than the others because 1) people love videos (duh!), but more importantly 2) we provided MASSIVE value.
And we’ve learnt that when you provide real, authentic value, you get rewarded with commissions like this:
That’s a $10,272.33 pay out from Shopify in the month of April.
And no, that wasn’t just a one-off: we make $10,000+ worth of passive income every month promoting Shopify. This means our whole team could take a month’s trip to the Bahama and still generate this kind of income.
That’s another advantage of affiliate marketing. Once you’ve put in the hard work upfront, it basically runs on auto-pilot. You could take a two hour nap, then check your phone and see you made an easy $400 while sleeping.
Do you think we actively worked to make $10,000? Of course not. We simply uploaded a video on YouTube, slid in our affiliate link — then left it. Those sales were made voluntarily, as a reward for the value we provided.
Note the word “value”, because that’s the secret: As long as you add value promoting a product, making money becomes second nature.
What is dropshipping?
Dropshipping takes a different route — but just as profitable.
Instead, with dropshipping, you dropship cheap, unique items on Aliexpress that you sell in your online store. By “dropship”, I mean have your supplier ship the item to the customer.
Here’s a walkthrough of the model from start to finish.
Step 1: Find a product to sell. Dropshippers on Aliexpress have a catalogue of items that they manufacture and sell to you at individually at Wholesale prices.
Pro tip: The key here is choosing unique, exciting products. Not “everyday” items you can easily find at the store.
Step 2: You list those items in your store with a big mark-up. For example, you might buy a mug for $3 on Aliexpress, but price it for $10 in your store.
Pro tip: Use the “3x method” when pricing items in your store. For each product you buy, price it at 3x the price you bought it for.
Step 3: A customer comes and buys the item from you for $10. You then go to the dropshipper and buy it for $3.
Pro tip: Use upsells and cross-sells to maximise your AOV (average order value).
Step 4: Your dropshipper ships it directly to your customer, and you keep the difference in profit.
Pro tip: Use apps like Oberlo that can semi-automate this process for you.
It’s a powerful model — one we teach a lot on our channel, in our free eBook and even built a step-by-step premium course around.
Now you’re familiar with how both models work, the next step is finding out which one is for YOU — starting with the first question:
Question #1: Which is easiest for beginners?
There’s no clear winner when it comes to this question: both business models have their own advantages and disadvantages.Affiliate marketing become easy when your affiliate partner is established and built trust online.
Think about it — would you rather purchase something from Amazon, or a site you only just found the other day?
Obviously you’d choose Amazon, because you either trust them or see them as an authority online, or both.
And so as an affiliate, promoting offers that have this trust and authority in their niche is an easy way to increase conversion rates, because people will feel comfortable purchasing from them.
This is different with dropshipping.
When running an ad on Facebook, you only have so much to show for yourself, especially as your store is still “fresh.” Apart from images and a space to put in your copy, you have no other way of displaying trust. And definitely don’t have a chance to leverage someone else’s credibility.
Now, of course there are workaround solutions. Using sales psychology, learning copywriting, and gaining reviews are all powerful ways.
BUT, none of these are “easy” to learn — and require years of studying, implementing and immersion to master. (Not so beginner friendly)
On the other hand, with dropshipping, your store is usually in a less saturated market for Facebook ads.
For big, profitable affiliate products, a lot of affiliates will be trying to run Facebook ads directly to offers, making traffic competitive, and well — expensive.
In addition, you have larger profit margins to work with when dropshipping, which also helps make it easier to create profitable Facebook ads. This is very relevant as Facebook ads are probably the easiest source of traffic for beginners.
Question #2: What makes the most money?
Dropshipping has the highest potential to make money.
When you create a store and sell products in it, you are building up a list of buyers you already KNOW are interested in the products that you sell.
So, if you have a store selling products related to Astrology, then you know that people who purchase items in your store are interested in products related to Astrology – and you can send out emails to them in the future promoting similar products and make more sales.
This gives you control — if Facebook shut down today, it wouldn’t be a problem because you already have a list of buyers who you can remarket to in the “back end”. You don’t rely on someone else’s platform for your business to survive.
And also, a sneaky trick that only the 1% of dropshippers do: You can promote affiliate offers in your email list. You can combine BOTH models together (sell physical products in your store and digital products in your email list) to get the best of both worlds. Sort of like having your cake and eating it too.
With affiliate marketing, you are helping your merchant build a list, NOT yours. And they will take the buyers that you worked hard and spent money on and send them a lot of emails promoting more of their products.
And unless you are using a sales funnel to capture these buyers you can remarket to, you’re making one-off sales.
Question #3: Which is the most passive – affiliate marketing or dropshipping?
Affiliate Marketing is a more passive business model than dropshipping.
In dropshipping, if a customer comes to your cat store and buys your “cat spoons”, you don’t just receive money. You have to:
- Go to Aliexpress
- Order the item
- Get it shipped out to your customer
You have to do these four steps — every time a customer orders.
Now with 4-5 sales per day, that’s pretty easy to do. But, with 20, 30, 40 orders per day? You’ll barely even have time to work ON your store, since you’re so busy working in it.
Asides that, there’s customer support and messages left by customers you have to reply to. You can in-time make your business a lot more passive by hiring staff to run it for you, but you’ll also need to manage those staff members too.
Affiliate marketing is much more laid back. Instead of you having do the “dirty work”:
- THEY send the products out to the customers
- THEY fulfil the orders
- and THEY answer all the customer emails
While there still are housekeeping tasks required of you, they only take 1-2 hours of work to do — and could easily be delegated to another staff.
At the end of the day, EVERY business has their pros and cons and will equally require hard work, dedication and commitment.
Both models are great — you just need to find one that works for you.
- Do you want more control over your customers, or would you rather leverage other brands?
- Do you want a business that’s completely hands off, or would you want to be largely involved in its daily management?
- Do you hate having to deal with customer service, or do you mind all of the hassle?
And you know what? Maybe you will try an online business and fail — and that’s okay! In life, you can only see what’s right for you by testing it first.
And if it doesn’t come out as planned, who cares? You’re still 10 steps ahead of the person who takes forever to decide what business to start — instead of actually starting it.
What is 10x more important than picking an online business to start, is taking massive action.
Want to learn the blueprint wildly successful dropship stores follow to make six-figures?
Six steps to building a six-figure Dropship store
In it, I’ve included:
- How just one “winning item” can earn $10k/month. Yep. A lot of people don’t realize this… but most stores make the majority of their money from just a handful of items!
- The right way to choose AliExpress suppliers. Picking the right AliExpress dropshipper is crucial to drastically reduce things like refunds. Learn how to pick the right suppliers.
- Why long shipping times DON’T matter. A lot of people are scared to start Dropshipping because of “long” shipping times. You’ll learn why this doesn’t matter inside.
- Why six-figure stores take ONLY 2 hours a day to manage. You’ll learn how they utilize apps like Oberlo to make their stores semi-automated… making managing orders super simple!