Affiliate Marketing Vs Dropshipping: Which Is Better?

Affiliate marketing vs dropshipping.

It’s one of the hottest rivalries in the entrepreneurial world.

Like thousands of historic rivalries that have come before — The Beatles vs The Rolling Stones; cats vs dogs; Fischer vs Spassky — it’s fiercely contested and debated, with both sides certain they’re the smart ones.

Speak to any affiliate marketer and they’ll tell you how it’s a highly attractive business model for publishers and brands alike.

In the US alone, spending on affiliate marketing is predicted to exceed $8 billion in 2022, with 81% of advertisers investing in the channel.

To which the average “dropshipping head” might respond:

“Sure, that’s impressive. But did you know dropshipping e-commerce stores were worth more than $128 billion in 2020?”

Fact is, there’s lots to like about both dropshipping and affiliate marketing.

Both have low barriers to entry.

And both offer lots of earning potential.

So it’s no surprise that both are becoming increasingly popular.

As affiliate marketers ourselves, we obviously have our favorites. 

But at the same time, we’re always open to new opportunities, and we can’t deny the appeal of launching a dropshipping store of our very own.

So which is best?

Let’s dive into our head-to-head analysis of drop-shipping and affiliate marketing.

Dropshipping Vs Affiliate Marketing: Pros & Cons

What is Dropshipping

Dropshipping is a method of order fulfillment by which the vendor doesn’t actually stock the products they sell.

Instead, they buy inventory from a third party — typically a manufacturer or wholesaler — as required (i.e. when a customer places an order).

As such, the vendor acts as a middleman between customer and supplier.

Dropshipping Business: Pros

1. Get Paid Straight Away

One big positive of selling dropshipping products is that you don’t have to wait around for weeks (or even months) to get hold of your hard-earned cash.

You sell something; you get paid.

No minimum sales threshold. 

No Net 30 payment terms. 

No muss; no fuss.

In reality, if your dropshipping e-commerce store takes off, it’s doubtful you’ll immediately transfer every payment straight into your bank account the second a sale comes in.

But it’s definitely nice to access your earnings without some third-party business holding onto them for a month.

2. Greater Control

As you know, we love affiliate marketing.

But the reality is that you’re always going to make more money for someone else than you’ll earn yourself.

At the same time, you can’t randomly decide to offer a discount or run a promotion, because it’s not your business. You’re just a referral partner.

It’s not like that with a dropshipping store.

You manage the prices, you control the incentives.

If you want to drive volume, you can launch a flash sale.

If you want to increase average order value, you can introduce a multibuy offer.

Already built a loyal audience? Great! Now you can potentially raise your prices and improve your profit margins.

The choice is yours.

In this way, dropshipping is arguably more like running a “real” business than affiliate marketing. 

3. More Scope to Retain Customers & Own Your Audience

Clearly, I’m not saying there’s no way for an affiliate business to build a loyal audience.

But it’s arguably easier to do so as a dropshipper. 

That’s partly down to the previous point: control.

By setting your own prices and promotions, you have more ability to control your messaging, which in turn helps you build a more unique proposition.

Nail your proposition and you’ll go a long way to attracting customers and driving repeat business.

There’s another important element to this, too:

As a dropshipping business, you have full control over the customer data you generate.

That means you can retarget your own website visitors with paid media campaigns, helping to bring people back to your site and improve your conversion rate.

It’s more difficult (and sometimes impossible) to do that as an affiliate marketer, for two main reasons:

1. You’re driving the potential customer away from your affiliate website and toward a third-party online store (or some other kind of affiliate partner).
2. Your margins will typically be lower, because you only earn a percentage of every sale.

Dropshipping Business: Cons

1. You Need to Manage Customer Support

Affiliate marketing is a classic example of a hands-off business.

Someone hits your affiliate link, heads to a third-party ecommerce store, and makes a purchase.

Once they’ve been referred, the affiliate’s work is over. All the other stuff is the responsibility of their affiliate partner.

With a drop-shipping business, that’s simply not the case.

The potential customer doesn’t care about the finer points of the dropshipping business model; it doesn’t matter to them whether or not you actually carry inventory.

That means they’ll definitely expect you to handle customer service.

If something goes wrong, you’re the one who needs to sort it out.

An online business that started out as a side hustle can quickly become a huge drain on your time, with lots of chasing up customer orders and responding to queries.

Being a successful dropshipping store owner is a lot of work, so it’s no surprise that many choose to outsource the customer service side to a third party.

Freelancers and specialist agencies earn a tidy income by offering these services to overworked dropshippers.

2. Little Control Over Fulfillment

Okay, so maybe managing customer support doesn’t sound like such a bad thing.

After all, you might enjoy talking to customers and helping them out.

But that leads us to another frustration of dropshipping: you don’t actually have much control over the whole shipping process.

Yet the customer will still hold you accountable for making sure their purchase turns up on time.

While suppliers obviously won’t go out of their way to annoy your customers and risk damaging their relationship with you, they have their own priorities and challenges.

If they’ve just received a huge order from another ecommerce store, they might not be too concerned about hitting the delivery date on the single pair of sneakers you sold.

To make matters worse, you might find yourself with little or no transparency over what’s going on.

You’ve been sent a shipping order ID, but the first you hear about a problem is when the irate customer tags you in an angry Twitter post.

Three-quarters of customers who encounter a poor delivery experience would likely stop recommending the retailer, according to research from Circuit.

So even though the whole fulfillment side of the business has little to do with you, late deliveries can still do real damage to your own brand.

3. Building An Audience From Scratch Is Tough

To an extent, this point is relevant to both dropshipping businesses and affiliate marketing.

But at least affiliate marketers get to “lean on” the brand awareness of their affiliate partners.

As a dropshipper, you likely won’t get that opportunity. You might even find yourself competing directly with the brands whose products you’re selling.

That can make it extremely difficult to build traction, especially if you’ve chosen a competitive niche.

Think about it:

Most customers won’t know who you are. They’re just shopping around for the most attractive deal (whatever that means to them).

You (probably) can’t guarantee faster delivery than anyone else.

And if your niche is competitive, you likely won’t have much margin to play with either, so cutting prices might not be an option.

In short, you’ll need to get creative to get people’s attention and persuade them to buy from you.

What Is Affiliate Marketing?

Affiliate marketing, on the other hand, is a performance marketing strategy under which brands pay affiliate publishers a commission for referred customers or leads.

Referrals are recorded through a tracking code placed in the affiliate link.

Affiliate Marketing Business: Pros

1. No Need to Worry About Customer Support

You won’t be shocked to learn that a lot of the (many) advantages of affiliate marketing are disadvantages of dropshipping, and vice versa.

This first point is definitely one of those.

As I’ve already noted, to make affiliate marketing profitable, all you need to do is drive traffic, recommend products, and funnel people to a quality online store to convert.

Everything else is simply none of your business!

That means no worries over delivery times or returns or any of that other complicated, logistical stuff.

All of which means you have more time to focus on the stuff you can control: writing amazing content and generally building the best damn affiliate website you can.

2. Getting Started Is (Relatively) Easy

The word “easy” is a little misleading here, so let me explain:

When I say “easy”, I don’t mean you can expect to launch an affiliate website and immediately start bringing in a huge revenue stream.

That just won’t happen.

However, affiliate marketing is comparatively easy to get started with. You don’t need any specific technical skills or specialist knowledge.

You just need to be prepared to put in the hours investigating potential niches, researching high-intent keywords, signing up for an affiliate program or two, and writing amazing content.

Best of all, you don’t need a ton of startup capital.

You might want to hire a contractor to help you build a website, but if you’ve got the time and patience, it’s pretty simple to do it yourself.

That’s why a lot of people start out in the affiliate marketing business as side hustlers, only dedicating more time to it once they’re earning a job replacement income.

3. Earn Passive Income

Dropshipping is a great business model, but it’s definitely not passive income (at least, not totally).

You still need to manage store inventory, manage customer support, and take charge of your digital marketing efforts.

With affiliate marketing, once you’ve got things up and running, you can afford to totally dial out of the day-to-day running of your website.

Hire a freelancer or two to bring in traffic from search engines or social media, sign up with affiliate networks that’ll handle all the tracking and commissions, and you can pretty much sit back as the money rolls in!

That’s obviously the best-case scenario.

In reality, you’ll likely be heavily involved in the digital marketing and content creation side of things for the foreseeable future.

It might take months or years until you’re in a position to outsource that stuff.

But once you’re there, you can earn passive income while lying on a beach or backpacking across Europe — the choice is yours!

Or you might do what we did and launch a bunch of new affiliate websites.

We’re never satisfied!

Affiliate Marketing Business: Cons

1. Little Negotiating Power Over Commissions

Okay, so this one isn’t 100% true.

If you’re a huge affiliate referring massive volumes of sales to ecommerce stores, they’re obviously going to want to keep you around.

In which case they might be prepared to negotiate a preferential commission rate.

But most affiliate marketers don’t reach that position for years, if ever.

Generally speaking, you’ll have to accept the commissions that are on offer.

In highly competitive niches and those with lower profit margins, you’ll tend to find those commissions are pretty similar from one affiliate program to the next.

Naturally, higher profit margins mean more wiggle room — but even then, you shouldn’t expect to negotiate a better commission rate unless your performance backs it up.

One other issue that’s worth mentioning here: it’s not uncommon for affiliate programs to change their commissions over time.

And by “change”, I almost always mean “reduce”.

Amazon is a good example.

You might wake up one morning and learn your commissions are going to be halved.

And there’s really not much you can do about it, beyond finding a different affiliate program or choosing a whole different niche.

2. Payments Aren’t Always Prompt

If you hang around affiliate marketing forums long enough, you’ll hear plenty of horror stories about affiliates waiting months to get hold of their commissions, or being ghosted and never getting paid at all.

Thankfully, that’s pretty rare.

If you work with one of the big affiliate networks, it’s extremely unlikely that you’ll be ripped off.

(And honestly, if you are, it’s more than likely because you breached the terms of service).

But there’s no getting away from the fact that slow payments are often a fact of life in the affiliate marketing world.

While it’s possible to find affiliate marketing programs that offer weekly payments, most will keep you waiting at least a month before sending your precious commissions.

3. Customers Might Mess With Your Affiliate Link

While there are a few bad apples out there, affiliate marketing as an industry (and a revenue stream) is definitely lit.

But there’s not a huge amount of consumer understanding about it.

However much time and effort you put into clearly displaying your affiliate disclaimer and explaining how the business model works, some people will never be convinced.

They think that buying via your affiliate link will somehow end up costing them more.

So they take one look at the URL and remove the tracking elements, effectively cheating you out of a commission.

You might be able to get around this by using a link shortener, but it’s not always possible (for instance, some affiliate programs don’t allow link masking).

Beyond that, there’s no real solution to this problem — we just have to wait for consumers to be better educated about the realities of affiliate marketing.

However, in our experience, this is a pretty niche concern.

Most customers don’t care what the URL looks like; they just want useful advice and a good price.

And you can give them both. 

Affiliate Marketing Vs Dropshipping: Which One Is Better?

Dropshipping. Affiliate marketing. Which one takes the crown?

Honestly, both dropshipping and affiliate marketing are great ways to earn money online.

They might have totally different business models, but both allow you to get up and running with minimal time and investment.

That means it’s basically an impossible question, because the answer depends upon your own circumstances.

If you’re looking for a sideline you can dip into and out of as time allows, and that can be easily scaled later on once you’re bringing in lots of passive income, affiliate marketing is hard to beat.

But if you crave the control that ecommerce entrepreneurs enjoy from opening their own stores, you won’t get it from affiliate marketing. At least, not really.

In which case the dropshipping market could be exactly what you’ve been searching for.

Dropshipping Vs Affiliate Marketing: Conclusion

If you’ve decided dropshipping is the only choice for you, we genuinely wish you the best of luck.

It’s a tough business, but if you’re smart and you put the hours in, there’s no reason you can’t make it work.

But if affiliate marketing is your preferred avenue, we can definitely help.

Having launched our first affiliate website back in 2013, we like to think we know a thing or two about affiliate marketing.

And we’d love to share our knowledge with you!

Just sign up for our free training and we’ll teach you seven simple steps to create a high-performing authority site in 2023.

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