The Incredible Benefits of Affiliate Marketing over Drop Shipping
If you’ve never had direct exposure with either affiliate marketing or drop shipping, it can certainly feel a bit overwhelming, especially if you’re trying to determine which one offers the best opportunity for your long-term business success.
You’re not alone. Millions of people all over the world step out of the tight confines of their office cubicles and try to establish their own business … but most fail. It’s not because they didn’t have desire, a passion, or even great products to over. It’s usually because they didn’t have experience, a strong brand, or the right tools.
That’s where drop shipping and affiliate marketing come into play.
The Power of Affiliate Marketing and Drop Shipping
These two business models provide people all over the world –average, every day men and women who had grown tired of the daily rigors of an office environment and low pay- the chance to establish their own business without building up an inventory of stock first.
It also provides the opportunity for people to build a business with minimal cost, including payroll, overhead, and more. Traditional businesses require tens of thousands of dollars (and even more) capital just to get started. They needed a retail store, inventory, employees, and much, much more.
That’s no longer necessary thanks to drop shipping and affiliate marketing.
So what are these two business models and why is one a better investment?
Drop shipping is a supply chain management technique in which either a manufacturer or wholesaler keeps products in stock while retailers sell them. When the retailer sells a product, the customer’s information is relayed to the manufacturer or wholesaler who packs and ships the products.
This model has managed to create some incredibly successful businessmen and businesswomen, but it does have some limitations (and flaws). The retailer will be responsible for all aspects of customer support, questions, concerns, returns, and much more.
Affiliate marketing is a program in which a small business sells specific products for a particular company. The affiliate marketer works to gain attention, attract customers, and generate sales.
Once the sale is complete, the company takes over and is responsible for shipping, customer support, and ensuring that the entire transaction (after the sale) is exceptional. This allows the affiliate marketer to focus their energies on bringing in even more business.
The Pros and Cons of Affiliate Marketing and Drop Shipping
Now that you have a general understanding of each business model, let’s get into the details about why affiliate marketing stands apart from drop shipping for the average independent entrepreneur.
The Pros of Drop Shipping
One of the strongest positives with regard to drop shipping is the fact that the retailer does not have to keep inventory on hand. In the ‘old days’ of small businesses, every single business owner had to keep products in stock in order to sell them. The only exception was for incredibly large or expensive products; those were considered ‘special orders.’
Another benefit of drop shipping was that the retailer didn’t have to worry about shipping. There’s no need to package items, print out address labels, and apply the right postage.
Most drop shippers enjoy a 20% to 30% profit margin, which is reasonable.
The Pros of Affiliate Marketing
With the right affiliate marketing program, a marketer would be able to enjoy a 20% commission.
Once the sale is generated, the marketer is free to focus all of his or her energy on attracting even more customers.
The marketer will know exactly what types of products they are selling (including the quality, which can’t always be said of drop shipping).
The affiliate marketer needs limited capital to start up and won’t have to be concerned with accepting online transactions, security, and so on.
The marketer will be able to honestly and accurately determine how long it will take the customer to receive their product(s). (The drop ship retailer is at the mercy of the manufacturer or wholesaler).
The Cons of Drop Shipping
In truth, there are many potential cons to drop shipping. The most significant has to do with the products themselves. If the drop ship retailer is using a wholesaler, that wholesaler could be constantly changing inventory to find the lowest prices (thus maximizing their profit margins).
That could result in the consumer receiving lower quality products that might look completely different than the image they were sold on.
If the package is lost (which happens more during the peak consumer seasons, like the ‘holidays’) the retailer will need to track the package, determine what happened, and handle customer support. This can consume many, many hours that would be better spent attracting new clients and generating more sales.
If the customer receives the item and decides to return it, they’ll contact the retailer to receive a RA number.
This can create many delays for the retailer, costing them money.
What about when the customer suddenly realizes he or she doesn’t know how to use the product? Guess who they’ll be calling? The retailer.
Suddenly the drop ship retailer has to add staff just to handle the influx of calls, complaints, and questions. Nothing erodes profits more than unnecessary expenses.
The Cons of Affiliate Marketing
Depending on what type of company a person becomes an affiliate marketer for, there may be limited products from which to choose. Of course, that all depends on the main company. A strong company with many products will provide numerous opportunities for the affiliate marketer to generate sales.
In some cases, becoming an affiliate marketer could require a startup investment. That’s not true for all endeavors, but it could be for some. Why should a person pay to get started?
Many affiliate marketing programs get the individual set up with a website template, resources, and powerful tools to begin making contact and reaching prospects within a matter of hours or days.
These companies have invested a significant amount of money into these marketing materials, and it’s worth the investment on the part of the ambitious affiliate marketer.
Which Would You Choose?
Knowing what you do now about the main differences between drop shipping and affiliate marketing, it should be clear which one is ideally situated for any driven entrepreneur. Drop shipping can certainly help many new business owners, but affiliate marketing removes many of the hassles and hurdles to short and long-term success.
