Affiliate Marketing vs. Dropshipping: What to Know Before You Commit
Welcome to the showdown: affiliate marketing vs. dropshipping!
If you’re looking into starting an online business, you might be trying to decide between these two options.
Here’s a quick one-line summary for each model.
Affiliate marketing is simple: promote products, earn a commission.
Dropshipping means you own an online store, but a supplier deals with inventory and shipping.
But knowing the definitions of these different business models isn’t enough if you’re serious about getting started. What about their potential? Their challenges? At Dropship Breakthru, we’ve seen it all, and are ready to share our findings.
Ready to dive into affiliate marketing vs. dropshipping? Let’s get started.
Watch it on YouTube Or Listen to the Podcast
The Basics: Two Popular Ways of Selling Products Online
To really understand the differences between affiliate marketing and dropshipping, we need to get into the nuts and bolts of them. Here’s a peek behind the scenes for each of these popular online selling strategies.
What Is Affiliate Marketing?
Affiliate marketing is essentially a referral system.
You find offers that other people have, and promote them to your audience. These could be physical items, informational products, or even software. You might connect with your audience using an existing Ecommerce business, social media, a blog, or a podcast.
If you have your own online business and a loyal customer base, you can recommend other people’s products alongside your own.
When a person from your audience purchases an affiliate product you’re promoting, you earn a commission. This payout, also known as a referral fee, comes from the product owner and is your reward for sending the sale their way.
The amount you earn can vary from product to product, but the principle’s the same. Your role as an affiliate marketer is not about handling the sale itself. You’re not part of the checkout process or customer service.
Your job is to send potential customers to the checkout page so you can earn sales from your links.
Need a few examples? A chiropractor might have a referral program. If I refer one friend to my chiropractor, I’ll get one session free – that’s affiliate marketing at work.
At Dropship Breakthru, we also have an affiliate program. If you recommend our courses to someone and they sign up, you earn a commission. It’s a way for our students to share knowledge and make money at the same time.
On our podcast, you can hear more about our experience and examples of affiliate marketing…but let’s move on to the business model we’ve had the most success with.
What Is Dropshipping?
Dropshipping is a bit like being the middleman in an online retail operation. You sell products using an online store, but you don’t handle shipping or maintain inventory.
When a customer buys a product from your store, you pass the order to a supplier who ships it directly to the customer. It’s Ecommerce without the hassle of inventory.
High ticket dropshipping kicks this concept up a notch. Instead of dealing in low-cost items, you sell high-quality, expensive products – $800 and up.
With high ticket dropshipping, especially how we teach it at Dropship Breakthru, the return on each sale is significantly higher. Why sell a hundred items for a small profit when you can sell one with a much larger margin?
What’s the Difference Between Dropshipping and Affiliate Marketing?
Next, let’s look at how dropshipping and affiliate marketing differ. We’ll review startup costs, time investment, competition, and how much you can earn.
Initial Financial Investment
Affiliate marketing and high ticket dropshipping both keep starting costs low and are budget-friendly for beginners. For affiliate marketing, you just need a site or a social media page to place your links.
With high ticket dropshipping, setting up your online store and connecting with suppliers usually costs less than $500 – If you follow our methods!
Here are the costs you’ll need to cover to get started with high ticket dropshipping:
- A domain name – We recommend LeanDomainSearch or Namecheap ($13)
- A place to host your online store – Shopify is the platform we always recommend, and you can get a 2-week free trial ($29/month)
- Shopify theme – Your theme is the “wrapper” that gives your site the look and feel you want. ($200-$500, or free if you join our course, Dropship Breakthru).
- Brand elements – You can hire a Fiverr designer to create a logo for you (approximately $20)
- A business phone number – You can get an 800 number with Grasshopper ($40/month)
- A business email address – We recommend Google Workspace ($12/month)
According to our quick calculations, that’s $314 to start a solid, long-term business! Not too bad.
Behind-the-scenes hint: You see those links above? Many of them are affiliate links! We get a small commission when you buy from those vendors using those links.
Time Investment
With affiliate marketing, the underlying question behind the time you invest is how long does it take to start making sales?
If you’re starting from scratch with no audience, get ready for a challenge. Your job will be cultivating an audience that trusts you and, by extension, your recommendations and clicks on your referral links. That’s how you’ll make money.
Of course, you choose how to build your audience. One option is to pay for traffic. This means advertising to attract potential buyers to your site or social media page. But keep in mind this approach comes with a cost. You can easily spend more on traffic than you get back in affiliate commissions.
Another way to build your audience is to spend time creating engaging content. This could be blog posts, videos, or social media updates. The goal is to attract visitors naturally over time. It’s hard work, but it can pay off.
Dropshipping, like affiliate marketing, also requires time and commitment. You need to set up your online store, connect with suppliers, market your products, and provide customer service. But dropshipping has an advantage. If you choose the right niche, you’re selling products people are actively searching for.
You still have to build an audience, but it’s easier because you’re tapping into an existing demand. People want these products, and you’re offering them. That makes it easier to make paid traffic profitable.
This means you can play the long game of audience building – while making sales almost as soon as you’ve set up your shop. It’s a different game from affiliate marketing, but it still demands dedication and strategic thinking.
Competition
In the world of affiliate marketing, competition can be fierce. It just depends on the niche you choose. Popular niches attract more people, which creates a crowded marketplace. You’re battling it out with others to grab the attention of the same audience.
Dropshipping has a different dynamic. With this Ecommerce business model, picking the right niche can actually mean less stress. Why? Because a well-chosen niche can have high demand but low competition.
The trick is finding products people want but aren’t easily found everywhere. If you can do that, you’ll offer something popular and unique, which gives you a competitive edge.
Even though your competitors might be selling similar products, they’re less of a threat. You’re not trying to convince the same audience to click on your link rather than someone else’s, like you are in affiliate marketing. You’re attracting customers who want what you’re selling, making the competition less of a direct clash and more of a background factor.
If you want to maintain a successful business, finding a balance is essential. In dropshipping, you’re looking for a niche that’s popular enough to have a sizable audience, but not so popular that competitors are overrunning it.
Earning Potential
Both affiliate marketing and dropshipping offer high earning potential. But your profits depend largely on your strategy and the time and effort you put in.
Affiliate marketing can be pretty lucrative if you have a massive audience. The commissions can stack up if you build a sizable, engaged audience and promote the right products. Remember, every product you promote that results in a sale earns you a commission. With the right mix of products and a large audience that trusts your recommendations, your earnings can be significant.
Dropshipping, especially high ticket, can also bring you a sizable income. With this model, you’re not just earning small commissions. You’re selling more expensive items and earning large margins with every transaction.
You still need to build an audience, but you can use paid advertising, like Google ads, to start making money right away. Because your profit margins are bigger with high ticket dropshipping, you can be profitable using ads quickly. The cost of advertising is offset by the significant profits you make from each sale.
Both paths, if navigated wisely, can lead to impressive earnings. The key is understanding each model’s nuances, figuring out your goals, and aligning your strategy accordingly.
Remember that you can also combine affiliate marketing and dropshipping to maximize earnings. You can operate a dropshipping store and promote related products as an affiliate at the same time.
For example, if you’re dropshipping fitness equipment, you can also promote workout programs or fitness supplements as an affiliate. This means every visitor to your store is a potential source of income, either from direct sales or from affiliate commissions (or both!). This combination diversifies your income streams and helps you provide more value to your audience.
The Pros and Cons of Affiliate Marketing vs. Dropshipping
Understanding the good and bad sides of a business model is key to selecting the right one for you. Let’s dive into the advantages and disadvantages of affiliate marketing vs. dropshipping.
Affiliate Marketing Pros
Affiliate marketing offers several advantages and can be a good choice for many aspiring online entrepreneurs.
Low Startup and Maintenance Costs
One of its biggest perks is the minimal startup cost. You don’t need a massive investment to kick things off.
As your business grows, affiliate marketing also has minimal ongoing costs. Unlike traditional retail models, purchasing inventory, managing a warehouse, or taking on shipping expenses is unnecessary. Your primary investment is your time and effort, which goes into creating engaging content, building an audience, and promoting products.
Low Risk
Affiliate marketing is also relatively low risk. Since you’re promoting other people’s items, you’re not the one who bears the risk of unsold stock. If a particular product doesn’t sell well, you can easily shift your focus to another product.
Outstanding Flexibility
The personal flexibility that affiliate marketing offers is another major plus. You’re not tied to a specific location – all you need is a good internet connection. You also have the freedom to choose which products to promote and the marketing strategies you want to adopt.
This flexibility lets you customize your business to your interests and strengths.
No Customer Service Woes
The personal flexibility that affiliate marketing offers is another major plus. You’re not tied to a specific location – all you need is a good internet connection. You also have the freedom to choose which products to promote and the marketing strategies you want to adopt.
This flexibility lets you customize your business to your interests and strengths.
Potential for High ROI
Finally, the potential return on investment (ROI) with affiliate marketing is high – once you have traffic and an audience. Your earnings are directly linked to your performance – the better you promote products and drive sales, the more you can earn.
But you have to consider the time and cost of building it up to the point of making a decent income from affiliate commissions alone. It’s not easy!
Affiliate Marketing Cons
As good as all of the above may sound, affiliate marketing also comes with its share of challenges.
Let’s take a look at some of the downsides.
Lack of Control
One of the primary drawbacks is the lack of control. As an affiliate marketer, you don’t make the rules – you follow them. The product owner or affiliate network sets policies, including commission rates and promotion rules.
Loads of Competition
Another potential downside is the level of competition. Depending on what you promote and your niche, you may find yourself competing with a flood of other affiliates for the attention of the same audience. This can make it harder to stand out and drive traffic to your links.
No Independent Customer Base
Affiliate marketing also doesn’t allow you to establish your own customer base. When someone buys a product through your affiliate link, they become a customer of the product owner, not you. You have no direct relationship with customers and no way to follow up or market to them in the future.
Potential Risks
There’s also a risk that affiliate marketing can come across as spammy. If you’re constantly pushing products without offering valuable content or authentic recommendations, your audience might lose trust in you. This can harm your reputation and your long-term earning potential.
Potential fraud issues are another concern. There are instances of fraudulent activities like cookie stuffing and commission theft in the affiliate marketing world. These can negatively impact your earnings or even lead to your removal from affiliate programs.
Low Margins
In the end, keep in mind that affiliate marketing typically offers relatively low margins. While there are exceptions, the commission rates for many products, particularly those available on large platforms like Amazon, can be brutally low. This means you need significant traffic and a high conversion rate to generate substantial income.
Dropshipping Pros
Granted, we’re biased because we’re such big fans of high ticket dropshipping, but that’s because we know from ongoing experience that it works. We feel like this business model offers a ton of compelling benefits for online entrepreneurs. Because you don’t need to purchase inventory, and you don’t need a lot of capital to launch your high ticket dropshipping business.
Scalability
One of the great strengths of high ticket dropshipping is its scalability. Once you have a successful store, you can replicate your success in other niches, or expand your existing store with more high ticket products. The sky’s the limit when it comes to growth.
No Inventory
You only purchase products after a customer has placed an order, and your supplier handles storage. This significantly cuts down your operating expenses and reduces risk.
Massive Flexibility
Dropshipping also offers flexibility. Want to be location independent? It’s the perfect gig for you.
As long as you have a reliable internet connection, you can run your business from anywhere.
You’ve got endless high ticket niches to choose from when looking for products and suppliers. Whether you’re passionate about gadgets, outdoor gear, or anything in between, you can find high ticket items to sell that you feel great about. And that’s important when building your business for the long haul!
Build Transferable Skills
Best of all, high ticket dropshipping is not just about making money (although you can make a lot of it!) It’s also about learning valuable business skills. From marketing and customer service to negotiation and logistics, you’ll gain a wide range of skills in dropshipping that you can apply in many different business contexts.
Dropshipping Cons
Most of the downsides of dropshipping – and we’ll admit, there aren’t many – are associated with the low ticket model.
Product Returns
Product returns can be a pain if you’re shipping low-quality products from overseas suppliers. But you can limit returns by choosing high-quality products and reputable locally-based suppliers.
Chargebacks
Chargebacks can be a problem for any kind of dropshipping, and they’re challenging when you’re selling large ticket items. A chargeback happens when a customer disputes a charge from your store with their bank.
While you can’t avoid all chargebacks, you can minimize them by publishing accurate product descriptions, providing excellent customer service, and using secure payment systems. We recommend using ClearSale.
Double Your Profitability by Combining High Ticket Dropshipping and Affiliate Marketing
We’ve pitted high ticket dropshipping against affiliate marketing, but it’s not a competition – the secret lies in combining the two.
You can build up a solid customer base with dropshipping, then offer related affiliate products when you’ve built up those trusted relationships.
At Dropship Breakthrough, we teach this combo approach in our courses. Why choose when you can do both, and add another revenue stream to your business?
Sign up for our free course to learn our step-by-step system for launching your own dropshipping business (and starting to build your audience) in just 30 days.
Want to start your own high ticket dropshipping business?
Watch this FREE, on-demand training session that will uncover the exact steps you need to take to launch your first high ticket dropshipping business in the next 30 days.
Article by Jon Warren
- Worked with 400+ Ecommerce business owners to help them grow their business
- Started 3 high-ticket dropshipping businesses that reached 7 figures per year in revenue
- Managed marketing for his and his clients’ businesses that has produced 117,000 high-ticket purchases for an estimated value of $120.5M
© Dropship Breakthru 2021