 Affiliate marketing or dropshipping? What is the difference between the two? Which business model is more profitable and which business model should you adopt when you are creating your business? Affiliate marketing and dropshipping are two different things with many differences and also many similarities. Now, whether you're looking for a side hustle or a full-time job to take over your current job, both of these business models can help you get there and that is exactly what I will be going over in this video. Affiliate marketing versus dropshipping coming right up, quick intro and let's go. Welcome back, I'm Niran from AutoDS and in this video we're gonna talk about affiliate marketing or dropshipping so that you can make the decision on what is the better business model for you to run. Now, I don't know if you guys have noticed but I'm running a little bit of a cold here so don't mind my voice and also don't forget to subscribe to our YouTube channel to always stay updated on all of the latest and all of the hottest topics that we have coming out in the world of dropshipping. That being said, let's go ahead and jump straight into the action and learn about the key differences and also the similarities between affiliate marketing and dropshipping and what is the better business model for you. Reminder, everything that I'm going over in this video you can also read about it in the full blog article which I'll leave a link to right below this video but of course in my videos I always like to throw in some additional value so if you're the type that likes to watch that is great, keep on watching. Affiliate marketing versus dropshipping let's take a look at some statistics before we get started and dive deep into what each one means. As you can see right here according to prnewswire.com the market size in affiliate marketing in 2021 grossed almost $20 million in sales and in 2030 it's expected to reach almost $37 million. So this is a market that's continually growing and expanding which isn't that different also from a dropshipping business model. And as you can see right here according to truelist.co more than 80% of brands have affiliate programs. So this of course has to do with affiliate marketing. And if you're not sure exactly what this means yet we're going to dive into the definitions very, very soon but first it's important to take a look at these numbers. America is the biggest player in the affiliate industry with a 39% share. So you know where to get most of your affiliate marketing links once you get started. Nearly 65% of affiliate marketers generate traffic by blogging and that is another thing that we're going to talk about when I get to the affiliate marketing section. 94% of publishers use multiple affiliate marketing networks. So just like if you are dropshipping and I always advise in my videos to work with multiple dropshipping suppliers and not just one this is how it works also for affiliate marketing. It's the same concept. Advertisers generate between 15 to 30% of all sales from affiliate programs. Now granted this is not all affiliate programs some will even give you just a small little 2% but with the compounding effect that could be a lot. Of course depending on what item you're selling or what product you are marketing with the affiliate program and how many sales you can make from that. And affiliate marketing is responsible for 16% of global e-commerce sales. Now the main majority after that will of course be dropshipping but affiliate marketing is also a growing market. Now let's talk about the dropshipping market size for just a second. The dropshipping market size between 2022 to 2028 which is a forecast is projected to reach $621 million Now for the comparison in 2021 which was the year before we reached $162 million. So if you can notice the difference between 162 million and 625 million we're talking about a five times increase from last year that is five X in the next five to six years. So for those of you who are asking yourselves if it's too late to enter the world of dropshipping or if last year or if two years ago or if five years ago was the gold mining it was the best time to join well this market is going to continue growing and multiplying itself. So there is no better time to join than now and one year from now you will regret not doing it one year ago just as time moves forward we always look back and say these things and according to these forecasts this is not expected to go anywhere but actually continue growing. So it is not too late to join dropshipping and it is definitely also not too late to be an affiliate marketer. Now let's go over these terms and understand more in depth what they mean. What is affiliate marketing? In affiliate marketing you earn money by promoting other companies products or services. It's kind of like dropshipping where you are selling someone else's product only here the buyer is not paying you the money to purchase that product or service but you're actually giving them a link your own unique link where they can click on it and then go to the seller's website because you aren't the seller here you're just the affiliate marketer. So they're going to click on your link to go to the seller's website to that company's website and purchase the product from there only when the customer used your unique link to get to that website then that company can see that the buyer came from your link meaning you are going to get a certain percentage off of that sell. So that is your profit you don't have to hold any stock you don't have to hold any inventory and you don't have to worry about payment methods because you are not dealing with the payments yourself. The customer is purchasing the product from that company which is different from the dropshipping business model wherein dropshipping you are holding your own online store granted you are not holding them in stock you are selling products from other suppliers that they are holding in stock and every time you get an order on your store and the buyer pays you not your supplier but they pay you then you go to the supplier you purchase that product and you ship it directly to the end customer. That is a very general and basic overview of the dropshipping business model and that is how it works. So that is how affiliate marketing on one hand is different than dropshipping. In affiliate marketing you're simply getting a link from that company you're signing up to their affiliate program and you're getting your own unique link whether to send to their website to create a sign up or a unique link that sends them to a certain product. For example, you can see Amazon's affiliate program where here Amazon allows you to sell their products or better yet link to their products and if anyone clicks on your link to go and buy that product from Amazon's website then they can give you up to 10% in associate commissions. So Amazon also has an affiliate program and as you've seen from the stats that I sent you before most of the big companies out there have an affiliate program because hey, why not? You are giving them more buyers and more customers from your recommendations with your unique links and they'll have no problem giving you a small commission off of that sale. So with Amazon or just like any other affiliate marketing website it's pretty simple you sign up to the service you recommend the product or whatever product or service they are selling and you will earn every time you make a sale when someone clicks on your link goes to their website and continues with the checkout process. So that is affiliate marketing you're simply getting affiliate links you're signing up for affiliate programs you're getting referral links and you're using those links to recommend to other people to buy. Now where can you actually recommend those links? I mean you can't just get links and I don't know start joining all kinds of forums and just spamming that link everywhere because it's not going to work so well. There are multiple ways for you to share your affiliate links with your audiences. For example, if you like social media you can use platforms like Facebook or TikTok or create YouTube videos and promote that product or service that you are trying to sell. Then add your affiliate link in your bio in your video description or whatever platform you use to create that shout out for that product and of course your viewers your audience will go ahead and click on that link. Another way to do it is to have your own website. A blogging website is a great way to become an affiliate marketer because as a blogger when you're creating a website now according to a specific niche like let's say for example you joined as an affiliate to some big pet store and you wanna send people to that pet store to purchase their products. So what you're going to do is you're going to create your own pet blog and you're going to create great content for pet lovers so that they can get to your website organically from Google or from their search engines they'll read your high quality blog pieces and you'll have your affiliate links in all kinds of smart places you will learn it better and better as you go along and of course they will naturally and organically click on those links because they're interested in pets they're interested in that product that you're recommending because you created some great value around it and now they're simply going to click on it and purchase it from that big company's website you're just the man in the middle who's going to earn a commission every time they purchase from that website. That is another way to run an affiliate marketing business. So some of the pros for becoming an affiliate marketer it's a passive income it's a great thing to have low cost startup because you're not creating a brick and mortar company so what are your costs? If you are posting things on social media your cost is zero if you're creating your own website that could cost you 10, $20, $30 these are very low startup costs and nothing to really take into major consideration and it also comes with a low risk if something happens if your business isn't working well you're not really losing any money you just lost some time but I don't see that as a bad thing because you have just learned what doesn't work and now you can continue working on what does work. Some of the cons, high level of competition you are not the only affiliate marketer who's going to that company and getting your own unique affiliate links and then trying to market it out. On the other hand you can do it in your own unique way you can do it better than your competitors and always beat them to it. Another con is that it is a commission based payment so the buyers are not paying you you're getting some small commission from whatever product it is and if you're not making enough sales then you're not going to make that much profit. And the third con is that it requires patience and learning. Now I don't see that as a con but many people do. I have a lot of patience and I do a lot of planning before I take my actions but if you're the type that doesn't have a lot of patience and doesn't like to plan you should know that well if you're creating any type of business and you don't have patience and you don't like planning then maybe creating a business is not the right thing for you but if you have no problem with these things you can try affiliate marketing. Now what is dropshipping already went over this but really quickly this is a place where you can host your own online store like you can have a store on eBay or Shopify or Wix, Facebook Marketplace WooCommerce and so forth and you can sell products from other suppliers that they're holding like Aliexpress, Alibaba, Amazon even though they don't completely support dropshipping but you can still do it. China Brands, CJ Dropshipping and so much more. If you wanna see the full list just go to our website autots.com click on suppliers right up here and see over 25 suppliers that you can not only work with but also automate your business with them including price monitoring, stock monitoring, automatic orders, customer service management and so much more. So that is the dropshipping business model you have a store, you have some suppliers that you're working with you're importing their products to your stores and you can also enjoy dropshipping automation that I just talked about so you can have thousands of products on your store and make lots of sales and have everything automated in one complete package. And as I mentioned once you make a sale on your stores you simply go to your suppliers website purchase that product and ship it directly to your end customer you have no physical contact with the products that you are selling or of course you can also automate your orders and everything will be automated along with tracking numbers and everything else but that is not what we're here to talk about we're keeping it very very basic so that you can understand the main differences and also similarities between affiliate marketing and dropshipping. So let's continue some pros of the dropshipping business model low startup budget just like affiliate marketing no need to hold any inventory since you're selling other people's inventory low risk and scalability. Low risk because once again you're not starting a brick and mortar business you don't have to put down a hundred thousand dollars just to start a business and it is very very scalable once you add automation if you're doing everything manually and you need to check the prices every day you need to check the stock statuses every day you'll never see the end of it and you won't be able to scale but if you're using automation then you can easily and then definitely scale your business and that is a huge advantage for the dropshipping business model. Some cons highly competitive once again now if you're only targeting one certain country like let's say you're only selling to the US audience and you're selling what everybody else is selling then you will notice some saturation and competition but if you try these products on different regions and you check out new products you're always testing out the market with new niches and categories that you haven't checked before while continuing the run rate of those products that are selling for you adding more products that are similar to them then you always will notice a good level of success. So affiliate marketing versus dropshipping let's talk about some of the similarities and some of the differences. So some of the key similarities that we have here and where we talked about this is that they come with a low effort you don't really have to put that much effort into starting a dropshipping business or starting an affiliate marketing business of course effort is required and the more the better but there's a huge difference between the effort required here to the effort required in starting a real physical company requires a third party to help run your business you can't do everything on your own but neither can you when you're starting a real business and a low risk because once again you're not putting that much money down you're learning and even if you fail it is fine you're not throwing money in the trash there was not a big risk that now you can't get out of it you simply learn something and you can continue to do it better and better as you go along and if you look at some of the most successful business people out there today none of them have a 100% success rate they all had to fall multiple times before they got to where they are today. Some of the key differences when comparing between the drop shipping and the affiliate marketing business model so profit margins are to start off with when you're making a sale from drop shipping your profits are most likely higher than those that you received from affiliate marketing and that is simply because you have more control over your profits no one is here to tell you hey you're only gonna make 2% or 5% or 10% if you make this sale you are the one who decides what is the selling price you have your source price you have the competition around you and you have your selling channel's price so this is a price that you can come up with and you can sell for whatever sells for you as long as of course you're making profit now this differs from drop shipper to drop shipper there's not one profit margin that works better than the other of course you don't wanna go too high because you know people have common sense and they know when a product is priced too high and you also don't wanna go too low because we're not here to try to kill the whole competition while also killing our business at the same time so profit margins differ between the two because on one you have control over it and on the other you have no control over your profit margin the next difference is the generated traffic this can also be a similarity because when you have a drop shipping website or when you have an affiliate marketing website you're gonna need to bring traffic to your website but if you're drop shipping on somewhere on a marketplace like eBay where they already have millions of customers who can search for your product and get to your listing and purchase from you without you having to do any marketing whatsoever when you have an affiliate marketing website you have to market your website otherwise no one knows that it exists unless of course you've worked on that blog page and the SEO, the search engine optimization worked really well for your blog articles people are interested in it you went on great topics that don't have a lot of competition on Google or you simply provided much better value than everyone else and now you have a great place that's generating organic traffic that's a great thing to have but when you're starting off an affiliate marketing website you won't have any traffic not from your blog and not unless you start marketing your products when compared to the drop shipping business model where you can do it on eBay and start making sales from day one organically order fulfillment of course is also different between the two because in the drop shipping business model you can fulfill your orders by simply going to your supplier's website purchasing the product and shipping it directly to the end customer as I've explained before or have the automated order service where the orders are being fulfilled automatically on the other hand in affiliate marketing there is no order fulfillment when a customer purchases from something he's not purchasing it from your affiliate marketing website but as I mentioned he's purchasing it from that company using the link that you sent them so you don't have any orders to process when you have an affiliate marketing website and that makes it a little bit easier than the drop shipping business model another key difference is customer service if a buyer has a problem with a product that they purchased from your drop shipping store they're going to turn to you but if you have an affiliate marketing website and they purchase the product using the link on your affiliate marketing website they know that the link took them to Amazon or Walmart or the Home Depot or anywhere else they know that they have to reach out to them and not to you if they have any problems so once again another point for affiliate marketing and business automation all the points here go to drop shipping and this is scalability this is the profit at the end of the month and this is my biggest recommendation once you add business automation to your drop shipping business everything is automated and now you can focus on growing and expanding your drop shipping business instead of thinking how long it's going to take you to import another 10, 15, 20 products to your store today or all the customer service issues that you have to attend or fulfilling those 20 orders that you got while you were asleep that's going to take up most of your day and you will not be able to actually grow your business so business automation goes a long way when it comes to scalability and how high you can climb when it comes to profiting let's take a look at this chart which gives us a better picture of the difference between the two so low setup time for affiliate marketing and drop shipping the answer is yes to both it doesn't take a long time to get your business up and running you can do everything in a matter of a day handling customers in affiliate marketing as mentioned you do not have to handle your customers they'll go straight to the website where they purchase that product and in drop shipping you do have to take care of customer service because they paid you for the product and now they're going to turn to you if they have a problem fulfilling orders there is no order fulfillment in affiliate marketing and drop shipping of course there is order fulfillment as I just explained average earnings from affiliate marketing is anywhere between one to 10% of the product price of course you can earn more if you join some different affiliate program but this is the average for affiliate marketing the lower percentage they give you the more popular the product probably is so they don't really need your help in selling it and the higher it is the more help they actually need in selling it so they're going to give you a little bit more in drop shipping the average earnings or the average profits of drop shippers is anywhere between 10% to 60% now does this mean that there is no one who's drop shipping below 10% of course there are but I don't recommend that because you're not really making any profit even on 10% you're not really making any profit unless you have thousands of orders per month 60% is more like it or 50% I am personally drop shipping in the 50% profit margin range why because the most important answer it's working and I don't pretty much look at anything else I barely even look at the competition today after five years in but that is something that comes with a lot of experience which I want you to start gaining if you don't have any yet investment required for affiliate marketing is zero and drop shipping is also zero or minimal and minimal should also go for affiliate marketing because if you're going to launch a Shopify website or a Wix website or your own hosting platform that comes with a little bit of a cost not a lot but let's say minimal is the right answer inventory required is a no for both and the earning method for affiliate marketing as you know by now is a commission based payment meaning every time someone clicks on your link and then they order the product you will get your commission based on that sale and on drop shipping it is a profit margin from the product price the difference between the source price how much you're paying your supplier and the selling price how much you're selling it on your selling channel minus the selling channel fees is your profit when you are drop shipping so you have much more control over your profit margins when having a drop shipping business so which is better affiliate marketing or drop shipping now that you have a great explanation and the key differences and also main similarities between the two this should go without saying but they are both good business models there is not a bad one and a good one but the better one is drop shipping in this case from the reasons that I already talked about plus let's add in some more we've got branding on drop shipping that we can do much better than we can on our affiliate websites even though as I mentioned in my example if you're going for a pet's niche and you create a pet's website it does look like a brand but you can't have a brand where you're telling people to go to another brand and purchase from them it just looks kind of weird and when you have a drop shipping store and it's a completely branded drop shipping store you create your own brand around it and your store's whole visualization theme complements your brand design and style it definitely will make it look like a real business which it is and your buyers will have the confidence to proceed to the checkout process when shopping on your branded store so branding is easier on a drop shipping business hire profit margins as I just explained because you have full control you decide how much to profit on every order instead of the company that decides for you scalability because you can add business automation as opposed to doing everything manually on an affiliate marketing business more website traffic when you have a drop shipping store even though you can generate traffic and you will generate traffic on your affiliate marketing website when you have a drop shipping store it's a little bit easier to generate traffic there because on the one hand as I explained you can do it on a marketplace where you're gonna get free organic traffic and you can also add marketing like promotions like PPC ads and more things that you can also do for affiliate marketing but on drop shipping it is an added bonus to your website traffic and loyal customers now granted you can also get loyal customers on your affiliate marketing website but when it's your drop shipping website the customers bought from you they purchased from you and they paid you so they're going to be loyal to who they paid to and not to the link that you sent them where they actually had to pay over there and then they will be loyal to that website so for example if you gave them an Amazon referral link and they purchased from Amazon they're going to be happy with Amazon not with you, they're not gonna come back to purchase from you most likely they could but they know that they purchased from Amazon so next time they'll need that product they can simply go directly to Amazon to purchase it again so more loyal customers are relevant to the drop shipping business model now here's a great question can we combine affiliate marketing and drop shipping what if you want to enjoy both of the worlds both of the worlds are increasing in numbers and you want to take pieces from both of these cakes that is definitely a possibility but you will of course have to work and put in some effort to make this work now there are several methods to do it but my recommendation would be to have a drop shipping website for example on Shopify or on Wix where you have your own customizable website and there's a big difference between having a website on Shopify or Wix than having it on eBay whereas on eBay you don't really have the customer's information when someone purchases from your eBay drop shipping store you don't actually get the customer's information I mean you get their name you get their phone number and you get their address their shipping address but you don't get the most important thing here which is their email address and if you have an online store on Shopify or on Wix or on WooCommerce or any of those customizable domain name websites where you can have your own here when a customer purchases from your website you're getting their information you're getting their email address which is the most important thing because you're going to save these email addresses in your database and then you can send email marketing promotions to these customers which is one of the best and also low cost methods for marketing your products now of course there are others like running PPC ads and so much more which we have tons of information on on our website and on our YouTube channel but once you get their email addresses and you have a list of them you can start sending them email promotion campaigns and in those email promotion campaigns while you can promote your own products that you have in your store you can also add affiliate links to those emails and send them to that company or that affiliate website where they can purchase that product and you will make your commission from there and slash or on your online website you'll also have a blog section so you're selling your drop shipping products but you also have a blog link which takes them to your blog and inside your blog you have articles with affiliate links where they can of course read that blog article click on the link purchase the product and you will earn that commission so those are just two quick methods on how you can combine the drop shipping business model along with the affiliate marketing business model and enjoy both worlds I hope that this video helped you understand what is affiliate marketing what is drop shipping and what are the key differences and similarities between them along with how you can profit from either of these worlds or even both of them combined let me know if you have any questions or if anything wasn't clear to you or if you simply want to say hi drop it in the comments right below this video and don't forget to subscribe to our YouTube channel to always take your drop shipping knowledge to the next level stay ahead of your competitors and of course like and share this video if you appreciate the value thank you for watching and good luck with your affiliate marketing or drop shipping website