What is Affiliate Marketing?
Chilcote basically means an affiliate marketing type relationship in the question. Let’s take an example: I reviewed a pen and discussed how it is the pen I use every day.
Then, at the end, I would share a link with you and say “Hey, by and large, here’s the link to buy that pen!”
Affiliate marketing allows you to promote other people’s products in a similar way as drop shipping. Affiliate marketing has many benefits, but one of the biggest draws is that you don’t have to deal with orders.
You are merely referring people to an online store. Orders won’t be processed because you’re not processing them. Their credit card is not charged and the money they pay will not be going to your bank account. It’s not necessary to deal with potential customers calling and complaining about their credit cards. Affiliate marketing doesn’t process orders, which is one of the greatest benefits.
Affiliate marketing has another advantage: you don’t have to deal with customer service. Referring someone to a retailer to purchase this pen will result in them purchasing the pen. If the pen arrives at their home and the ink has exploded, it is not my fault.
I will not be contacted by the customer asking for a replacement pen for the one that exploded. Instead, the customer will contact the company to say that their ink has exploded. It’s a great benefit to affiliate marketing not having to deal with support.
Customer service is a key focus of my eCommerce training. We try to provide the best customer service possible for our eCommerce shops. This means that we don’t sell problematic products.
This could prove to be a benefit for affiliate marketers. Let’s say that you’re promoting something extremely technical and don’t know all the answers. It could be a new electronic type, or something similar. You can promote it as an associate. These questions and complicated customer service issues are not your responsibility. If you are a content producer or promoter in this niche, it could be a great benefit to not have to deal with customer service.
Now the way you make money as an affiliate is by earning a commission per sale. As the YouTube commenter suggested, they say why not just refer the sale through my relationship to the manufacturer and I could get 10%. Affiliate marketing is all about commission-based sales.
Now, before we move on to an explanation of what is drop shipping, here’s a quick recap of what affiliate marketing is:
- Promote the products of others
- Orders are not processed
- You do not handle customer service
- Commissions are earned based on sales
Drop Shipping: What does it mean?
Drop shipping is a retail method that doesn’t require you to keep products in stock. Instead of warehousing, you partner with a drop shipping supplier that stocks its own inventory. The suppliers send the order to the customer by transferring customer details and shipping details. This graph will help you understand drop shipping.
Dropshipping has some similarities to affiliate marketing and some differences. Let’s take a look at these:
First, let’s say that you are still promoting the products of others. Let’s take the pen example as an example. It would be the same as promoting a pen from another person, but it will be through my shop. This means I would process orders and people would enter their credit card information on my website. I would also have to deal with customer service.
Drop shipping is a great option for anyone who has a question or was sent a damaged product.
Drop shipping is a way to make money. You earn profit per sale. It is possible to make two dollars per sale if someone buys a pen from you for three dollars. However, I must also consider my expenses such as hosting, paid traffic and customer service outsourcing.
Dropshipping isn’t a guaranteed way to make a profit. It all comes down to the price of your products and how well you manage your expenses.
Drop shipping can make you a lot of money, but you still have control.
Instead of earning a 10% commission on every affiliate sale like you would, you can earn more depending on how your website is monetized and the sales you make and the customers you serve. (I’ll talk more about this in a moment.)
Drop shipping is, as the name suggests,:
- Promote other people’s products
- Orders are processed
- You handle customer service
- Every sale earns you profits
Drop Shipping vs Affiliate Marketing
Let’s look at an example I use every day because it helps me to show the difference between affiliate marketing and drop shipping. Funny thing is, I’ve been talking about this paddle board example since 2013 when I founded Drop Ship Lifestyle.
Let’s suppose you decide to make a YouTube video on paddleboarding. After getting a lot of views, you are now thinking, “Wow, I want people to buy these paddleboards from me.” This is how I plan to make some money.
This will allow you to build an audience who cares about paddleboards. These two options can be compared.
You could earn 10% commission for each sale if you are an affiliate and refer your audience and traffic to another store. If the paddleboard cost $1,000, then you could make $100 each time someone uses your link to purchase their paddle board.
These numbers can vary if you dropship a paddleboard. But if you set things up properly, you can expect to make about 25% net profit on each sale. This means that instead of people visiting the site you refer, they will go to your site and purchase the $1,000 paddleboard. Instead of making $100, you’ll make $250 net profit.
Many people are now wondering if it’s worth 15% to have a business that is “hands off”. People often think I mean that you don’t process orders or provide customer service. Because it is a more complicated situation, I don’t want to make you think that way. It’s not so simple.
You probably guessed the answer to drop shipping vs. affiliate marketing. You are correct if you chose drop shipping. Let me tell you why drop shipping is better than affiliate marketing. (And it’s not just because I run drop ship stores and have a business called Drop Ship Lifestyle.)
Benefit #1: More than twice the profit for minimal extra work
Even if your product is manufactured or private labeled, the advantages of owning your website over affiliate marketing are immense. The first major benefit with drop shipping is there is a potential for over twice the amount profit every time you get a sale, for a minimal extra amount of work.
You might also be thinking about the earlier points (processing orders and customer service). It sounds like a lot of work. It can be, if you’re selling something low-cost like a $3 pen.
We recommend selling more high-priced products in our eCommerce stores. This is what makes my training so special. This means lower volume, less customer service, and higher profit margins.
It is not difficult to make more money doing affiliate marketing than it is for drop shipping. Drop shipping is worth the effort.
I am telling you, building a long-term drop shipping business is a great way to spend your time. It is definitely worth it to set up your own shop and build relationships with suppliers and manufacturers.
Benefit #2: Open up new traffic sources
This is my biggest, but drop shipping can open up new traffic and opportunities to find customers. In the past ten year, I’ve managed many affiliate websites. Some of them have earned close to seven figures in commissions. Affiliate marketing is a great way to get people to visit your site. However, it is completely different from drop shipping.
You can’t use every traffic source, even if you have an associate site. Imagine an affiliate website as an online catalog of products. Clicking “Add to Cart”, a user could be taken to Amazon, or any other company that supports the affiliate relationship.
If you have a Shopify or WooCommerce site, the click “Add to Cart” will take them to your store’s cart.
There is a huge difference between these two business models. Not only in terms how you make money, but also in terms where you can advertise. Google does not allow affiliate websites, particularly with Google Adwords or Google Product Listing Ads. If you own an affiliate website, you can’t upload CSV products to Google and get traffic. This is a huge deal!
Understand, that if you’re going to be running a successful affiliate site, your primary traffic source, and what most people do, will be focused on SEO. This is a great way for affiliates make money and drive huge amounts of traffic. However, you must be very skilled in SEO to be able to rely on it as your main source of traffic.
SEO is not the best option for affiliate sites. You are making only 10% per sale so it’s difficult to afford to spend on paid traffic. Affiliate marketers heavily rely on traffic from search engines and influencer marketing (in which case you could try to become an influencer).
Like I mentioned earlier, if you have that paddle board video on YouTube, got a bunch of organic traffic, that could be something that you then funnel in to an affiliate offer.
On the other hand, with dropshipping or any other type of eCommerce, not only do you have more profit per sale to play with, but Google loves when you advertise with them and their shopping aggregator sites.
This means that you can reach a wider audience in a shorter time frame. It’s much easier to manage your profits when you don’t rely on search traffic but instead rely on paid traffic.
Benefit #3: More control!
Because I am not making that much money anymore, I want to mention that I have done well with affiliate websites and made a lot of money. While some of them do still do well, I had no control over their success.
I had no control over the affiliate deals that were offered to me. This means that companies can change the products and stores you promote because they aren’t your product.
Google can make changes to how search traffic is sent, rank you pages, and how you appear in the SERPS. You don’t have any control over how you boost your traffic if you rely on organic search results. It’s not paid. It’s possible for your traffic to run out quickly if you rely on the traffic of others or affiliate offers from other people. Affiliate marketing is not your responsibility. Drop shipping, or selling your products privately labeled or making your own products, gives you that control over traffic sources.
You also have control over your customers’ data when you run a drop shipping company. Let’s say that I was referring 20 people per day to a site. That other website collects the name, email address, home address, phone number, and other details of each person I refer to.
This means that the pen company I’m referring to will continue to have these customers for life and be able to market to them. The pen company will send an email to the customers that I have sent and inform them about their Black Friday Special on Pens.
Affiliate marketing has another major drawback.
This is how it works. You make more money if you process the order the first time. Although it takes a little more work, you still own the customer data. You are the person marketing to this customer if you sell 10 pens or want to upsell them.
These data will grow in value over time and be more valuable for you and your business.
This is a huge number and, honestly, it is the reason I quit.
Yes, I know I keep repeating the main reason, but these are important. These are the reasons why you should invest your time in building Shopify stores.
Benefit #4: Your Business is More “Sellable.”
Drop shipping is an option over affiliate marketing. A drop shipping store can also be a business you can sell. Drop shipping is a popular way to make money and cash out.
Affiliate sites do sell. If you have a dropshipping store with a strong sales history and customer base, you are more likely to get a higher payout for your site.
Drop shipping sites are generally more lucrative than affiliate businesses for a few reasons.
You have a larger buyer base, especially if you go for the higher price points. Drop shipping businesses sell for seven figures more than affiliate sites. You might be able to, and I’m not saying that there aren’t exceptions. However, you will be better off if your time is spent building your business.
This explanation of drop shipping vs. affiliate marketing is now complete. This is a great question. Please leave a comment below to continue the conversation. If you have any experience in affiliate marketing, I would love to hear about it!
Thank you for reading this article. I hope it gives you some inspiration or a lesson in business that you can use in your personal life.