The internet is a goldmine for those entrepreneurs willing to learn how to make an income from all the bountiful resources. Whether it is through social media, business websites, and blogs, these traditional ways are above, yet there is more to know about what is really happening below. We’re talking about drop shipping versus affiliate marketing.
These are mysterious avenues to income are residual income forces are. We are going to cover this in-depth, in an user-friendly way to explain the concept behind these two separate income opportunities.
What Is Dropshipping?
Dropshipping is operating a storefront on an online store without having to carry the inventory .You also doesn’t have to ship the product. When you receive an order, you place the identical order with the original distributor who has a wholesale price. The amount of profit you will make depends on your selling price minus the wholesale price. You will accept payment when the customer’s order is placed on your storefront.
The biggest advantage to Dropshipping is to don’t have to manage inventory or engage in product fulfillment. You are basically the main company’s advocate, sales force, middleman, and advertiser. You are still responsible for customer support because you are selling the product under your own store name.
Drop Shipping, can becomes a profitable venture when you partner up with a vendor who manages the warehousing and logistics of the product all the way to the customers door. With drop shipping, you can price the products at whatever you please, typically staying within a reasonable selling price. The payment goes to you first. Either a check to the drop shipper after your customer has purchased your product or sometimes the vender will have a different payment process.
The best way to secure more profit is to find a low priced drop shipper, like wholesale or bulk. The markup is better, but use competitive pricing on items so you price accordingly for the item to sale quickly
What Is Affiliate Marketing?
Affiliate marketing is referring a customer to another business and receiving a commission percentage after the customer makes the purchase. Basically your website is a marketing tool to send referrals to other websites specializing in sells, products, and services. You are not involved in selling any product, only referring someone to go to site for their purchase.
The commission is a bit different with affiliate marketing as well. You do not collect any money until the sale has been made; then the affiliate business will pay your commission, typically monthly (some companies will do weekly though.)
It is through link building on your websites which tracks the customer from your site to the product. Once they click on that link on your site, it immediately opens to the product in mention. Should the customer purchase the product, the commission is tracked into your affiliate account.
There are both advantages and disadvantages for Affiliate Marketing and Dropshipping. People, who take part in one or the other, find their own comfort zone and work manageability in what each has to offer. This is also referred to niche marketing.
Affiliate Retail Marketing is performance based marketing or referral based marketing. In an affiliate retail marketing set-up, you would build a website. The idea is your website would showcase as many products or services, but none of them would actually be your own. Products would be sold at other e-commerce retailers, such as Amazon. Someone clicks on or purchases a product, you get a referral commission. Referral commissions vary
From a customer’s standpoint, the customer would shop around your website, just as they’d shop around any other. The only difference is, they’d be transferred over to the affiliate retailer’s website when it came time to purchase the product.
Advantages of Affiliate Marketing:
ü The entire sales process is hands off, once the customer purchases, your part is done.
ü You don’t ever have to be involved in product fulfillment.
ü You are not involved in customer service interactions.
- By being an affiliate, if something goes wrong the customer goes back to the main company not you.
- By being an affiliate, you can mix things up a little, earn some funds and start your own web store with your own stock and your own customers.
- Starting up an affiliate website is much easier and requires less maintenance,
ü You can start as an affiliate with next to none investment
The Disadvantages of Affiliate Marketing:
- When you act as an affiliate, you are not a real business. When a customer makes a purchase using your affiliate link, you don’t get any long term benefits after the sale.
- If the customer wants to buy again? He is not going back to your blog, but straight to the purchase website.
- He will also refer friends to the place he made the purchase, and not where he found the link on your website
- Whenever you make a sale as an affiliate, it is pretty much a one-time kind of transaction.
- As an affiliate, you will constantly have to create new business and referrals because of lack of return customer base. There is no foundation. All these reasons above have to do with the desired concept of “second income streams” or “multiple income streams” or even “passive income streams”.
The Advantages of Dropshipping:
- Dropshipping is more about ease of setting up and maintaining, this would be a second income stream.
- The customer makes the purchase from your storefront, but you forward the order to the main store.
- The amount of profit that you can make dropshipping has potential to be much higher than if you are just an affiliate. With an online store, you get to set your own prices
- Typically you could possibly make a 50% gross profit on your dropshipped goods, although some report 20 to 30 percent gross profit to move the item quicker.
- With an online store, you have the opportunity to establish a reputation and a brand to get repeat business.
- With an online store, whenever a customer raves about your product or service, you will be the one to get the credit for it. This goes on to word of mouth marketing when other asks for a referral, your store will be the one referred.
- A quality online store will naturally grow over time with a strong foundation of repeat customers, referrals, website content and maintenance.
- If you have the time and knowledge of the niche a dropship store may be much more profitable.
The Disadvantages of Dropshipping:
- You are the one responsible if the customer does not get their shipment on time. You are responsible if the product is defective or arrives broken. You have to be professionally prepared for this.
- You going to have to devote a certain amount of time dealing with customer issues especially if you have unreliable and unavailable dropship vendors.
- Also, owing a dropshipped store means you have to setup a complete storefront that accepts credit cards and other forms of payment (affiliate marketing where all you have to do is throw up an informational site or blog).
- The amount of work required to start a dropshipped online store is going to mean way more effort than that is required as an affiliate marketer.
- Opening an online store will take considerable work and is less “passive” but the difference is that you are building a true business. If you can go in for the long haul, you will own something with infinite potential to grow.
- Another major consideration, if you’re drop shipping, you’re opening up so many areas that could absolutely ruin your reputation.
There have been success stories and nightmare stories from both income opportunities. The best way to decide is by learning as much as you can about both as well as what your comfort zone is. There is more money and risk in drop shipping, so if you don’t know what you are doing begin as an affiliate. This way you can learn the basics, and grow your ideas from this experience.