The similarities between wholesale drop shipping and affiliate marketing are very hard not to notice and make a connection to their similarities. So how do you decide which is best? More to the point – How do you decide which is better for you.

How can you make more money?

Let’s start out by looking at the facts and issues of each before we contrast and compare so you can decide which will work best in your situation right now.

What is Drop-Shipping Exactly?

Drop-Shipping at its core, is going around the usual distribution channels and having your customer’s orders shipped to them directly from the manufacturer. Many manufacturers are focused on just that, manufacturing. So they gladly hand off the job of distribution, advertising, customer service, and order taking and payment taking to someone else.

How does Drop-Shipping work?

With Drop-Shipping, when a store sells a product, the store then makes purchase of the ordered item from the wholesaler or directly from the manufacturer and they ship it directly to the store’s customer. The store doesn’t have stock, or own any inventory for that matter. No money changes hands, or product moves, until an order is placed and paid for by the end-user. The store (or merchant) never handles or even sees the product.

As the store or seller, that’s the main advantage of Drop Shipping; you don’t have to manage any inventory or be responsible for product fulfillment.

What you do have to have (and do) as a Drop-Shipping Merchant is:

Build a website, Source your products, Sell products on your site, Make sure that your orders are getting to your suppliers and are being fulfilled. There is a lot of talk around the drop shipping business model and how “easy” or “hands-off” it is. You don’t have to keep any inventory, and deal with a very minimal amount of customer service. A common claim is that you can spend just a few hours per week on it. And you can run a profitable, full time drop business in this way. This is an awesome way to make money on the internet. That part is true. But it’s not as easy as it sounds.

It sounds great, but:

Since you are selling the product under your own store name, your primary responsibility is customer support and that means Customer Service. As much as Drop-Shipping is said to be “so hands-off” and “passive income” it’s not really that simple because you have to deal with customer service. If someone orders a product from your site and it arrives broken, they will call you. If they’re disappointed or it doesn’t fit or work the way they thought, they’re coming to you. With Drop-Shipping you also have to deal with things such as product knowledge (to answer questions from the prospect) and handle all the warranty and returns.

Low margins are the biggest with Drop-Shipping, because it's so easy to get started, and the start-up costs so minimal, with little to no overhead, many merchants will set up shop and compete just on price. They have no problem selling items at rock-bottom prices in an attempt to grow revenue. They've invested so little in getting the business started so they can afford to operate on minuscule margins. And it is the laziest way to sell anything, have the lowest price and you’ll make the most sales.

You have to maintain your business and store’s reputation as a Drop-Shipping Merchant. Why would someone buy from you over someone else? - Customer service, value-added services and quality of merchandise. So you work hard to build it up and get known so when there’s good word-of-mouth they come to you.

And it can all be gone in a flash. Manufacturers and Distributors make mistakes, nobody is perfect. But their mistakes are your responsibility and you will have to apologize and ‘make good’ with the customer. There is the very real possibility of endless frustration with low-quality packing, missing items, and botched shipments which can damage your business's reputation.

What is Affiliate Marketing Exactly?

Referring customers to businesses where they then make purchases is Affiliate Marketing. Your Ads act as marketing for someone else and your website as a referral engine, yet you don’t actually sell any product, you get a commission. In addition, you don’t directly collect any money either. When the customer makes a purchase you get a percentage of the sale price as part of the cost to the customer. The business who made the sale because of you, pays you money for bringing them business. Payments are usually made on a monthly basis.


How does Affiliate Marketing work?

Affiliate Marketing programs are sources of revenue and off-brand promotion for retailers and distributors. Affiliate Marketing can be as much as 3-21 percent of online revenue and have an ROI (Return on Investment) among the highest of any of their channels on-line. Affiliate Marketing is an important part of their arsenal and their overall marketing strategies.

Why are they willing to pay you for this? The higher ROI - Because it’s performance-based, they are buying paying, active, customers, not just visits that may or may not turn into a sale. From their point of view, this gives you as an Affiliate Marketer a big advantage over other marketing channels, such as PPC, where it can cost a lot of money without producing actual sales. (In the business, when people who visit the site and then buy is called a “conversion”.)

Which is best for you – Affiliate Marketing or Drop-Shipping?

Both are sources of Passive Income; you set it up, do a few tweaks and then mostly check your bank account. But there are some key elements that will help you decide.

The main advantage of Drop-Shipping is that you don’t have to manage inventory or product fulfillment. However, since you are selling the product under your own store name, you are still responsible for customer support. And have to guard your reputation being tethered to a few key products or lines; your business is at the whim of both your suppliers and Search Engines. A policy change with a Search Engine and your traffic can fall off; it’s happened, and sometimes literally overnight!

The main advantage of affiliate marketing is that the entire sales process is completely hands off. Once you refer a customer to a business and the customer makes a purchase, your job is done. You don’t have to worry about product fulfillment. You don’t have to worry about customer support. You just get paid your commission and that’s it. And if the business relationship goes south with your advertisers, you just get new ones without having to change a thing. Search Engine changes their policy? Alter your websites’ content accordingly and it’s a non-issue.

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