Drop Shipping vs Affiliate Marketing. Why The Latter Approach is Way Better.

Having done TONS of business through affiliate marketing, I have seen it’s benefits first hand and how it’s vastly more convenient than most other options are of making money, including drop shipping.

For those who are truly interested in both these options, I have created a comparison and realistic things you will experience should you try one of these options or both, below.

Firstly, if you are unfamiliar with drop shipping, here is a brief summary of it that I wrote in this article:

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Should you wish to undertake this option as a means to make money, that article will help you better figure out how to start, but I will recommend you take a good look at THIS one because you may want to reconsider and do affiliate marketing instead, and I’ll explain why.

Here’s the thing: Both options are actually very similar…

Drop shipping and affiliate marketing are actually the same thing if you look at it from a broad perspective. In either case, you are not the owner of the product, but you are technically selling it for commissions.

But there is also a difference and with these 2 options, it is VERY distinct:

The difference comes when you look at how each method operates…

  • With classic drop shipping, you buy the product from the vendor, but charge a higher price from the customer who comes to buy it from you so you can profit. 

Which option can make more money? 

Theoretically drop shipping and the main reason being is that you technically set the price of the product. Should someone want to buy say a smartphone through eBay which normally sells for $500, you can technically make a sellers page and charge $700 for it, and then buy it for $500 from an actual vendor and keep $200.

Whereas with affiliate marketing, you can look at the same $500 phone, but depending on the commission rate, you can earn about 10%, meaning a $50 commission.

Obviously there is a gigantic difference in earnings here and in most cases, considering what you charge above the normal price, you can make more through the first approach.

However, there is a distinct reality with both these approaches that make the first option very difficult to pull of and in many cases can cause you a much bigger headache to deal with with EACH thing you try to sell and that’s what brings me to the following:

5 reasons why affiliate marketing is a ton better:

1) There is far more convenience. 

Let us say that you have a website which sells a particular brand of products. Considering that it actually converts and does well, you are looking at a much more automated and convenient system where a steady flow of visitors comes to your site and buys the product.

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You as the middleman have little to worry about because as long as the sales are coming and there are no refunds, it means the customers are happy and you can technically sit back most of the time and let the site run on it’s own.

There’s no need to micromanage most of the time with the buyer unless they leave a specific question and if there is a problem, the vendor gets to handle it, which actually brings up a very important point (#2):

2) If something goes wrong through drop shipping such as the product is not available, your reputation is affected, not the vendors.

I used the smartphone example because awhile back I had an issue in which I was trying to buy an exact copy of a phone I really liked having and because I didn’t have any interest in testing out the new ones on the market, all I wanted was the SAME phone. 

However, the problem was that in many stores, the model itself was no longer in production so finding it forced me to look online.

Through doing so, I had found several options on Newegg, Amazon and eBay on which the individual sellers who promoted that phone there said they had it, but when I ordered it…

That’s when I was informed that they actually didn’t have it and that they could have sent me a different model instead. That’s when I knew I wasn’t actually dealing with an authentic distributor but rather a drop shipper.

I told them no and from that point on, I remembered who they were and made a note NOT to do business with them. I was very disappointed because I felt like I was tricked despite me not losing any money (although some of the people charged more than others…). 

The people who said they had this phone probably knew they wouldn’t be able to get it and as a plan B would just try to retain their reputation by selling me a different one. That just doesn’t work with someone who is obsessed with getting the specific model like I wanted…

Now that is actually a problem that happens pretty often especially with items like my phone which were available. I don’t mind doing business with a drop shipper. As long as they have what I want and for a good price, I’ll buy from them, but when they don’t because they never actually had it, that destroys their reputation, and possibly their seller account.

Now in affiliate marketing, you can definitely hit a point where what you promote gets bad feedback, but it is up to you to figure out if what you’re promoting is going to make customers happy or angry and I’ll tell you what, even in the worst case, if the customer isn’t happy, they’ll have less to blame on you as an affiliate marketer if you didn’t charge them extra like you would have with drop shipping…

3) Pricing makes a BIG difference and in most cases, propping up the price will lose the customer…

That example of charging $700 for a $500 product sounds good, but when you have a regular customer who knows what the market price is seeing it for $700, good luck making them buy it (unless they are obsessed and don’t care which is very rare). 

There is a limit in drop shipping for the amount of money you can charge over the top of the regular price until it starts to work against you and the customer just won’t pay that extra amount. 

To me personally who does affiliate marketing, I just don’t care about it because the price of the item will always be the same when I promote it and I know that I am NOT ripping of my customer in doing so.

4) You’re going to need to sell either 1 expensive product to make drop shipping work or for lower end priced items a MASS amount to make good money.

To me, in many cases this whole approach personally feels more like a hassle than a stable business because you’re constantly looking around for items to sell and manage prices such that you attract the customer. 

Selling 1 very expensive item with a little over the top will make you a lot as long as that product is popular. To me, I was ready to buy my phone for $100 over the top because I wanted it so much so if a new popular product comes out, people will be willing to spend more on it.

However for smaller charged items, because you can’t really price it TOO much over the top, you need to make sure that you figure out the right price and sell in the right bulk so you actually make something.

But here’s the thing, even on popular items, people know the price and rarely pay more for it so as an affiliate marketer, I could make more in volume and probably in profit over a hot item vs if I were to individually sell that same item through drop shipping and most of it would be, again, automated.

I just don’t like going through all that pricing math of profit margins and fees and then separately buying all the products to send to each customer. There’s just more stuff to (again) micromanage than in affiliate marketing and I prefer not to do all of that.

The 1 area where drop shipping is superior in my opinion:ds2

When I talked about affiliate marketing working better, I pointed out that provided you have a good working website, that it’ll be superior. The fact however is that MOST people who get into affiliate marketing do NOT have that. 

And they don’t have it either because they are new and haven’t even started one or they do, but it’s not working. In those cases, especially if you are brand new, drop shipping may be a better way to start to make faster money, but this is only in the short term. 

It doesn’t take a website and other factors to make a sale via drop shipping. What it does take is picking out an item that is selling well and putting it up as a seller on popular networks, then hoping someone will order. 

Long term wise however, I feel affiliate marketing is FAR better in terms of convenience and even profits when you add everything up. 

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12 Comments

  1. Hannah

    Great post. The main thing that would concern me with drop shipping is that it would be a much bigger deal if you did not make enough sales. It seems like a much bigger risk, while affiliate marketing is pretty much risk free. Making it a much better option for most people.
    Thanks for explaining this so well.

    • Vitaliy

      There’s also a risk with affiliate marketing Hannah, it’s a difficult business to begin succeeding in but long term, I think it’s far more stable than drop shipping.

  2. Deb

    I think this is where a lot of Affiliate Marketers go wrong, marketing products that don’t provide enough return. I agree that Affiliate Marketing is the way to go but to be successful you have to find a quality product to promote.

    Even though I’m not fan of sales funnels as a buyer, I have bought my most expensive products that way. As an affiliate they offer price points right along the spectrum from a few dollars right up to $1,000s. Affiliate marketing is hard work, fun but undoubtably hard work, so why would you do it for pennies?

    I agree also that people need a website. And yes you can get that for free, but then you need to find a great funnel to promote which gives you the potential to earn the big bucks. In my opinion anyway 🙂

    • Vitaliy

      Hi Deb, I agree with a lot of your points but there needs to be a balance in what the affiliate promotes, the commissions they get paid and so on. One thing I would not prioritize first is the sales funnel, not until you have a lot of traffic anyway.

  3. Loretta

    I just recently started working on a site for affiliate marketing. I have to get used to writing quality content, a lot of it. But anyway while I’m waiting for the money to roll in I also sell products I produce on Ebay. I am not interested in drop shipping, even though I thought about it briefly.

    • Vitaliy

      As long as you have tangible products to sell, you won’t really have much time for drop shipping Loretta, but it is still an option to consider while you’re trying to get your affiliate marketing business up.

  4. Simone

    Thanks for the great explanation of drop shipping vs affiliate marketing.

    I am trying out affiliate marketing but I have a friend who is getting into drop shipping. He told me he started with affiliate marketing and even had a website but he only made a sale here and there equaling to less than $5 a month in commissions.

    He said that he worked on his website everyday. Now with drop shipping he told me he made $1,100 in his first 2 months. He did explain it like you did. He said he finds products and then he created his own store on Amazon.

    This sounds like so much extra work. And it seems like a lot can go wrong. Like in your example with the phone. I did like that he made $1,100 in his first 2 months. But maybe this is not sustainable. Would you agree with this?

    • Vitaliy

      It can be sustainable as long as he can deliver the product and not get his customers angry that there’s cheaper options Simone. And as for his affiliate marketing experience, I don’t know how much actual work he put in, but $10 in commissions sounds he may have been trying to do Adsense.

      Like I said in the article, affiliate marketing is a long term investment. It’s good that your friend made over a $1,000 but I wonder if this was the PROFIT or just revenue? You need to ask them for all these details because I believe he or she may be leaving a lot of important details out of their story.

  5. John

    I have previously tried my hand at Drop Shipping and even though I completed a comprehensive training course I was still a bit confused with the whole system, and then I turned my attention to affiliate marketing and have had some consistent success ever since. So it was very interesting to read your take on it and I have to say that I agree with all of your points!

    One thing I was surprised with though,was that most affiliate marketers DON’T have a good website! I would of thought that this was essential and the very first thing they should set up?

    Great article, and I have to agree that affiliate marketing is far superior from my experiences!

    ~John

    • Vitaliy

      Most affiliate marketers DO have websites John. The problem is that they don’t know how to optimize them to get proper traffic to their site. Is it this lack of knowledge that makes most of them fail and at times consider drop shipping to be better.

  6. Denise

    I haven’t tried drop shipping but it sounds interesting. I’m currently into affiliate marketing and I agree that it is better.

    Though you are a middle man in both business types, in affiliate marketing, you have more control over the product you refer than with drop shipping. I don’t like the idea of increasing the price of a product like it is done with drop shipping.

    I take time when referring clients to a product and try to find the lowest price for them. Thus affiliate marketing is way better.

    • Vitaliy

      Well in terms of the price, you’re absolutely right Denise, but I am not sure about control over the product unless you personally buy it before you promote it. In most cases, you just don’t have to go through the hassle of finding a way to order it after someone buys it like you’d have to do via drop shipping.

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