When you are deciding how to set up your online business you will find that you are faced with some choices. After the obvious steps like finding your domain name and setting up your website, you will need to decide how you are going to generate income from your new online home.
Will you monetize it simply based on advertising revenue, or will you sell products of some kind?
If you decide to take the product sales route there are a couple of options to consider. Will you design your site to provide income based on affiliate marketing (pushing site visitors to external sources to make a purchase) or are you more comfortable finding a supplier to send purchased products directly to your buyer (drop shipping).
There are some advantages and disadvantages to each one. Here we will look at some of the differences between the 2 selling methods to help you decide which one is the best choice for you.
We covered briefly the concept of affiliate marketing and drop shipping but here is a more in-depth breakdown of how affiliate marketing works. This income-generating method breaks down into 4 major components.
Let’s break down these components one by one:
The Affiliate Website – this is your website and the place where you advertise your products and include links to items or services that you want to sell. This site may be in the form of a review site or best of style, or it could be a blog that provides help and information to your visitors.
The Affiliate Partner Network – this is the place where you obtain links to the products you wish to sell or promote. Many Affiliate Partner Networks supply a wide range of products and have relationships with multiple companies and businesses which gives you a wide variety when choosing the products you will sell.
Commission Payouts – this is what affiliate marketing is all about, earning commissions from sales. Check when choosing your Affiliate Network Partner as commission levels and payout schedules can vary greatly. But if you are marketing your website and products effectively you should start seeing a monthly commission check.
Dropshipping varies a little from Affiliate Marketing and is a retail fulfillment method. The seller never actually sees or handles the products and purchases are shipped directly to the buyer.
You as the seller earn commissions from sales and do not need to directly handle shipping, packaging or postage. If we break down the components of drop shipping they look like this:
Let’s take a closer look at each of these components individually:
The Website or Store – this is the place where you display your products and product range to purchasers.
This can be set up by using a WordPress site with an eCommerce plugin such as Woo Commerce or many choose to go the route of an all in one purpose designed platform to help with setting up their online store.
The big players in the field currently are Shopify and Amazon FBA.
The Products – These are the items that you select to sell on your online store. Items can have varying commissions and depending on your industry demand can vary or fluctuate depending on seasonality and other factors.
For example, if your business is Christmas Ornaments you would expect to see higher sales towards the end of the year.
Shipping – this part is handled by the product supplier and is the essence of drop shipping. Although you as the seller market, promote and sell the products the actual shipping and delivery is handled by the supplier.
When the buyer makes the purchase on your website the product will arrive directly to his front door without you ever having to touch it.
Commissions – depending on the product range and categories you choose to sell commissions can vary and can get quite slim for drop shipping but you have to take into account that all of the shipping and delivery is handled for you.
After you make your sales you will start to receive commission payouts regularly.
Once you have all the facts at your disposal and are determining which route to take; drop shipping or affiliate marketing, there are also a few other factors to consider. When weighing the pros and cons of each method it is important to also take some additional elements into account, such as:
Neither drop shipping or Affiliate Marketing is a get rich quick or a fast track to success scheme. Both methods will require hard work and time invested. You will need to understand your markets, be able to conduct valid research and find ways to offer unique selling points and value propositions.
There may be a large number of email inquiries to handle and respond too or questions from your buyers. These will all need to be addressed and they all take up time so think about how many hours per week you can dedicate to your venture.
While there are platforms out there that design online stores and websites for you, it will stand you in good stead to have a basic understanding of tech terms and web design. Understanding how search engines work is useful.
Keyword targeting and hashtag research will be beneficial and can help with promotional methods. Basically while not a requirement, the more knowledge you can amass the more it will help you throughout the process.
While the appeal of Dropshipping and Affiliate Marketing is the zero to low cost set up, there may come a time when you have to do a bit of advertising to drive traffic to your website or online store.
In that case, you will need to decide how much you can spend and if you are going to run an ad campaign based on cost per click or cost per lead.
There is a range of options out there from Google Ads to Social Media Ads and other variations that you may want to consider.
As part of your promotional efforts, you may want to utilize social media platforms to drive traffic to your online store or website. This is a nice, free way to raise awareness and build an audience.
Using Facebook, Twitter, Pinterest, and Instagram are all good options depending on the type of business you are managing.
Pinterest appeals to a largely female audience where Instagram is good for any type of industry that is visually appealing. A bit of trial and error on each platform will reveal which one works best for you. Converting your accounts to business accounts will also provide you with useful analytics information.
To blog or not to blog…that is the question. Blogging has also become a viable way of driving traffic to your website. Providing articles that contain useful information to help your audience is a great way to extend your reach and gain exposure.
These blogs can then be shared on social media to widen your scope even further. However, the downside to blogging is that it can be time-consuming so you will need to determine if you have enough time available to create quality articles for your site visitors.
Managing an Affiliate Marketing or Drop shipping business can become time-consuming. Especially if you decide to have a few social media accounts and add a blog. All of that takes dedication and hours out of your day.
So you may want to think about outsourcing parts of your business as you grow. You can enlist the help of friends and family members or you can seek professional outsourcing services via sites like Upwork or Freelancer which provide a large range of professionals in many different areas.
Now you have all the pros and cons of drop shipping and affiliate marketing business models you should be able to make an informed decision about which method suits you best.
The great thing is that neither requires a great deal of money to start but they will require work.
Once you decide which method you will be using head over to our Affiliate Marketing Beginners Guide to help you get started and good luck!
We're An Affiliate - We are reluctant to allow advertising on this blog, which we believe will spoil the user experience. Instead (so that we can continue sharing our knowledge and expanding our content), we have decided to include affiliate links for the products that we use and/or rate highly.