It is believed that dropshipping and affiliate marketing are the most popular e-commerce methods in the world now. Drop shipping is an online retailing method which allows retailers to purchase merchandises individually from suppliers, and these suppliers should take the responsibility of delivering merchandises directly to end-customers. Moreover, affiliate marketing is an online practices that helping merchants to gain much more visitors or customers to their websites whatever visiting or purchasing. Furthermore, the ‘products’ in the affiliate marketing include merchandises, services or even campaign. In this posts, I’m gonna list some of the pros and cons in drop shipping model and affiliate marketing method, and then make suggestions for you by taking a comparison between them.

Pros and cons

Pros of drop shipping:

a. Lower capital requirement. It is believed that drop shipping model requires lower capitals, which means retailers should not spending too much money in the early stages of drop shipping process. For example, basically, retailers do not need to built up a online store before doing drop shipping business. Retailers should only need to find some more customers as quick as possible, and they can make profits from it easily. However, in my opinion, it should be better to build up your own store or brands because you need to strengthen the brand awareness among customers, which should be helpful for your long-term strategies. Therefore, it can understand that it is up to you if you want to spend much more money in the early stages of drop shipping, if not, it should be fine to start your drop shipping business with lower capitals.

a. Get escaped from the inventory. As we know that drop shipping allows retailers do not need to carry inventories during the trading process. That means retailers can saving lots of costs on inventory and warehouses renting. Moreover, they can also change selling strategies easily like switching niches.

b. Jobs from home. As the features of drop shipping model, it is possible to understand that retailers can totally carry out the complete drop shipping process at home by using smart devices like PCs and tablets. For example, some of the drop shipping platforms should built up its software systems, that allows retailers to deal with supplying issues, inventory management, and logistics. It is believe that retailers should saving time on deal with drop shipping business, and they can also make profits from it.

Cons of drop shipping:

a. Lower profit margin. As the statistics shows from the Guardian, it illustrate that the average profit margins of drop shipping is approx 15-30% globally. That means retailers should making lower profits from it, and it definitely need much more sales for supporting the drop shipping business. As its lower capital and costs requirement, the profit margin in drop shipping business is also lower than other business models.

b. Less control. Drop shipping allows retailers to set their hands free, that means retailers should not need to do so much business operation and they can make profits from it. However, retailers may get less control on their business. As the inventory management and order fulfillment carry by suppliers and other partners, retailers cannot directly manage its supplying and logistic issues, that should leads them to a passive way to do their dropship electronics business.

Pros of affiliate marketing:

a. No order fulfillment. Actually, affiliate marketing is not selling a physical product, which means it should not have any logistics or order fulfillment. All affiliate marketing can do is help sellers to gain much more website traffic and customers to entering online store whatever visiting or purchasing. Therefore, people do not need to worry about the order fulfillment when they are doing affiliate marketing.

b. Providing spaces for advertising. Doing affiliate marketing only requires for blank spaces on the web pages for advertisement. The advertisers should save a lot costs on delivering products.

c. Understanding demands and market trend. It is believe that the basic affiliate marketing process is shows as following:

Sellers give its basic requirement to advertisers include advertising campaign, key words and targeted customers=>advertisers put finished advertisement on available websites=>visitors click the links and entering to the websites=>sellers pay for the clicks once it happened.

It can clearly understand that sellers need to give the information about market trends or even market reports to advertisers to doing the advertising campaign, which means advertisers can easily collecting these information and statistics that should be helpful for understanding the current market whatever in any categories.

Cons of affiliate marketing:

a. Less control on profitability. As we know that the profits of affiliate marketing can only gained from CPC (Cost-Per-Click), CPL (Cost-Per-Lead) and CPS (Cost-Per-Sales), which means the profits if is higher or not are depend on the quality of advertisements and kind of luck. The profits that can be made is uncontrollable especially in the early period of affiliate marketing. Therefore, advertisers should stay focus on how to improve the quality of advertisement that should make more profits for affiliate marketing.

b. Risky when doing affiliate marketing. According to the case studies for affiliate marketing, it can find that some of the advertisers have been owed money by sellers, which means some of the sellers are not paying for the advertisements even it already increased the website traffic. For example, sellers may exit from the existing transaction without paying any money for advertisers, even advertisers are spend so much money and time costs on its advertisement. There are so many cases happened just like it shows above, advertisers cannot make sure they can get paid by sellers every single time.