What is the difference between drop shipping verses affiliate marketing, and could you do both?
The main differences between the two as far as I can see, is the upfront costs required to do drop shipping.
Drop shipping is what some term as product arbitrage, which is a fancy word for buying in a product in at a low price and then on selling the product at a profit.
This model is what is what most people are familiar with in the marketplace. To see it in action all you have to do is go to your local supermarket and buy stuff off the shelf. The owners of the supermarket have basically bought in product and then sell it at a profit.
One of the draw backs to drop shipping is that you must have either a substantial line of credit to buy in the products at a reasonable discount or you have to have a large sum of cash on hand to buy in the product. Either way, you will be spending hundreds if not thousands to get setup before you even have the opportunity of making a profit.
You will also have to have a warehouse to house your inventory. The warehouse space requirements are subject to the size of your inventory. You may need to consider specialized warehouse facilities depending on what you are storing. For example, if you have a lot of frozen inventory like ice cream for example, you may require a warehouse with refrigeration. Some to keep in mind.
With physical products you will also need to take into consideration shipping costs. If your product sells for say $20 and your shipping cost $25 then you are at a loss of $5. So this figure needs to be considered and either added onto the price of the product or built into the margin of the product.
Affiliate marketing on the other hand has a lot more going for it. You see, with affiliate marketing, all that you’re concerned with is marketing the product to a high targeted segment in the marketplace.
If you can do this successfully, then you can potentially make thousands of dollars. Some top affiliates can earn hundreds and thousands of dollars.
With affiliate marketing you have no inventory costs, because you don’t own the product . And even though you don’t make as much money in the transaction, the owner of the product has a lot more to worry about than you. All you have to do is to get qualified buyers to the product.
So with this in mind, it means that your overheads are super low, and all you have to do is to concentrate on getting people to your affiliate product page.
No shipping costs
You don’t have to worry about the shipping requirements as this part of the process is handled by the owner of the product.
If you’re a good marketer then the affiliate marketing model is definitely the way to go.