Having seen some success as an affiliate, I have been thinking about the next step. So, I came across dropship model (which I knew before but didn’t spend much time researching it). So, the dilemma is whether to continue to invest time and effort on the affiliate program or diversify into dropship model.
There are a few dropship companies such as shopster.com which will only show their prices if you have an account (though you can have a 7day free trail account) while I found MegaGoods.com showing it’s prices openly to non-members as well. So, using the member prices given on MegaGoods.com and comparing it to the same product offerings on Amazon, I found that the margins are typically 6% and above for electronics. However, Amazon Affiliate program gives only 4% for electronics category (but gives up to 8.5% depending on performance for other categories). So, while it’s obviously a disadvantage of atleast 2% being an affiliate, here are some pros and cons of Dropship vs Affiliate programs.
Affiliate Pros compared to Dropship
- No need to deal with online transactions
- No need to have secure website to take orders
- No need to process the orders
- No need to deal with customers and take any calls for returns and other maintenance work
- No need to worry about maintaining reputation of the store/brand
- No need to worry about losing a potential customer due to lack of trust/brand recognition
- Number of product choices is much more with a program like Amazon affiliate program, than any of the dropship programs (while Amazon has millions of products and typically hundreds in each category such as GPS or even dozens for a category such as Massage Chairs, the choice available with any dropship program is typically much lesser.
Affiliate Cons compared to Dropship
- No control on pricing. Whatever the affiliate program company (Amazon for example) offers, have to convince visitors to buy at that price.
- No customer info to be able to maintain a mailing list and follow up with them with deals (adhering to the opt-in/out policy)
- No repeat customers
- Difficult to obtain statistics or they are inaccurate
Assuming that in both cases it’s important to maintain a good website, follow SEO techniques, bring traffic to the site and so on:
The lack of operational overhead for affiliate programs is probably enough reason to not worry about the extra 2+% revenue possible with a dropship model.
My current conclusion is that if you are considering either program as a side income and not too serious of making it a mainstream income, then going with affiliate programs is perhaps the best option. But if you are very serious about your own small business and be your own boss one day, then you should definitely try out one or two dropship programs.
