There is a lot of buzz around the drop shipping business model and how “easy” or “hands-off” it is. On paper, it sounds great:
Step 1: Build a website
Step 2: Source your products
Step 3: Sell products on your site
Step 4: Put in the order at your supplier
You don’t have to keep any inventory, and deal with a very minimal amount of customer service. A common claim is that you can spend just a few hours per week to run a profitable, full time drop business in this way.
This is an awesome way to make money on the internet. That part is true.
But it’s not as easy as it sounds. Plus, there are equally profitable business models out there that require even less maintenance, namely affiliate marketing.
Here are some things you might not have considered:
1. Profit margins – If you are sourcing products here, so are you competitors. If you are selling the same products as other people, competition will bring down your profit margins.
2. Customer Service – You still have to deal with some customer service. If someone orders a product from your site and it arrives broken, they will call you. Not all distributors deal with returns and complaints, so this has to factor in to your plan.
3. Traffic – You need traffic to your website. Free traffic requires content creation and ranking. You will either have to pay for content or write it yourself. Ranking doesn’t come easy, and may require training.
You can get paid traffic, but it’s going to cost you per click, and it’s very easy to spend more than you make in the world of Pay Per Click advertising. Running a profitable PPC campaign may require training and a flexible budget.
4. You still need a website, and you need it to be secure for orders. If you can’t build one, you need it built and maintained. That’s also going to cost you, maybe into the $1,000’s of dollars plus maintenance fees.
5. What about those products? There really aren’t that many drop shipping suppliers out there. Sure, there are some, but the type and quality or products are very limited. Companies like Doba make you pay a monthly fee to access their database or suppliers. Places like DS Domination claim that you can just use Amazon (even though you aren't supposed to)
So some of you are thinking that buying a “ready made” business in a box could be the answer. Traffic is flowing, products are sourced, and the website is built.
But an established drop shipping business is going to cost you 20x earnings, so if the site is making just $1000 per month, expect to shell out $20,000. On top of that, it’s unlikely you’ll be able to get a bank loan for that money because banks don’t really understand online business (trust me, ask my realtor).
AND there’s no guarantee that the site will continue to be profitable in the future. If the guy who built the site didn’t do a good job of it and it relies on organic traffic, the next Google update could destroy your business in less than a week.
Drop Shipping VS Affiliate Marketing
Essentially, we have 4 main problems with drop shipping.
- Finding products
- Dealing with customers
- Making enough profit
- Knowing how to run an internet based business
This is why I do affiliate marketing.
True, you still have to find products to sell on your website, but there are way more products available via affiliate marketing programs than there are drop shipping. Amazon has an affiliate program, so that should give you some indication as to the vast variety of affiliate products out there.
This includes completely digital products like ebooks and other digital downloads.
You do not have to deal with ANY customer service if you don’t want to. Your website is essentially a portal to the vendors website. They take care of all sales, billing, returns, complaints, and support.
If you choose to, you can use the comment section on your website to answer pre-sales questions, but it’s not required.
Oh, and the profit margin in huge for many affiliate programs. Many digital download sites pay 50%-75% to affiliates. Physical products range from about 5%-20%+ depending on the program. That means if you sell a $100 item you could make $75 for one sale.
Doing the same thing with drop shipping would be a totally different story after you factor in cost of goods purchased (unless you had an extremely high markup)
So a greater variety of products available, a higher profit margin, and less work dealing with orders makes affiliate marketing the obvious choice.
The thing that sealed the deal for me, and got me to start my first online affiliate marketing business was the fact that there is actually training available on how to start out as a newbie.
Have you ever seen any training on how to start a drop shipping business? There isn’t any (legit) training out there.
But there is very awesome training available on how to start an affiliate marketing business at here.
This is the training center where I took my first baby steps as a complete newbie. I learned how to:
- build a website
- write content for the website
- get traffic to the website
- find products to promote on the website
- increase traffic-sales conversions
With their training I was able to quit my job as an English teacher and become a full time affiliate marketer. I didn’t go to business school, and am not even university educated. If I was able to use the training to start my own successful business, there’s no reason that YOU can’t do the same. Here's how I do affiliate marketing.