This was taken from an essay written by a student at BYU-I and is published here for our learning and edification;
I look at the two methods using three variables; time commitment, feasibility, and return costs and hassles.
Drop shipping lets websites send low quantity orders to manufacturers that then ship out the orders to customers. In terms of time commitment, the group would save time in managing the guitar inventory but would also be required to follow orders placed and manage complaints. In terms of feasibility, finding the right drop shipping company for acoustic guitars and their market can be difficult. However, once the contracting is over, the inventory and shipping issues are taken care of by the drop shipper. The largest concern for the group should be returns. While using drop shipping makes things easier on your workload, returns can be quite nasty and costly. Depending on the drop shipping company you are working with, you may end up having several pains like broken packages, broken guitars, unsatisfactory guitars, late packages, undeliverable packages, or little financial understanding by the drop shipping company. It is important to wisely choose your drop ship company. Even if a good one is found, returns are inevitable and that means eating the shipping charges.
Affiliate marketing is a different sort of way to gain revenue. It is an advertising method where advertisers (retailers, etc.) drive traffic to their own website. The advertiser has products (like acoustic guitars) or services to sell, collects payment, and fulfills the order. The publisher (e.g,. you) markets the product on your own website, and gets a commission when you drive traffic to the advertisers website to make a sell. The advertiser makes the most money, while the publisher gets a small profit for successfully advertising. Depending on the group’s choice to be a publisher or an advertiser, time commitment, feasibility, and return issues are very different. Time commitment levels as a publisher would be quite manageable and feasible. Start up is fairly easy and overseeing an online publishing site for acoustic guitar advertising between the three of them would be simple. Returns would be nixed because there would be no products shipped by their business, only other companies that advertise on their site.
My recommendation would be to become publishers within an affiliate network in order to gain e-business experience because it is simpler and would allow more flexibility while each group member goes to work. The group should choose the affiliate network, Commission Junction, because of its prestige, simplicity, and management assistance. Commission Junction would just require the group to obtain a CJ account and provide the user information, website information, and billing and transaction information.