Affiliate Marketing vs. eCommerce

Suppose you want to be an entrepreneur but can’t decide which business model to use: affiliate marketing or eCommerce. You don’t have the inclination to wade through the intricacies of both. You wonder: in a nutshell, which is better?

If you prefer an automated business, choose affiliate marketing. If you don’t mind running a business that needs your constant input and you have your investment capital, inventory, payment gateway, shipping/logistics/customer service solutions, and online platform ready, pick e-commerce.

This article discusses each business model’s pros and cons to help you decide which path to take for your endeavor. We also suggest solutions to some dilemmas but reserve detailed problem-solving for a future post.

What Is Affiliate Marketing?

This is a transaction whereby companies pay you to sell their products on their behalf. They give you a tracking link. When someone buys their product or service from your tracking link, you get a commission.

Advantages

• There’s nothing to ship. You simply sell the source company’s product/service. All other challenges associated with their business are not your problem.
• There’s zero to minimal investment upfront.
• You can try multiple affiliate offers simultaneously because you don’t have to buy their products.
• It’s easier to set up a website because there’s no interactive e-commerce component.
• It’s easy to scale, even to a massive degree. You can sell multiple products or just one without worrying about delivery.
• There’s no need to invest in reselling opportunities because your affiliate partners already have a website with promotional links. They provide the payment collection method, packaging, shipping, inventory, and customer service. All you need to do is market their product/service.
• You have the freedom to use your own marketing method. One way is to drive traffic using a search engine resource. Your website should have the right keywords to generate search engine optimization (SEO) to attract customers. If your keywords are up-to-date, you generate more leads.
• You can work whenever and wherever you want—live a digital nomadic lifestyle.

Disadvantages

• You don’t have control. The affiliate marketing program can shut down. It’s common for a source company’s owners to end theirs after the business takes off.
• You need to keep looking for a new audience. It’s much harder to get a first customer than to retain the ones you’ve got.
• You have to continue earning. Affiliate marketing is suitable for single transactions only. You can’t build a stable customer base because the source company won’t need you after making the first purchase. You won’t get commissions from subsequent orders because the client can go directly to them afterward.
• Beware of unscrupulous source companies. You trust them as your affiliate partners, so make sure they’ve got a reputable program. How do you know that when you attract 100 customers, they’ll pay you for securing them?
• Lack of flexibility. You have to follow the source company’s rules. Most are understandable. Some are unreasonable, such as: don’t use ads they don’t like, don’t post on social media, don’t bid on certain keywords, don’t use your promos—use theirs, and don’t mention the company you’re promoting in your advertising. Surprising, but the last one is common.
• You can’t sell an affiliate marketing business (or it’s harder to sell).
• The source company can slash their commission rate, change their prices, modify their product/service line, or fire you as a marketer—and you can’t do anything about it.
• The commission percentage is usually low.
• It’s not a quick money scheme. There are no shortcuts. You need to put in lots of time and energy to build your business and profit from it.

Solutions

• Don’t let these potential decisions affect your website or business activity. Have a contingency plan so your previous efforts won’t go to waste.
• Generate SEO to attract traffic while minimizing costs.
• Use software-as-a-service programs that pay recurring commissions.
• Use volume-tracking software.

How to Profit From Affiliate Marketing

• Be sure this business model is right for you.
• Promote the product in a way unique to your business.
• Don’t be complacent. Affiliate marketing may seem more straightforward than other business models, but you need to monitor it regularly.

What Is E-commerce?

This refers to commercial transactions electronically conducted online. It’s the go-to business model for those with products or services they’ve created or developed. E-commerce is appropriate for sellers, resellers, service providers, and creators of educational courses. There are many avenues for e-commerce. An online store is just one of them.

Advantages

• You have total control: you pick the products, conceptualize promotions, implement your rules, and establish your margin.
• Unlike affiliate marketing, you build your own customer base—great for repeat business.
• You’re not held hostage by paid ads. Sure, you can buy ad space if you want, but why not employ free or inexpensive marketing methods?
• You’re not at the mercy of search engine resources. Attract traffic without using them. Try pay-per-click services like Facebook ads instead. Increased traffic + fast leads = quick income.
• You can make much more money than affiliate marketing because you control your profit-per-sale.
• You can build your e-commerce business and sell it later because it’s not tied to a person or affiliate.
• Once you acquire customers, you can continually up-sell your products/services to them.
• It’s safer and sustainable long-term.

Disadvantages

• Be prepared to manage the usual aspects of a traditional business, like customer service, inventory, shipping, logistics, traffic generation, and payment method execution.
• It’s hands-on throughout. You need to spend lots of time and effort to establish your brand and improve product quality.
• There are higher start-up costs because you have to purchase inventory, rent/buy storage space, set up websites/online stores/teaching channels, etc.
• Inventory management is a real pain. You must have the right quantity at hand, but you can’t overbuy because you might not be able to sell everything. So, activate your inner crystal ball to predict outcomes.
• It’s time-consuming and needs unbridled dedication, but your sacrifice will pay off through higher income, a solid customer base, and quicker profit times.
• You have to rely on your entrepreneurial skills. No source company will hold your hand.
• Your online platform is more complicated.
• Customer service is an inherent problem in e-commerce. There will always be people with complaints or who want their money back. The drain on your time and effort will impact your profitability.
• It’s harder to scale. 

Solutions

• Do e-commerce with digital products (e-books, podcasts, vlogs) instead. This move will alleviate the mentioned challenges. You also get the benefits of e-commerce without some of the drawbacks.
• Dropshipping may solve the inventory problem, but you still have to do vendor management. You have to work with vendors and make sure they have inventory. Drop-shipping also spawns logistics and shipping challenges. If your drop-shipping partners aren’t as dedicated as you, they may not package products correctly. You have less control over what is shipped. You don’t know what your customer receives because you never see it.
• Use website generators like BigCommerce, Shopify, Wix, and WordPress.
• Hire people to do this for you.

Which Is Better?

Choose eCommerce if:

• You have investment capital, existing products/services, staff, inventory/logistics/shipping/payment solutions, product storage, online store, and time to set up.
• You’re selling a trendy product at a considerable profit from your home base because you’re getting it dirt cheap from somewhere else.

Choose affiliate marketing if:

• You don’t have any of the above.
• You hate massive problems.
• You don’t want to mess with details.
• You want to start ASAP. But remember: it’s not easy to profit from this model.

Your choice between the two modalities depends on your:

• Skill level
• Background
• Interests
• Industry/niche
• Exposure to commerce

It’s easier to simply match the business model to your field. But why not try both? A practical way to do so is to create a website, then incorporate affiliate marketing later. Or start with affiliate marketing, then educate people in your niche or sell products. For example, begin with a health and wellness blog, then later sell related products from an online store attached to it.

Conclusion

Consider these factors when choosing between affiliate marketing and e-commerce: 

the product/service you’re selling, budget, lifestyle, time/effort/energy reserves, marketing strategies, current and future costs, ability to hire staff, willingness to train or upgrade your education, and your priorities as a business owner.

Both are sustainable and successful business models. You can always obtain guidance from others, but ultimately, the choice is up to you.

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