Affiliate Marketing and E-Commerce: A Side-by-Side Comparison

An online business presents many opportunities for success. You can identify and connect with potential customers from all around the world. Even better, your business can be entirely virtual and still succeed.

The two major types of online businesses are affiliate marketing and e-commerce. Both involve selling products or services. The difference is how those products or services are sold. Let’s take an in-depth look at each.

A Brief Overview of Affiliate Marketing and E-Commerce

With affiliate marketing, you’re selling other people’s products or services. You earn money based on a commission.

According to a report by Business Insider, affiliate marketing is on the rise. As one of the four largest sources of e-commerce orders, affiliate marketing outperforms social commerce, display advertising, and other popular strategies.

E-commerce is when you sell the products or services yourself from your online store. The products could be original creations or you could be a reseller. Either way, you set the prices and keep the profits. An e-commerce store can even recruit affiliate marketers to help increase sales.

Examples of e-commerce sites include giants such as Amazon and Wal-Mart. But even a small Etsy store run by one person can be an effective and profitable e-commerce site. An e-commerce site can be big or small. It can also be entirely virtual or attached to one or more brick-and-mortar locations.

E-Commerce Advantages

When you own an e-commerce store, you’re in charge of every detail. You can set prices, offer promotions and otherwise run everything how you want to. E-commerce also offers the opportunity for a lot of steady growth. Targeted marketing techniques can be used to develop long-term customers and cultivate brand loyalty. Plus, all of the profits are yours to keep. You’re not selling for anyone else. Free from affiliate restrictions, e-commerce offers the most freedom for business owners.

E-Commerce Disadvantages

While an e-commerce business gives you a ton of control, you also have quite a few responsibilities on your shoulders. All day-to-day operations, payment processing systems, marketing strategies, customer service, and more will need your involvement. A professional internet marketing agency is certainly a valuable asset, but you still need the commitment and skill to run your own business.

Additionally, an e-commerce store often requires an initial financial investment. If you’re a reseller, you’ll need to purchase bulk items. In some cases, you’ll also need to store products either in your home or elsewhere.

Affiliate Advantage

With affiliate marketing, you’re not responsible for every aspect of the business. Instead, you’re creating links to products and services. Affiliate sites have a much lower barrier to entry than e-commerce. You don’t need to buy products up front. You’re also not responsible for warehousing, customer service, payment processing and other operational matters.

Affiliate Marketing Disadvantages

While affiliate marketing is easier to jump in to, your earning opportunities are a bit more limited than with e-commerce sales. Your commission will vary by partner. However, if you’re able to sell a lot of product, most affiliate partners will reward your efforts – sometimes even awarding you a percentage of certain customer sales for life!

However, an affiliate marketing business will often have a lot of restrictions. The affiliate partner can drop you or go out of business without much warning. Plus, they might place certain restrictions on how you can advertise or otherwise promote the products.

Developing Long-Term Customers

One of the biggest differences between affiliate marketing and e-commerce stores is the ability to develop repeat customers. When someone purchases a product or service online, the seller gets a lot of info including the buyer’s name, email address and purchase history. Customer info is a valuable resource. You can send customers offers based on their past purchases and interests. The idea is to turn a one-time purchase into a life-long customer.

With an e-commerce store, this process is pretty easy. As the business owner, you have access to all the customer info you want. Even if someone has simply visited your website, you can create an effective remarketing campaign.

Affiliate marketing doesn’t usually allow for as many re-marketing opportunities. Because you’re not the business owner, you likely won’t be granted access to the customer info for re-marketing purposes. Instead, re-marketing is the responsibility of the owner.

Which is the Best Choice for You?

E-commerce and affiliate marketing both have their advantages and disadvantages. You want to select the business model which works best for you. In order to choose the best option, ask yourself the following questions:

1: How Familiar am I with the Products I’ll be Selling?

If you’re not very familiar with the products, you’ll likely want to choose affiliate marketing. The affiliate will be able to provide you with all the product info you’ll need to know. With affiliate marketing, expert help is always available.

When you run an e-commerce store, you don’t necessarily have someone else to turn to for assistance. Instead, you’re the authority on the products you provide. However, if you’re an expert in your industry, you might prefer the increased autonomy an e-commerce store provides.

2: How Much Business Experience Do You Have?

If you already run your own business, you’ll probably prefer an e-commerce store. After all, you’ve already developed a brand, business model and so on. Converting an offline business to an e-commerce store requires much less work than building an e-commerce store completely from scratch.

Affiliate marketing is often the better option if you’re relatively inexperienced with running a business. The business owner has a vested interest in seeing their affiliate marketers succeed. You won’t be operating completely alone.

3: How Fast Do You Want to See Profits?

Affiliate marketing lets you get set up and selling faster than e-commerce. Building an e-commerce store from scratch takes a bit longer to get going.

In the long run, you have the potential to earn more profit from an e-commerce store. As the owner of the business, you’re entitled to all of the earnings. You can still make a lot of money as a successful affiliate marketer, but revenue will always be commission based.

Final Thoughts

Both affiliate marketing and e-commerce can be excellent ways to earn money online. When choosing one over the other, you want a clear understanding of your goals, experience and market knowledge. With the right strategies, anyone can use either affiliate marketing or an e-commerce store to be successful online.