Affiliate marketing and E-Commerce are two very popular methods for starting an online business with relatively low capital. The internet is packed with ideas for online business but these two are probably the most popular routes of passage for people that are just starting out.
This post will take a quick look at some of the pro’s and con’s of each business model to give you a clear idea of what each business model entails and what you can expect from them.
Affiliate marketing is a type of performance-based marketing where the “affiliate” earns a commission from making a product referral.
To explain this in the most simple way, I’ve borrowed this infographic from Bengu Marketing.
So affiliate marketing works on the premise of affiliate marketers getting paid on a performance basis. This works for both the merchant and the affiliate because the merchant doesn’t have to pay anything unless they make a sale and the affiliate only needs to generate targeted traffic to his offer and provide decent content to generate an income from affiliate sales.
What are the pro’s of affiliate marketing?
- Low startup costs – You don’t need to take out a loan to start affiliate marketing. Some of the best affiliate programs can be started with just a few dollars.
- Geographical freedom – This means you won’t be tied down to any location. You could be sipping espresso’s in a beautiful cafe in Italy while running your business through your laptop.
- Market anything – The ability to market almost any kind of product, allowing you to find something you’re passionate about. You can build a business around something you love with affiliate marketing.
- You don’t need a website – A website is a valuable tool for many affiliates but quite a few jump straight into paid advertising and promote products directly through to the merchant. Many successful affiliates don’t actually have their own website.
Cons Of Affiliate Marketing
- Negative stigma – Affiliate marketing has a negative stigma for terrible spammy websites and thin content. This is something that was practised fairly frequently in the past but is slowly disappearing as huge companies adopt affiliate marketing as their primary business model.
- Lots to learn – You’ll feel overwhelmed at the start with the sheer volume of things that you can learn in order for you to improve your strategies for business success.
- Low commissions – Some affiliate programs pay measly commissions so you may feel as if you’ve been slightly ripped off by the merchant. The solution to this is to do your research and join one of the high paying affiliate programs that offer higher priced products and pay handsome commissions.
Moving on to ecommerce:
Starting an online business is hard work and an ecommerce business is no exception. The first step to building a successful ecommerce business is knowing what to sell and finding great suppliers. This is probably one of the most challenging parts of the business.
What Are The Pro’s Of An E-Commerce Business?
- Speed and flexibility – Just like affiliate marketing, an e-commerce business can be built and run with just a laptop and internet connection. Getting yourself setup with an online store is easy as pushing a few buttons, quite literally.
- Low startup costs – You can buy a domain and hosting for less than $50 and be up and running with an e-commerce business in a matter of days. Access to large inventory of products is something that is also affordable.
- Huge market potential – the world is truly your oyster. Your products can be sold to anyone so your target market is potentially huge.
- No inventory or shipping required – Dropshipping allows you to build an e-commerce business without having to stock or ship out any products. The products is kept at the supplier warehouse and shipped straight to the consumer when a product is purchased.
Cons Of An E-Commerce Business
Stiff competition – Because the barrier of entry is so low for this type of business, there is a lot of competition out there. You’ll need to find unique ways to compete with similar companies that offer the same products as you.
Establishing trust – Most people stick to what they know, people are scared of the unknown so in some cases they will stick with the companies they know even if yours provides a better service. Establishing trust and authority is paramount with an e-commerce business.
Security problems – As you’ll be taking payment information from consumers on your website, you may run into security problems. Hackers are always trying to break through and steal information from websites that are vulnerable. Some of the biggest businesses have been hacked, with credit card details being stolen so this is definitely something you need to watch out for.
E-commerce and affiliate marketing share quite a lot of similarities due to their online nature, but at the same time, they are very different business models. I encourage you to do your own research to find out which one suits you best before diving head-first into something.