If you are in the business of making money online then you may have looked at various programs including affiliate marketing and Amazon FBA.
But when you are deciding on your business model which one should you use? Is one format better than the other, or does one of them suit your needs better?
This article should help you identify the differences between the two options and help you determine which one is for you?
For entrepreneurs, the world over Affiliate Marketing has proven to be a legitimate way to start an online business and make profits from it. It is the practice of marketing and promoting third-party products or services online, usually via a website, and earning an affiliate commission from any sales made.
This can be done using an affiliate program such as Amazon, or other affiliate marketing programs such as Clickbank, CJ or Share-a-Sale.
Last year a top-ranking affiliate marketer made over $7 million in sales and many people make a decent yearly salary operating their business. Affiliate Marketing has seen consistent growth in the past decade and industry experts believe that growth will continue for many years to come.
Where Can You Learn About Affiliate Marketing?
Learn more about my story (and struggles) with affiliate marketing, and the best affiliate marketing training courses you can get.
Amazon FBA for those that don’t know, stands for Fulfillment By Amazon. This method of making money online is basically the opposite of Affiliate Marketing. In the FBA business model, your market and sell your own products and items and Amazon handles the storage, shipping, distribution and customer service needs associated with making sales online.
People that use this method will need a substantial product inventory but everything is processed through Amazon’s impressive shipping network and they even take care of any returns or issues on your behalf. It’s a ‘hands-off’ way of selling and shipping your goods.
Where Can You Learn About Amazon FBA?
After spending (and wasting) thousands of dollars learning how to sell on Amazon, find out my favorite Amazon FBA courses.
For any entrepreneur, it is imperative to have the right tools for the job if hoping to achieve any level of success. Amazon FBA and Affiliate Marketing both offer viable platforms from which to operate your business but there are major differences between the two.
Amazon FBA will require you to hold large levels of inventory which means you can have a lot of capital tied up in stock. With affiliate marketing, you make money by selling and promotes other people’s product there is no need to carry inventory or tie up your money.
Amazon is a much more active model and affiliate marketing can be somewhat passive, even making you income while you sleep. Amazon will require high levels of product research to find niche markets or products and evaluate the competition.
For either program, it is worth investing in some training courses or online boot camps to learn the ins and outs, especially if you are just getting started.
As with most business models, there are pros and cons to be considered before setting up your online store or marketplace. It could be that your company and products fit better with a specific business platform, or maybe your decision is based on cost or other factors.
Whatever the reasons here are some of the advantages and disadvantages associated with Affiliate Marketing and Amazon FBA.
Ease of operation – Affiliate Marketing is relatively easy to set up and operate. Many affiliate program partners will help you by providing you with training, promotional help, and back-office support. The only investment you need is to start a blog and fill it with content.
Low start-up costs – Apart from the initial set up of your website or online marketplace there are few costs associated with starting a business as an Affiliate Marketer. Since there is no inventory to buy, products to store or staff to hire.
Flexibility – You can work when you choose and from anywhere. Because you will be conducting business online you can operate your day from any location where you have access to a laptop and an internet connection. If you do your best work at 3 a.m or can only dedicate time on a weekend then Affiliate Marketing will fit around your schedule.
No degree needed – Even though as an Affiliate Marketer you are a business manager of sorts, you do not need any formal training or qualifications to start your business, There are no particular skills needed other than a desire to succeed. No matter what your background you can own a successful eCommerce store,
Scaleable – Successful Affiliate Marketers can a lot of money by making a small investment. There are also thousands that make money online just by starting a blog and creating great content. No matter how big or small you want your business to be Affiliate Marketing can be scaled up or down to fit your needs. Grow your business as large as you like or keep it small and manageable.
Lack of control – As an affiliate, you are marketing and selling products for other people you can be somewhat subject to their programs, promotions and commission structures. Depending on the programs that you are partnered with you may feel a bit restricted in terms of what you can and cannot do.
Market Saturation – While there is room for growth and potential for profit it may depend on the niche you are marketing to. Some popular areas are flooded with competition so it is wise to do some research and choose your niche wisely. Too broad and you will struggle to beat out the competition, too narrow and you will struggle to find customers.
Commission Hijacking – It is possible due to malware and hackers for people to ‘hijack’ your affiliate links. This is where link cloaking, the practice of disguising your affiliate links, can be useful. If you are not keeping a close eye on your earnings you may find that your links have been corrupted in this fashion and you are losing your commission.
Revenue Fluctuations – Although there are profits to be made from Affiliate Marketing it is subject to fluctuating profits so if you are looking for a stable income stream this may not be achievable. Profits are likely to move up and down driven by factors like customer need and seasonal demand.
Ease of shipping – The big advantage of using Fulfillment By Amazon is that you can take full advantage of their extensive shipping channels without any of the stress. Anything sold will be picked, packaged and shipped to the specified destination by Amazon’s logistics team. Leaving you free to focus on selling.
Customer Service – Along with using Amazons amazing shipping service you will also have the benefit of their customer service team. The in-house customer service teams will handle any issues, address any concerns, and manage any problems for you. You never have to speak to the end customer and you can be secure in the knowledge that everything will be handled promptly and professionally by the Amazon team.
Ship with Prime – Once you are signed up to use Amazons FBA service you get the added bonus of your items automatically qualifying for ‘Prime’. This is the premium shipping service Amazon offers its customers for a monthly or yearly fee. Any Prime orders benefit from free shipping which sweetens the deal for customers buying from you.
Returns management – Handling returns can be tricky it means you have to keep track of items that are coming back and that may need refunding to the customer. This is where FBA shines again. Amazons team will handle any returns shipping and management efficiently and effectively so you don’t have to worry about it.
Cost – All that efficiency comes at a price. So while it’s true that Amazon FBA smoothly handles much of your business like returns and customer service it will cost you some dollars. You can expect to pay for storage, fulfillment and long term storage if your items sit for too long.
Product returns – Because Amazon has such a smooth shipping operation this can actually lead to more returns. Amazon customers buy their item secure in the knowledge that they can ship it back for a refund should it not suit their needs. This can lead to more quick impulse buys and test purchases, leaving you with higher rates of product returns.
Strict Guidelines – It can be tricky to meet all of Amazon’s specifications especially when you are first starting out. Amazon requires items shipped to them for their FBA program to be packaged, marked, and entered into their database. This can be a bit overwhelming for new shippers so expect to experience a bit of a learning curve.
Inventory Management – If you are selling a large number of products and multiple items then inventory management can be a challenge. As your products ship out and return via Amazons FBA program there is a real chance of losing track of what you have in stock. If you are selling on several channels that can increase the complexity.
When it comes to setting up your online business using Amazon FBA or Affiliate Marketing there are also a couple of other factors to take into account. Amazon’s FBA program is perfect if you have products to sell and Affiliate Marketing is for selling other people’s products.
As a general rule, you will spend money on inventory if you use Amazon FBA, and you will spend money on advertising and promotion if you choose Affiliate Marketing.
The initial outlay may be a little steep with Amazon FBA but if you have a large inventory its the way to go. Affiliate Marketing will cost less to start initially but will require more time to start making money.
Amazon FBA is more of high risk, high reward proposition while Affiliate Marketing is perfect for those that don’t want to invest too much. There is the ability to gain high returns with Amazon but a bad inventory could risk the loss of capital. There is also a learning curve for both business models but Amazon’s will be steeper.
Affiliate marketing can take time for sales to build and many give up during the early stages of the business. Amazon can yield profits very quickly and in large amounts.
While no business model is perfect it is worth taking the time to decide which one will best suit your needs. Amazon FBA and Affiliate Marketing fulfill quite different functions when it comes to selling for profits.
The model you choose will also depend on what you are willing to invest personally in terms of money and time, and what level of risk you are prepared to take.
We're An Affiliate - We are reluctant to allow advertising on this blog, which we believe will spoil the user experience. Instead (so that we can continue sharing our knowledge and expanding our content), we have decided to include affiliate links for the products that we use and/or rate highly.