One of the most significant advantages of the internet today is arguably the ease of making money.
There are so many income streams you can build without leaving your home. Two of those popular methods are affiliate marketing and Amazon FBA.
These online business models allow people to make money without stress. Although similar, the two models have a lot of differences.
The two are ideal for different people and they offer different earning potentials.
If you are considering what online business to choose, consider reading this article. I cover the differences between these two models and give you recommendations on which to choose.
What is the Difference Between Affiliate Marketing and Amazon FBA?
|Affiliate Marketing||Amazon FBA|
|Involves promoting the products of others||Involves selling your own products|
|Affiliate programs are typically free to join||You need a fee to start|
|No need for customer interaction||You need to interact with customers|
|You don’t need inventory management||You need to manage inventory|
|Different companies have their version of the program||Owned by Amazon|
|You can’t control earnings and the quality of products||You are in control of your earnings and product quality|
What is Affiliate Marketing?
Affiliate marketing is an eCommerce business model where you get commissions for helping businesses sell their goods and services.
As an affiliate, your job is to promote the products or services of the brand you work with using whatever online channel you can.
Affiliate marketing is a performance-based marketing model that mutually benefits the affiliate and the company. The company enjoys promotion without spending money on adverts and marketing strategies, while the affiliate earns money as long as they make sales.
How Does Affiliate Marketing Work?
Most affiliate marketers start their online business by picking a niche they are familiar with. After that, the affiliate can find an online marketplace for affiliate programs from different companies in their preferred niche.
The affiliate will apply to their chosen company and await a response. When they are accepted into the program, they will receive a unique tracking ID or URL.
The affiliate will then use this unique ID on their website, blog, or social media to attract customers.
As customers buy the product, the affiliate network will track any sales made via the affiliate’s ID or link. If someone makes a purchase after clicking on their link, the affiliate will receive a commission.
Affiliate marketing is essentially a system consisting of three components. The components listed below elaborate on the operation of affiliate marketing.
Customers are the most essential part of every affiliate program. Every company with an affiliate program today started because they wanted to attract more customers to their products.
As a result, successful affiliates typically build their promotion around the demands, preferences, and interests of their customers. Affiliates typically assist customers in selecting the best product by comparing products, writing reviews and explaining how to use products.
The company is essentially a manufacturer or service provider who wants to attract more customers. The company can be an entrepreneur, a corporate brand, a merchant, or any other business. However, all these companies have the same goal of attracting more customers or clients.
Finally, the affiliate acts as an interactive link between the company and its customers. The affiliate encourages the targeted audience to purchase the company’s products using various means.
As a result of each sale, they enjoy a substantial commission which is usually between 10 to 30% of the total sale.
Each of these three components is vital for the survival of an affiliate program. Without one of the components, the affiliate program cannot function. As a result, affiliate marketing is usually regarded as a three-tier business model.
Now that you understand affiliate marketing, let me also explain Amazon FBA.
What is Amazon FBA?
Image Source: Amazon
The acronym FBA means Fulfillment By Amazon. In the FBA business model, people can market and sell their products online, while Amazon handles storage, logistics, and customer service on their behalf.
Imagine you want to sell shoes on Amazon FBA. All you need to do is ship your shoes to an Amazon fulfillment center close to you. Once your shoes are there, Amazon takes over and handles shipment, payment collection, and delivery on your behalf.
Amazon’s warehouses will store all of your delivered goods until customers buy them. When customers buy your shoes, Amazon staff at the warehouse will package and deliver your product to the consumer.
In summary, it is a hands-free method of selling that relieves sellers of their shipping and packaging duties.
How Does Amazon FBA Work?
Image Source: Amazon
First, the prospective seller registers for the Amazon FBA program. When you sign up for Amazon FBA, create a product listing. Once your product is listed on Amazon, customers can search for it and purchase it directly from the site.
You would first ship all your products to an Amazon affiliate center, where they will be inspected and stored in a warehouse until purchased.
Aside from shipping your product to the fulfillment center, you no longer have to worry about logistics. Your product will stay secure until it is purchased via Amazon.
If your products are damaged due to a natural disaster or accident while in the fulfillment center, Amazon will refund you the full retail price of the product.
This tells you how secure it is to keep your goods in the Amazon fulfillment centers instead of your own location.
Once a customer buys your product, Amazon will process your payment. After that, Amazon will package and ship the product to the customer.
The product is eventually collected from the Amazon fulfillment center by the delivery guy and delivered to the customer.
Pros of Affiliate Marketing
The following are the primary benefits affiliate marketing has over Amazon FBA.
Ease of operation
The affiliate marketing business model is relatively easy to run. All you need to do is create a platform and build good followership.
Once people know they can trust your recommendations, they’ll likely return for more. In fact, some affiliate programs provide affiliate training to help them do better. There are also many affiliates like you who are willing to help as well.
Affiliate marketing allows you to have flexible work hours. It’s a perfect source of passive income that will enable you to earn money even when you are not working.
When you decide to work, you can do it anywhere, as long as you have a laptop and a good internet connection. With such flexibility, you can plan your time and do more meaningful activities.
Low initial investment
You don’t need a lot of investment to start an affiliate marketing business. Most affiliate programs are free to join.
All you need to do is pay to set up the website you want to use for promotions. And if you are good, it is something you can do on your own. Plus, you don’t have to employ employees or pay for shipping or any other thing.
Affiliate marketing is scalable, meaning it can be adjusted to meet the requirements of businesses of any size. This means you can make your company as huge as you wish and obtain six-figure salaries from affiliate marketing.
Many affiliates have made their marks by making money online simply by starting a blog or vlog on YouTube and providing high-quality content. With time, they began to scale, increasing their income and the size of their business.
You don’t need customer service
As an affiliate, your main job is to promote products. Your sole responsibility is to encourage prospects to buy products. The moment someone uses your ID or link to make purchases, your job is completed.
As a result, you do not have to bother about any concerns that customers may have. The seller is responsible for resolving any queries or problems the customer may have regarding product availability, order fulfillment, or returns.
This frees you from the stress associated with running a company. It also means you won’t spend money on a customer service team.
Cons of Affiliate Marketing
The following are some of the most significant disadvantages that affiliate marketing has. If you are considering your options, you should consider some of the following flaws:
You can’t control your products
Affiliates promote the products and services of others. Customers typically look up to affiliates for ideas on which products to purchase. That means recommending poor-quality products can ruin your reputation and make you lose your earnings.
But then, there is little you can do about the quality and pricing of the products you are trying to sell. You may complain to the company to improve their services, but then, it’s beyond you to implement the changes you want.
Saturation of the Market
One of the problems beginners have with affiliate marketing is that it is gradually becoming a saturated market. Everyone loves the idea of easy, passive income that affiliate marketing brings.
Even though the market is getting saturated daily, you still have room. With the right strategy, you can still take a huge chunk of the pie to yourself. You simply need to do an in-depth study and find a less crowded niche with enormous potential for yourself.
Affiliate marketing thrives on the idea that you can make passive income by selling other people’s products and services. However, it is possible that you recommend a product to a customer and still lose your commission.
Hackers can manipulate your affiliate links and earn your commission. Sometimes, customers may decide not to purchase using your link if it looks funny. These two scenarios mean you could have a working strategy and still not make money.
To solve this problem, many affiliates now practice link cloaking, which is the process of concealing your affiliate links.
No doubt, affiliate marketing is a great business model with which you can make lots of profit. However, the model does not support recurrent profits.
The reason is once a customer uses your link once, they likely won’t come back for the link when making the next purchase. That means you can only make a limited income from your customers.
As a result, if you are seeking a constant revenue stream, you may not be able to achieve this goal with affiliate marketing. Fluctuations in profits may occur due to factors such as the needs of customers and seasonal demand.
Plus, affiliates don’t get their payment immediately after sales. Most affiliate programs will only pay you after some time. Sometimes, you may wait longer than the ideal time if the company is going through financial issues.
Some programs may even reduce their commissions after onboarding affiliates.
Pros of Amazon FBA
On the other hand, here are some advantages of Amazon FBA:
You are in control
One significant advantage of Amazon FBA is that you can control the price and quality of the products you sell. You can choose to give your customers the best quality at a high price for more profits. This makes Amazon FBA a good model for rapid profits.
Depending on what you sell, your customers can always return to buy your products. As long as you still have the product on sale, you will continue to make money in Amazon FBA.
Plus, unlike affiliate marketing, Amazon will pay you in 14 days after your customers pay in the Amazon FBA program.
Amazon FBA is a business model that is relatively easy to manage. All you need to do is provide the products to Amazon; they handle everything else including deliveries on your behalf.
That means when you use Amazon, you can have more time to do meaningful activities like marketing your products.
The primary benefit of employing Fulfillment By Amazon is that you can utilize their broad shipping channels without hassle. Amazon’s logistics team will select, package, and send all items to the chosen destination. Leaving you to concentrate on sales.
According to Amazon, shipping with FBA is 32% less expensive per unit than the most sluggish shipping alternatives provided by the largest U.S. carriers. Also, FBA two-day shipping is 72% cheaper per product than alternatives.
When you sign up for Amazon’s FBA program, you can use Amazon’s shipping support. That means you do not have to deal with customers with shipping issues.
In addition to Amazon’s excellent shipping support, you will also get access to their customer service department. The in-house customer service specialists will answer any complaints and manage any difficulties on your behalf.
You are never required to communicate with the final consumer, and you can be assured that everything will be handled promptly and appropriately by the Amazon staff.
As your business expands, you will likely need more space to store your wares. However, Amazon FBA allows you to scale and grow without worrying about increasing storage space.
Amazon maintains warehouses all over the country equipped to store a significant quantity of products. Your business can effectively enjoy access to an endless amount of storage space for a fee.
Not only does FBA make it possible for you to sell to specific customers by using the Amazon platform, but it also gives you access to several new multi-channel fulfillment options.
With the MCF service, also known as Amazon Multi-Channel Fulfillment, you may sell your products on various platforms and channels, such as BigCommerce and eBay, and still have Amazon fulfill your orders.
Cons of Amazon FBA
The following are some main disadvantages of Amazon FBA.
It costs money to use Amazon FBA.
Amazon FBA handles many aspects of your business, such as returns and customer service, but the extra service comes at a cost. For starters, you have to pay a fee to start signup for Amazon FBA.
Image Source: Amazon
Asides from the signup fee, you will still pay for storage, fulfillment, and long-term storage if your products wait for an extended time.
People who love the business model and perhaps do not have the financial means may find this prohibitive.
In addition, because of the way the fees are calculated, this service is not ideal for low-cost things; therefore, you will want to be reasonable about the products you enroll in.
Because of this, you ought to use the service for products that are simple to sell and that will still give you profit even after these deductions have been made.
You’ll be happy to know that Amazon has a helpful FBA calculator that will assist you in determining whether a product will make a profit on the platform.
If you don’t want to spend much to get started, you can consider dropshipping.
You may see more product returns
Because Amazon provides a straightforward process for customers to return items, you should expect more returns from your customers.
Amazon customers are confident that they can return an item for a refund if it does not meet their demands. This can lead to more impulse and test purchases, resulting in increased product return rates.
It might be challenging to keep track of inventory.
Inventory management might be challenging if you sell a considerable quantity of products and multiple items. As your products ship out and return through Amazon’s FBA program, you risk losing track of your inventory.
To beat this challenge, you need to develop selling tactics that will make it simple to unload all your inventory.
It can be difficult to meet all of Amazon’s requirements, particularly when starting out. Amazon requires that FBA items shipped to them be wrapped, properly labeled, and recorded in their database.
Expect a bit of a learning curve if you are a first-time shipper, as this might be intimidating.
Product pools can cause issues
Amazon has developed a system to boost its efficiency by grouping together identical products purchased from a variety of sellers. If everything works out as planned, you will reap long-term benefits.
On the other hand, some vendors can bring in counterfeit versions of comparable products. Your page will be flooded with bad reviews due to this action.
Other Things to Consider
Amazon FBA is an excellent choice for people that want to concentrate on their own products but lack the time or resources to handle shipping, customer care, and logistics.
Affiliate marketing, on the other hand, is a low-cost option to launch an online business, and you may earn a commission on sales produced through your link.
If you choose Amazon FBA, you will spend money on inventory, and if you decide on Affiliate Marketing, you will spend money or time on advertising and promotion.
Amazon FBA may have a high initial investment, but if you have an in-demand product, you will start to see results early. Affiliate Marketing, on the other hand, costs less to start but takes longer to generate profit.
Affiliate marketing is easier for beginners and requires no knowledge at all. Plus, it carries less risk since you are not paying anything upfront.
But then, no rule says you cannot do both. Affiliate marketing can be starting strategy to help you get money to start Amazon FBA. While doing affiliate marketing, you can gather the knowledge you need to build your own product to meet the demands of customers.
Plus, by then, you will have the followership you need to promote your products and the financial backing to run the business.
Amazon FBA or Affiliate marketing?
So, which is better, Amazon FBA or affiliate marketing?
We can agree that both have good points and bad points.
Affiliate marketing can be a source of passive income if done right. And there are no limits to how much money you can make.
With Amazon FBA, you also have a good chance of making money. Amazon FBA is different from affiliate marketing because you could make more money quickly.
One thing to keep in mind is that you need money to start Amazon FBA. Before you make any sales, you have to buy the items you want to sell or produce the items yourself and send them to an Amazon warehouse.