When it comes to making money online, Ecommerce and affiliate marketing are two of the most popular business models. An Ecommerce business sells products or services directly to customers, while an affiliate marketing business promotes the products and services of other businesses to earn an affiliate commission.
Both Ecommerce and affiliate marketing are major industries that have grown quite rapidly and are expected to continue on that trajectory. Shopify lists the global Ecommerce industry with a value of over $5.5 trillion, while according to statistics by BloggingX, the global value of affiliate marketing is $12 billion. Considering the fact that affiliate marketers are primarily marketing Ecommerce products for a commission of the sale, it makes sense affiliate marketing is a fraction of the size.
However, that certainly doesn’t mean affiliates make a fraction of what Ecommerce sellers make. There is profit potential with both these business models. In the following article, we break down the differences in Ecommerce vs affiliate marketing so you can decide if either of these business models is for you, or if you should explore a less competitive online business opportunity like local lead gen.
Ecommerce vs affiliate marketing, what’s the difference?
Sell online with Ecommerce
Ecommerce is a broad term for selling products and services online. There are multiple ways to engage in Ecommerce. You can sell your products on digital marketplaces with established customer bases like Amazon or eBay, or you can create your own online store with an Ecommerce platform like Shopify or WooCommerce and use digital marketing to reach your own customers. Furthermore, you can choose between selling already proven products of successful brands or diversifying yourself by creating your own branded products to sell. With Ecommerce, you can even decide whether you want to buy products in bulk upfront as a private label or wholesaler, or just purchase the product from your supplier only once you’ve already sold it to your customer with dropshipping.
Promote the products of others through digital channels with affiliate marketing
Instead of selling your own product, as an affiliate marketer, you promote the products of others to earn a commission on the sale. You obtain an affiliate link by visiting an affiliate network like CJ affiliate or going directly to the business you want to partner with and then promote that link in front of a relevant audience. Like Ecommerce, there are also various avenues affiliate marketers can take to run their business. Some affiliate marketers build up free traffic sources like blogs or email lists, while others run paid advertisements to start making (or losing) money quickly. There are marketers that choose to only affiliate market products they themselves use, called involved affiliate marketing, and others that will recommend anything that can make them money without caring about the actual benefit to the end consumer. The primary goal of affiliate marketing is to get people to click on your affiliate link and make a purchase so that you make money on a piece of the sale in exchange for promoting the product.
What are the similarities of Ecommerce vs affiliate marketing?
Low-entry barrier to get started
Ecommerce and affiliate marketing are both accessible to nearly anyone with a laptop computer and maybe a few hundred dollars. You can start making money with both business models without the need to set up a formal business. Anyone can sign up to start selling on Ecommerce platforms like Amazon and get approved instantly, and there are tons of affiliate networks out there recruiting affiliates with no established traffic or proven experience like ClickBank. Obviously, both business models will have you competing with established experts and businesses with years of experience in the space, but there’s nothing stopping you from trying to grab your own piece of the digital marketplace.
Opportunity to take advantage of a growing online customer base
Ecommerce, which affiliate marketing is part of, has experienced explosive growth and experts expect it to continue on that trajectory through the coming years. There are several factors driving this trend, including the fact that technology is becoming more ingrained in our modern lives and purchasing online is becoming so easy and convenient. Only around 63% of the world currently has access to the internet and it’s estimated that 640,000 people come online for the first time every day. With online shopping becoming both more popular and accessible every day, the Ecommerce marketplace has a long way to go before it matures.
Ability to optimize through data analysis
Potential affiliates and Ecommerce store owners can choose either online business model with the confidence they will have access to make data-driven decisions. With an affiliate marketing campaign, you can efficiently reach your target audience using tools like Google Analytics to optimize blog content and Google Ads. You can also use these tools if you build your own Ecommerce website to effectively create a marketing strategy that drives sales and brand awareness. If selling through an Ecommerce marketplace like Amazon, there are also plenty of incredible tools you can use for product and keyword research such as Jungle Scout or Helium10.
Advantages of an Ecommerce business
Control over your offer
An affiliate just has to accept the commission percentage they’re given, but as an Ecommerce store owner, you create your own offer and set the price. You can price, package and market your offer however you feel is best.
Many options for operating your business
There are many options for engaging in Ecommerce, here are a few of the most popular options.
Retail Arbitrage - Ecommerce sellers who use the retail arbitrage business model find products that are selling at a discount compared to the marketplace where they plan to sell the item, such as Amazon or eBay, and then purchase that product and resell it on one of the marketplaces for a profit.
Dropshipping - Dropshipping is finding a product from a C2C marketplace like AliExpress, setting up an online store to market that product for a premium in order to generate a profit, and then paying the supplier for that product only once a customer has already bought it from your store and having the supplier ship the item directly to your customer.
Wholesale - The wholesale business model for Ecommerce requires you to buy generic or branded products in bulk to optimize your per unit cost and then sell the items individually at the market value to generate a profit.
Private Label - Private label is a popular Ecommerce model often used by Amazon FBA sellers where you take a generic product from a manufacturer and market the product with your own branded packaging and logo.
Higher average income potential
In most cases, Ecommerce businesses make more money than affiliates because you have better control of your profit margins and scaling the business is a bit easier. Sure, there are super affiliates out there that are media buying gurus and have the right connections with ad networks to make enormous sums of money. However, it takes years of dedicated focus to reach that level in affiliate marketing, whereas an Ecommerce business with a solid product can progressively scale to a 6 or 7 figure business in a few years. According to Jungle Scout, 60% of Amazon sellers with at least three years of experience are generating at least 6 figures in revenue from their business.
Disadvantages of an Ecommerce business
When you have your own product to sell, you have to deal with customers. This often involves answering customer inquiries, resolving complaints, and processing returns and refunds. If you elect to sell through Amazon FBA, they’ll handle customer service for you, but refunds are likely to be higher. Depending on the size of your business, customer support can be a major task that you’ll either have to outsource or do yourself and spend less time on other aspects of your business.
Higher startup costs
When selling Ecommerce, you’re often selling physical products, so your startup costs are higher when sourcing products in bulk. We already touched on some of the different Ecommerce selling models, so it’s clear startup costs depend on which option you choose. According to Jungle Scout, private label is by far the most popular selling method on Amazon, with 59% of sellers choosing to sell that way. The costs of private label are not cheap, but the majority of sellers on the world’s largest Ecommerce platform still choose it because it improves your chances of long-term success.
Extended time off not possible
Operating an Ecommerce business requires regular attention if you want to be successful. You’ll need to wear a variety of hats and be flexible to pivot your focus to whichever part of your business needs attention. Your tasks will comprise things like creating relationships with manufacturers, maintaining adequate inventory, updating your website, product listing, or marketing campaigns to remain competitive, researching new opportunities to scale your business, and addressing customer needs. You can probably take a little time off here and there, but you won’t be able to step away from your Ecommerce business for long without things falling into chaos and losing your revenue stream.
Advantages of an affiliate marketing business
Get started with little money
If you want to be an affiliate marketer, you can actually get started for free by joining an affiliate marketing program like Amazon Associate and then promoting the product by putting the affiliate link on your social media account. Although you’re probably not going to strike it rich with this method, it is a way to get started if you already have an established social media audience. If you have just a few hundred bucks lying around, a better way to build an affiliate marketing business is to create your own affiliate website and earn a commission through blog content creation.
One of the best aspects of an affiliate marketing business is that it can generate residual income, and it does so in two ways. First, once you put your own custom affiliate link out there, it stays active as long as the business keeps the program active. That means you can still earn money on blog articles you wrote 10 years ago, even if you decide to stop creating new content for a period. Second, some subscription services offer recurring commission affiliate programs. Take, for example, the popular email automation tool ActiveCampaign. ActiveCampaign pays a recurring affiliate commission to you each month that a business continues using their services of 20 - 30%!
Convenience and flexibility
As an affiliate marketer, you can work from wherever, whenever! Obviously, the more work you put into your business, the more quickly you’re going to sharpen your skills and make more money. Although you can certainly create your affiliate marketing business around a timed offer that customers expect on a regular schedule like a niche weekly newsletter or posting YouTube videos on a set day that your audience expects, you don’t have to. If you want to be an affiliate by being a content creator, you can write blog articles or create TikTok content whenever you’re feeling most creative. If you elect to use paid advertising to promote your affiliate link, you can set up and maintain campaigns whenever is convenient for you.
Disadvantages of an affiliate marketing business
When operating as an affiliate partner, you need to read the fine print and abide by the rules of the company you are marketing for. Brands create these guidelines to set expectations on how you can promote their image and to limit their legal liability if an affiliate partnership were to use illicit tactics in that promotion. Every affiliate program has different policies to follow. Some may allow you to use any marketing channel at your disposal while others may limit to promotional methods that they feel align most with their brand.
Revenue more volatile
As an affiliate marketer, you’re working on a pay-per-performance basis. If nobody buys after clicking on your links, you don’t get paid. It’s common for affiliate marketers, especially those operating as media buyers, to have up and down months. There are some affiliate marketing businesses that have established blogs or email lists that generate stable affiliate sales month to month. However, many affiliates in the space operate on short-term opportunities that do not provide a stable payout.
Inability to build a customer base
In Ecommerce, you can build a customer base that repeatedly buys from your brand. As an affiliate marketer, once you get someone to click on your link and make a purchase, you won’t get that customer to purchase through you again. The referral to the brand has already been made, so if they want to buy the product again, they’ll just go directly to the brand.
Are either of these business models worth it in 2023?
Whether you’re looking for a side hustle to earn extra income or an online business model you can focus on full time, both Ecommerce and affiliate marketing are proven options for making money online. Is affiliate marketing worth it in 2023? It can be if you have the knowledge, resource, and skills for it. Alternatively, Ecommerce can also be lucrative if you know what niches, products, and strategies to implement.
Ecommerce businesses can earn 6 - 8x when selling their business
As mentioned, there are many options for selling Ecommerce, so your profit potential really depends on which business model you choose to employ. Those creating an Ecommerce brand with their own products increase their profit potential as these are the kinds of businesses that demand a high price tag. Ecommerce businesses on average sell for between 3 - 4x their yearly revenue. However, if you’re able to establish a private label product on Amazon, your business could be worth nearly double that! Marketplace Pulse notes that Amazon private label businesses are selling for 4 - 8x the seller’s annual take home profit.
Around 20% of affiliates could earn at least $1 million a year
According to a survey conducted by STM forum, 80% of affiliate marketers earn between $0 and $800,000/year. However, the other 20% are making $1 million/year or more! Given that STM forum is an affiliate marketing-specific community, these numbers are likely to be somewhat inflated. Even so, it’s clear there is huge profit potential in affiliate marketing and the immense flexibility in your working schedule makes it a tempting option for many.
Why some people are quitting affiliate marketing and Ecommerce
Although the fact that these business models are accessible to anyone sounds great, it also means both are extremely saturated and highly competitive. The internet is becoming more globalized every year. Instead of competing with just your own country, with these two business models, you are competing with literally everyone trying to sell to a select group of wealthier countries like the USA or UK.
Let’s first start with Ecommerce and take selling through Amazon as an example. Before, it was fairly easy to find a manufacturer in China to produce cheap goods, stick those goods up on Amazon, and make a killing. Now, data from EcomCrew estimates that the majority 63% of sellers on Amazon are Chinese. Many Chinese manufacturers are cutting out the middle-man sellers and selling on Amazon themselves.
Now let’s consider if you want to be a content creator to market affiliate products. If you start a blog, you’ll be competing with the 600 million blogs already in existence. It’s incredibly difficult to get a blog to rank on the first page of Google these days because the established brands are already at the top for high-volume keywords. If you start a YouTube channel to promote affiliate offers, your content better be incredible if you want a share of the audience interest, as 500 hours of new content are uploaded to YouTube every minute!
Why I prefer local lead gen right now
Listen, it’s totally possible to still be successful with Ecommerce or affiliate marketing with dedicated effort and enough time. Even though I’ve had success with both, I prefer to spend my time on local lead gen because it’s substantially less competitive for now. In fact, the local lead generation business model has natural barriers in place that make it difficult for anyone outside your home country to enter your market.
If you want to build a passive income business, check out this short video explaining the local lead generation business model.
Is Ecommerce or affiliate marketing better for you?
Ecommerce if you prefer a business that requires you to be more active and take on many roles
If you want to create a successful Ecommerce brand, you’ll need to be prepared to take on a variety of roles to keep your business on track. You may spend one day doing just product research, and then the next day you're re-ordering new inventory, connecting with a manufacturer on a new potential partnership, and making updates to your website or product listings. If you’re someone that needs a busier schedule with variety to stay focused, Ecommerce will provide you that type of working schedule.
Affiliate marketing if you’re marketing-savvy and enjoy creativity
With affiliate marketing, you can be a content creator and target your best potential customer through blog articles or video content. However, you’ll need to be marketing-savvy if you want to make good money. Even those that use influencer marketing to promote an affiliate product have a high-level of awareness for their audience and know how to best reach them and convince them to buy. If you have a knack for understanding groups of people and their motivations and enjoy creative work, affiliate marketing may be for you!
Final thoughts on Ecommerce vs affiliate marketing and an alternative to consider
Although affiliate marketing and Ecommerce are two distinct business models, they both operate under the same umbrella of Ecommerce. With affiliate marketing, you’re using an affiliate link to get someone to buy online, so it’s really just Ecommerce affiliate marketing. Whether you’re looking for an Ecommerce affiliate program to get started or want to get started selling physical products, Amazon is the go-to choice for most beginners. However, if neither of these options sound 100% appealing to you, consider local lead generation. It's an excellent business model that is beginner friendly for those willing to learn and allows for many of the same benefits as Ecommerce and affiliate marketing at a fraction of the competition.