In this article, we are going to look at Amazon FBA vs Affiliate Marketing. We will look into each model and the pros and cons so that you make a more informed decision as to the course to take going forward.
Whether you choose Amazon FBA or affiliate Marketing comes down to your own individual leaning and resources. Either model can provide a lucrative income but Amazon FBA usually requires more upfront investment than affiliate marketing. With Amazon FBA, you make more per sale but with their affiliate program, you only earn 1% to 3% before they recently slashed their rates from 3% to 8%.
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What is Amazon FBA?
Amazon FBA stands for fulfilment by Amazon. It’s white label business model where you send your products to Amazon warehouses and they pack, fulfil and ship your products. With this method, you take advantage of Amazon’s huge marketplace and fulfilment system but you pay for the product.
This is the reverse of affiliate marketing where you don’t pay for the products upfront but you take advantage of Amazon’s vast range of products and use your own web properties or content to drive traffic to these Amazon offers.
Why Should I Choose Amazon FBA?
Amazon FBA is business model that takes advantage of the Amazon brand and their vast network. It’s like getting the ability to put your product in a large store chain like Walmart or Target then cash in for a small fee.
Everyone these days trusts Amazon. They are not afraid to take out their credit card and make a purchase whereas if you are a new eCommerce store, you need to build trust with any potential customer before they can be comfortable enough to buy from you.
You also don’t have to worry about order fulfilment, packaging and the shipping of your product. In other words, you can be a one-man operation and leverage the brand and systems that Amazon has set up over decades.
How Does Amazon FBA Work?
To answer this question, let’s look at exactly how Amazon FBA works. To run a successful FBA business, you need to find a product that will sell on Amazon. To do this, you need to do product research.
The idea is to find a product that is already selling well then gat a similar product produced and branded then offer it for a lower price. This process is called white labelling a product.
It’s advisable to get 200 to 300 units produced in the initial run so that you see whether or not it will be able to sell on Amazon before mass-producing if your budget allows for it.
Once your product has been manufactured, you ship it directly to an Amazon warehouse. You then load his product on the Amazon website and promote it.
When someone buys this product on Amazon, they take care of the order fulfilment, packing and shipping to the customer. They take an administration charge from the sale and you get paid the rest.
That’s a simple overview of how Amazon FBA works and I’m sure you can see how powerful this can be as a business model.
You can sell one or multiple products on Amazon FBA. People make five, six or seven figures per month leveraging Amazon.
Amazon Affiliate Marketing
A few weeks back, Amazon announced a major cut in the commissions that they pay out to affiliates. Prior to the cut, affiliates were earning between 3% to 8% commission when they sent a buyer to Amazon.
The rates were slashed to 1% to 3% meaning that affiliate marketers lost over 80% of their income literally overnight. Of course, there was a great outcry from people whose livelihood depended on Amazon.
How Amazon Affiliate Marketing Works
The beauty with Amazon’s affiliate product was that they paid you for everything that your referral bought and not just the product you referred them.
For example, if you promoted a dog tent on your affiliate site and the customer went on to buy five other products not related to it, you still got paid on all the other purchases.
A lot of people had built their businesses and basically their livelihoods on Amazon and they naturally feel hard done because it is affiliates who made Amazon the giant it is today.
The news was made worse because it came at a time when Amazon has grown 8% in the previous financial period and the world was under lock down meaning that people were already hard-pressed financially.
It felt like a low blow but truth be told, the writing was on the wall for many years now because they had done this before. Indications point toward Amazon shutting down their affiliate program completely.
Fortunately, there are other options available out there that you can take advantage of. If you are considering Amazon’s Affiliate program I recommend you look somewhere else because you will most probably be left in the dust.
Most current Amazon affiliates are either partially or fully moving away from Amazon Associates program.
Regular Affiliate Marketing
If you hadn’t already picked up on it by now, affiliate marketing is where you get paid a commission when you refer a buying customer. There are other affiliate marketing programs out there besides Amazon.
The biggest advantage of Amazon is its product diversity and the ability to get paid on multiple purchases. On the other hand, if you were to promote other affiliate products, you will make more per sale.
You can still use Amazon to Research top-selling products then look for the manufacturer or supplier to see if they have an affiliate program that you can join directly. In this way you cut out the middle man and make a bigger chunk of the money.
Alternatively, you can register with other big retail groups such as Walmart and Target who also have affiliate programs but offer up to 6% commission and some have cookies which last 90 days as opposed to Amazon’s 24 hours.
What this means is that when you refer them their data is stored in the browser so that if they come back at any other time within the cookie period, you still get credit for the sale.
Affiliate marketing doesn’t have to be physical products only, you can also make a significant amount of money by promoting digital products. These can pay up to 80% commission because they don’t have any production or delivery course.
In most cases, they make money on the back end by offering upsells.
Amazon FBA vs Affiliate Marketing Pros and Cons
Now, let’s look at the pros and cons of Affiliate marketing vs Amazon FBA.
|• Greater Profit Margins
• Easily Scalable
• Take Advantage of Amazon Brand
• Quicker Path to Profit One you Have Winning Product
• You Don’t Have to Touch or See The Product
|• Higher Cost of Entry than Affiliate Marketing
• Product May Not Sell
• Manufacturer Can Produce Poor Product
• Market Can Get Saturated
With Amazon FBA, you can make a lot of money and scale up your business a lot quicker once you find a winning product. There are risks associated with it though like a product saturating the market or a competitor undercutting your price.
|• Little to No Start up Cost
• You Don’t Carry any Risk With Stock
• You Don’t Worry About Customer Support
• High Affiliate Margins if Not on Amazon
|• Low Commissions on Amazon Associates
• You don’t control Product Quality or Return Rates
• You Don’t Control Conversion Rate
Affiliate marketing on Amazon is pretty much on its last leg but affiliate marketing as a whole is still alive and well.
How to Take Advantage of Amazon to Build Your Own Brand
Whether you use Amazon FBA or affiliate marketing program, there are still ways for you to use this giant platform to build your own brand.
A simple way to do this is build an email list of the customers that you get from this platform then you can direct them to your own eCommerce store.
Once they buy one product from you that they are happy with, they now know and trust you and are willing to buy direct from you especially if you give them a better deal than what’s on Amazon.
When you do it this way, you a building a proper business that you can scale and even sell down the line. With what’s happened with the affiliates, who knows what Amazon will do with the rest of the other business units.
Make hey while the sun shines, the saying goes. Don’t be left hanging the next time Amazon chooses to make the cut because you put all your eggs in one basket.
Whether you choose to do Amazon FBA or affiliate marketing really depends on your objectives and how deep your pockets are. I hope this article has helped you make a more informed decision on which direction to take.