Affiliate Marketing vs Amazon FBA (2023)

Selecting the most suitable business model is important in online entrepreneurship. Two prominent options that often captivate aspiring business owners are Affiliate Marketing and Amazon FBA (Fulfillment by Amazon).

Both avenues offer unique advantages and challenges. Affiliate Marketing involves promoting other companies’ products and earning a commission for each sale, while Amazon FBA entails selling physical products through the e-commerce giant’s platform.

To make an informed decision, one must weigh factors such as personal preferences, financial resources, and the desired level of involvement.

In this post, Affiliate Marketing vs. Amazon FBA, we will explain the key aspects of each model to help you make informed decisions for your online venture.

What is Affiliate Marketing?

Affiliate marketing is a result-driven marketing strategy used by businesses to promote their product. Individuals or entities, known as affiliates promote a product or service of a business and only get paid when they make a sale or generate a lead for that business.

How does Affiliate Marketing Work?

How does Affiliate Marketing work

First, find an affiliate program you want to join. Consider their payment method, commission rate, cookie duration, conversion rate, etc.

Sign up for the affiliate program and wait for acceptance. Once accepted they will provide you with their unique affiliate link. These links monitor the traffic and sales generated by you.

Create content on the product or service you are promoting and embed your affiliate link with the content. Content can be in various forms such as Blog posts, reviews, videos, emails, and social media posts.

Once a person clicks on your affiliate link that person will be redirected to the business or merchant website and the action will be tracked by the affiliate tracking system including the tracking of sales or generating leads.

When the person then buys the product or service you will get a commission. The commission may be a percentage of a sale or a fixed amount.

There is also a minimum payout level. This means that you cannot transact your money until you reach that payout level

Key Players in Affiliate Marketing

There are three key players in affiliate marketing i.e. Merchant, Affiliate, and Consumer

Merchants

Merchants are the businesses, companies, or sellers that create the product or service. They set up the affiliate program to attract affiliates who are willing to promote their product or services.

Affiliates

Affiliates are independent marketers, influencers, or website owners. They act as a middleman between the merchant and the consumer. They partner with the merchant to promote their product or service and start creating content that can drive traffic and conversion.

Consumer

The consumer is the end user of affiliate marketing. Without the consumer, the affiliates do not get the commission. Affiliates have to create content that encourages the consumer to make a purchase.

Advantages of Affiliate Marketing

Here are the Advantages of Affiliate Marketing.

Cost-Effective

You can start affiliate marketing with no money making it the most cost-effective online business.

Affiliate marketers are individuals or entities who advertise for advertisers to help them sell their goods and services

Affiliates are paid commissions only when the desired action is completed such as sale, lead generation, or any other.

It is a pay-for-performance arrangement. Therefore, they will only pay when their ads yield fruit. It compares the performance with the conventional method.

Performance-Based Payment

Affiliate marketing is an advertising strategy in which affiliate merchants partner with affiliate marketers. Affiliate marketers advertise for their products, and services and only get paid when a desired action is completed.

Contrary to other forms of advertisement, advertisers pay for space. In affiliate marketing, an affiliate merchant will only pay the affiliate marketer when the desired action is completed.

This “invest per performance” policy makes sure that advertisers spend their investment on proven, measurable results and directly relates those expenses with the obtained result.

Diverse Audience Reach

In affiliate marketing, when affiliates access multiple niches. They are reaching out to different lines of interest and business sectors as well as targeting diverse market segments.

Such as an affiliate may deal with technology products and another one might be concerned with beauty products and cosmetics. Advertisers can extend their reach by working with affiliates who specialize in various niches.

The affiliates bring with them their followings comprising people who are interested in similar things and they expand the coverage of the advertised products or services among various groups of consumers.

Through this diversification in promotion, advertisers are in a position to relate to a bigger customer base and consequently achieve maximum effectiveness in their affiliate marketing approach.

Disadvantages of Affiliate Marketing

Here are the disadvantages of affiliate marketing

Dependency on Affiliates

The success of affiliate marketing largely relies on how honest and trustworthy every single affiliate is. Every affiliate’s integrity and reliability are crucial as advertisers trust that the effort they put into product promotion will be valid.

Trustworthy affiliates stick to commitments as well as promote ethics. For this reason, there should be a clear disclosure of their links, truthful representation of what they are promoting, and adherence to any applicable laws.

The reputation and performance of the affiliate marketing scheme are heavily reliant on associates’ good behavior and dependability. This underscores the necessity of recruiting associates who uphold the core principles and values of the advertiser.

Commission Costs

The accumulation of commission payments in pay per performance marketing model may substantially influence the advertisers’ profit margins.

Pay-for-performance guarantees that advertisers exclusively pay for actual sales or leads; however, the cumulative commissions provided to affiliates constitute part of the overall costs.

Commission for affiliates goes up as sales and conversions rise. Although this cost is linked with positive results, it constitutes part of the total expenditures undertaken by the publisher.

Potential for Fraud

Affiliate marketing is exposed to various forms of fraudulent activities including click fraud and false leads which can compromise its integrity. Click fraud encompasses illegitimate clicks on affiliate links designed to inflate the advertisers’ costs in vain without bringing any tangible value.

On the contrary, false leads imply affiliates manufacturing leads that are not necessarily real leads for customers. They also undermine the integrity of such performance indicators as CTR, which in turn can result in financial damages to the advertiser and damage the credibility of any affiliate marketing program.

Such risks are overcome by advertisers applying strong tracking and fraud control systems which highlight an absolute necessity to keep the environment clean.

What is Amazon FBA?

Amazon FBA stands for Fulfillment by Amazon. It’s a service offered by Amazon that allows third-party sellers to store their products in Amazon’s fulfillment centers. Amazon takes care of picking, packing, shipping, and providing customer service for these products. Sellers benefit from Amazon’s extensive logistics network, which can help streamline the selling process and improve customer satisfaction.

How does Amazon FBA Work?

With Amazon FBA, sellers follow these steps:

Sign up for a seller account on Amazon.

List the products you want to sell on the Amazon marketplace.

Package and prepare the products according to Amazon’s guidelines. Then, ship them to one of Amazon’s fulfillment centers.

Amazon stores your products in their warehouses, and they handle inventory management.

When a customer orders your product, Amazon picks, packs, and ships it to the customer.

Amazon handles customer service, including returns and refunds.

Sellers pay fees for storage, picking, packing, and shipping, but these costs can be offset by the convenience and scalability of the FBA program.

Advantages of Amazon FBA

Here are the advantages of Amazon FBA

Logistical Convenience

Sellers save on time and resources like storage, packing, and shipping since Amazon does it for them. It enables sellers to concentrate on other areas of management.

Prime Eligibility

Many of the items stored at Amazon’s fulfillment centers can be shipped at high speed to customers with Amazon’s Prime. This is an additional advantage offered by Amazon Prime since it helps attract more clients with Amazon Prime whose products arrive at high speed.

Customer Service

Customer service is usually handled by Amazon for the FBA products, returning products as well as inquiries of the customers on the same can improve the shopping experience

Disadvantages of Amazon FBA

Here are the disadvantages of Amazon FBA

Fees

FBA offers convenience however, sellers pay numerous charges ranging from storage fees to delivery costs, among others. It is of great importance to understand and control these costs to remain profitable.

Limited Control

Sellers have certain responsibilities in the fulfillment stage which are control over specific aspects of the process. Despite being responsible for possible problems related to packaging or shipment, it could affect consumer confidence.

Storage Limits

Amazon may restrict its storage services for instance in the peak months. Inventory stockouts also attract hefty additional charges, requiring sellers to maintain stock levels meticulously.

Similarities between Affiliate Marketing and Amazon FBA

Here are the similarities between affiliate marketing and Amazon FBA.

Promotion of Products

Selling in Affiliate Marketing and selling through Amazon FBA are both meant for product promotions. In Affiliate Marketing you promote products through content/marketing and in Amazon FBA you list and sell products on the Amazon platform.

No Product Fulfilment

Neither Affiliate Marketers nor Amazon FBA suppliers have to bother with handling fulfillment directly. With affiliate marketing, you only promote the product and get a percentage of the commission while with Amazon FBA, it’s Amazon that will worry about storing or shipping your products.

Passive Income Potential

Passive income can also be attained in both of these models. You can earn commissions in affiliate marketing, even if you are not actively working on it. Just like this, listing the products in Amazing FBA makes it possible to achieve ongoing sales without involving yourself all through.

Global Reach

The two designs afford the possibility of communicating with the entire world. Through affiliate marketing, you can promote your product globally, whereas Amazon FBA makes it possible for you to offer items to foreign countries using the Amazon outlet.

Key Difference between Affiliate Marketing and Amazon FBA

The key differences between Affiliate Marketing and Amazon FBA are:

Product Ownership

In Affiliate Marketing Affiliates do not even produce the products that they sell. However, they make a commission in selling other people’s goods.

While in Amazon FBA all sellers own physical products with which they are listed on Amazon. The work includes dealing with inventory, pricing, and product standards.

Inventory Handling

In Affiliate Marketing Affiliates do not have any inventories for selling and do not ship goods to consumers. They are into the promotion of products and creating website traffic.

While in Amazon FBA sellers get involved in the management of inventories. Amazon takes charge of storing, packing, and shipping of products by sellers.

Customer Service

Affiliates do not provide any customer service. The product owner or merchant handles this

Amazon handles shipping, return, and logistic issues which include customer services. Inquiries concerning particular sellers would also be handled by them.

Earnings Structure

Every time an affiliate sells a product using its referring link, they are paid a commission. This is usually a proportion of the sales price.

Amazon deducts its share of profits on the selling price for the products leaving the sellers with the remaining profits. The product’s price determines sales, while the sales minus the seller`s cost equals earnings.

Marketplace vs. Promotion

Affiliates promote products through different channels but in this case, do not engage in direct sales.

In Amazon FBA entails putting or selling goods directly into the Amazon marketplace.

Conclusion

Whether to pursue Affiliate Marketing or Amazon FBA as an online business model depends on your preferences, skills, and business objectives. If you prefer promoting products without the responsibility of inventory management and customer service, Affiliate Marketing might be the right fit. It allows you to focus on marketing strategies and driving traffic to earn commissions.

On the other hand, if you enjoy the idea of owning and selling physical products, handling inventory, and utilizing the vast reach of an established marketplace like Amazon, then Amazon FBA could be a suitable choice. It involves a more comprehensive business approach, including product sourcing, logistics, and managing the operational aspects of selling.

Consider your strengths, resources, and long-term goals. Both models offer unique opportunities for online entrepreneurship, and success in either requires dedication, strategic thinking, and adaptation to the evolving landscape of e-commerce. Ultimately, the right choice is the one that aligns with your interests and allows you to build a sustainable and profitable online business.

Which business model do you like? Tell us in the comments.

Further reads on Fam Guides: Affiliate marketing vs. Dropshipping.

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