A while back, I received an email from Amazon.com informing me that they just cancelled their affiliate program effective immediately. (Update:It has since come back online, but this is irrelevant)
They provided very little notice and in just one day, my Amazon affiliate account became worthless. Now I make a decent amount money with affiliate marketing for various business services, but what if I relied entirely on Amazon.com as my primary income source? I’d be screwed.
After running MyWifeQuitHerJob.com for several years now, I’ve fielded many questions about how to open an online store and how to put up niche affiliate sites.
And whenever someone asks me for advice, I almost always advocate creating an online store as opposed to going down the path of making a pure affiliate website.
The problem is that most people are attracted to the prospect of creating a niche affiliate site due to the passive nature of the business.
Simply put up a content site, get it indexed in Google and then watch the money start flowing in. But the reality is far different than the dream.
Affiliate Marketing Sites Are Fragile
As Amazon has demonstrated with the cancellation of their affiliate program in many states, affiliate marketing is fragile. You are entirely at the mercy of the company you are marketing for.
At a moments notice, the company might decide to lower their commissions or cancel their program altogether. Is that the way you want to try and make a dependable income? Don’t you want to be in control of your own destiny?
Very few people can make a living as a pure affiliate marketer and if you ask, most of them will advise you to diversify your affiliate sources in order to not put all of your eggs in one basket.
The problem is that most niche websites are specifically created to sell a specific type of product. That and it also takes a tremendous amount of time and effort to get your niche site ranking in Google.
Sure, you can put up multiple affiliate sites but that requires a lot of effort, effort that you could be spending building a real business for yourself. After all, wouldn’t you rather concentrate all of your efforts on your own products that you have full control over?
Let’s be straight about one thing. Affiliate marketing is not a business. A business is an organization engaged in the trade of goods, services, or both to consumers. When you are an affiliate marketer, you’re just a salesman.
Online Store Income Is More Predictable
When you are deciding whether to quit your job, predictability of your income is important for proper financial planning and your sanity. Having run our business for almost 4 years now, I can tell you when our busiest months are and when business will be slow.
In addition, based on the first 3 or 4 months of the year, I can usually make a fairly accurate prediction of how the rest of the year will play out.
Why is this important? It’s important because predictability allows you to plan out your expenditures and to know what to expect. I don’t have to worry about the income from my store drastically fluctuating from month to month.
I generally know when certain products are popular and I can base my purchasing decisions based on data as opposed to pure guesswork.
In the event that I’m having a slow month, I can also make the necessary adjustments. The biggest advantage is that online stores get to set their own prices.
If I need income, I can artificially increase demand by having a sale. If there’s a ton of demand for my products, I can raise prices accordingly.
With affiliate marketing, you’re stuck with the terms and conditions of your affiliate which can change at any time. You have to wait for your affiliate to have a sale in order to have a sale.
Opening An Online Store Will Make You More Money
Selling your own products will make you more money simply because you get to pocket more of the profit. The combination of being able to set your own prices coupled with the fact that you are purchasing your goods at wholesale prices means that you are in full control over how much you can make in a given sale.
The other side benefit is that you can freely re-market or re-position your products in a different light in order to command premium pricing.
If you look at our online store, we sell handkerchiefs. But since we market our handkerchiefs as wedding hankies, we can charge an extra premium on our products.
With affiliate marketing, you have to abide by the terms and rules of the affiliate. Most of the time, the affiliate will not allow you to get too creative with your ad copy.
In addition, most affiliates expressly forbid you from purchasing PPC ads using their product names in the ad. That means that the only way to get traffic to an affiliate site is through search or by blasting your affiliate links to your email list or followers.
The ability to set prices and the freedom to market your store in any way you like generally leads to higher income and revenues if you play your cards right.
But Wait, Doesn’t A Online Store Cost More To Open?
Most people are afraid of hard work and high startup costs. Opening a niche affiliate site costs almost no money at all which makes it extremely attractive.
But most people aren’t aware that starting an online store can be just as inexpensive. My wife and I started our online store for around $630 including initial inventory costs and we managed to make $100K in profit during our first year of business.
If you are concerned about shelling out too much cash up front, you can try drop shipping which requires no inventory costs at all. In fact, you can open up a drop shipped store for the same amount of money it takes to start a niche affiliate site which is about $7 a month.
Either way, if you want to make a significant income in a shorter amount of time and quit your job, opening your own online business trumps affiliate marketing every time.
With your own online store, you’ll never go out of business because someone else decides to cancel their affiliate program. You’ll never go out of business because someone else decides to lower their commissions.
While nothing is guaranteed in business, having your own online store is more viable in the long run. Does it require more work than a niche site? Definitely. But along with hard work comes higher profits and greater barriers to entry.
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- 5 Ways To Beat Amazon At Ecommerce
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