Pros And Cons Of Starting A Niche Affiliate Site Vs An Online Store

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A while back, I received an email from 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 as my primary income source? I’d be screwed.

After running 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.

Ready To Get Serious About Starting An Online Business?

If you are really considering starting your own online business, then you have to check out my free mini course on How To Create A Niche Online Store In 5 Easy Steps.

In this 6 day mini course, I reveal the steps that my wife and I took to earn 100 thousand dollars in the span of just a year. Best of all, it's absolutely free!

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36 thoughts on “Pros And Cons Of Starting A Niche Affiliate Site Vs An Online Store”

  1. Fantastic article, as always, Steve! While my business is currently purely service-based, it’s fascinating to learn more of the ins and outs of different business models. Much of what you wrote still applies, and this give me good insights for future expansion and endeavors. Wishing you and your family a great summer!

    1. @Laila
      Thanks! Hope you have a wonderful summer as well!

  2. I am getting ready to launch my online store and I really appreciate all of the information you give out for free! Especially the email course. I’ve saved those emails and I refer back to them often. Although I like affiliate marketing for the ease, there are definitely higher profit margins in direct sales. — LaTisha

    1. @Financial Success
      I’m glad that you’ve found the email course useful. Higher profit margins means that less foot traffic is required to make an equivalent amount of money compared to affiliate marketing. Also, it allows you to go after lower traffic keywords which usually means less competition as well.

  3. Great article, Steve!

    I never try affiliate sites, but I do enjoy the freedom of having controls over my online shop instead of having to depend on others for my income.

    1. @Jeff
      Thanks man! Hows your online store doing these days?

  4. Steve,

    It might be true that running your own store is more predictable in terms of revenue, but I see the other side of the coin as well. When you try to market your products, you still need Internet Marketing and affiliates are a great help for that. For example, aren’t NexTag, type of comparison engines super affiliates in a sense?

    Direct selling of products has also big risk. What if the manufacturer that supplies you the products pull the carpet under and hike their price? Also, what if you overstock and couldn’t get rid of the inventory? Plus, typically you just don’t have the money to buy a lot of inventory, that limits your growth as well.

    For affiliate marketing, it seems to me that most affiliates couldn’t get to the level of scale, compared to directly selling products. But either affiliate marketing or direct sell of products, it is different challenges and both could make a healthy living if done properly.

    1. @Jian
      We are talking about making money with your own site here. The article is not about about using affiliate shopping sites like and NexTag. With an online store, there’s no issue with using an affiliate service to help promote your products.

      To address your other point, if a manufacturer that supplies you with products pulls the carpet from under you and/or hikes their prices, you have time to react. This has happened to us on several occasions and we’ve had several months to find a new vendor. Contrast that with Amazon which canceled their affiliate program in a single day!

      If you are worried about scale, then even dropshipping is better than affiliate marketing because you have the ability to set your own prices. Having no control is the biggest disadvantage when you are an affiliate.

      1. @Jian
        One other thing that I forgot to mention is that it’s much easier to find multiple suppliers for a given product than it is to throw up multiple niche affiliate sites. If I look on Alibaba, I can instantly find many vendors that are willing to make products for us. Today, we have at least 2 vendors ready to go for any given product that we sell.

      2. @Jian
        Forgot to address your overstock issue with goods. Most online stores make most of their money from 20% of their products. The safest way to stock your items initially is to just carry a few of every item until you find out which items sell. Then you can up the inventory for those products only. Sure, we have products that we rarely sell, but we carry extremely small quantities of these items.

  5. Steve,

    I think it’s a big blow to the affiliate marketing community (the whole Amazon thing). It would almost send a message that says affiliate marketing is not the way to go. I really hope that losing affiliates causes Amazon to rethink their position.

    The fact that you were able to start your business for $630 would be kind of a surprise to many. Regardless of what model people pursue, it comes down to education, knowledge and resources because without those, one might spend lots of money and not make much (or any) in return and possibly get disillusioned.

    ~ Anthony

    1. @Anthony
      Don’t get me wrong. I’m still a big fan of affiliate marketing. But if my goal was to replace my day job’s income with a consistent income stream online, I would much rather open my own store than pursue the affiliate marketing route.

  6. I remember when pulled out of North Carolina, where I live. At that time I was just starting to run affiliate ads, but had to pull them. Since then, I’ve put affiliate advertising behind me, seeing that it was a totally uncertain way to make money. Your business model is the better one!

  7. Thanks Steve for your thoughts.

    I think for computer savvy/programming people, affiliate marketing could be good since you could reach the scale using programming and efficient data mining techniques.

    For people that are more familiar with products than software, definitely selling products is the way to go.

    I agree with Anthony on it comes down to education, knowledge and resources. Basically, you either have excellent programming skillset or you are very good at products in an industry.

    By the way, Amazon is big enough these days so they don’t care about affiliates anymore, but, there are a ton of good merchants out there that are hungry for super affiliates to market for their products. I don’t think it is end of the world for affiliates, Amazon pays out just 4% anyway at the basic level.

  8. Wow, this is amazing! I discovered your blog through twitter and will definitely return to learn more about opening an online store. Hopefully, that will be my next project :)

  9. Well, this gave me really a great idea. And shopping online really gives me good discounts and low prices.

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