There is a lot of risks involved in starting an e-commerce business. For one, most would-be merchants don’t know what products will sell well and what products won’t. And being unable to move inventory can be extremely costly — especially if you have a new business with little to no brand recognition.
However, if you start with an affiliate site with impartial reviews of your future competitors, merchants, and products, you can quickly learn which products are popular with customers and position yourself to make significant profits from your own private labels (i.e. products that are manufactured by one company and sold under the label of your own brand).
To get ahead in e-commerce, don’t get ahead of yourself
The instinct for many new e-commerce business owners is to launch with products that are filling a popular niche and start buying relevant traffic. However, if you start with an affiliate site, you mitigate significant business risk because you are learning as you earn commissions on top selling products.
To be a successful affiliate site, you have to build trust with impartial content. Take selling mattresses, for instance. An effective affiliate site will feature different top brands and manufacturers with trusted reviews. From the end user’s perspective, your reviews give your site credibility that then generates sales to the merchants you are promoting.
To think of it another way, you are pre-selling mattresses by providing information to the consumer that he or she can’t get from the merchant directly. And, as you motivate traffic and send it to merchants, they will, in turn, provide you with the stats on what sells. Throughout this process, you can learn who the customers are, what they buy, why they buy, when they buy, etc. The merchant takes care of everything else while you draw commissions from your site recommendations.
Limitations of affiliate marketing for e-commerce sites
While building a successful affiliate site is a great way to learn about what sells, it’s not a great way to make long-term profits. There are significant disadvantages to the affiliate business model. For one, the tracking system is reliant on HTTP cookies with expirations, and affiliate sites either get credit for being the first or the last to refer the sale.
Say a manufacturer only gives commission to the first cookie, that means if you drive purchasing traffic to a manufacturer’s site but were not the first affiliate to do so, you will not make a commission.
Even worse, when you drive traffic to a manufacturer’s site, but the user doesn’t buy right away (they buy later, over the phone, through another affiliate, directly on the manufacturers website, etc.), your affiliate site will usually not draw a commission on the purchase. In addition, if users become too familiar with a brand through your affiliate site and others, they may bypass your site altogether.
The biggest disadvantage in building affiliate sites is that their effectiveness drops off dramatically over time as new affiliates copy successful ones. Years ago, when I was starting out in SEO, I created affiliate websites for various products, but I got frustrated with how many other sites were copying my approach. The more they copied me, the harder it was to compete as an affiliate.
Introducing private label affiliate sites to maximize revenue streams
To avoid the pitfalls of the fiercely competitive affiliate marketing space, you need to introduce private label products into your reviews sites once you’ve become successful. I happen to know this approach works because I’ve done it myself.
As I mentioned before, when I became more successful with my affiliate sites, more people began to copy my approach. The fact that they were copying me made them predictable, and their predictability allowed me to anticipate their next steps.
I used that against them when I set up my private label sites — I created a pseudo-affiliate program and they started promoting my private label products. In other words, I flipped the script on my competitors who were copying me. They were now signing up in droves for my affiliate program, not realizing that they were promoting my own products. In turn, I was able to earn higher commissions and profits.