Why your ecommerce business needs to start as an affiliate site

There is a lot of risk involved in starting an ecommerce 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 ecommerce, don’t get ahead of yourself

The instinct for many new ecommerce 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 ecommerce 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 with 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 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.

Recently, I had a Twitter exchange with fellow SEO expert Jesse Hanley about leveraging your ecommerce business in this way. Hanley tweeted out this formula for ecommerce success:

Technically speaking, instead of affiliate tracking links, I set up API connections to the merchants that are invisible to the users (and competing affiliates). The advantage is that all the affiliates I was once competing with are now sending me their sales. I was able to pay them the commission that they would get, and net the difference with my higher commission.

Amazon Essentials has capitalized on a similar approach. The ecommerce behemoth set up private label brands to compete with the very products it promotes from third party vendors. Wag pet products, one of their private label brands, has dominated sales on both Amazon and other sites, such as Chewy.com, which is a PetSmart ecommerce marketplace. By using the data from its millions of reviews, Amazon positioned a private label pet brand that competes with some of its top selling brands that is also promoted and sold via other affiliate sites.

Save time and money as you determine products that sell

If you’re thinking of launching an ecommerce startup, there is no need to waste time and money on inventory guesswork. Being strategic with your affiliate sites and content allows you to see what sells upfront and make educated business decisions about your own products.  

Make money as you figure out what sells — then you can use that money to start a successful business under your own private label brand. In creating a feedback loop between your affiliate site and other affiliate sites that will promote your product, you will draw higher commissions and profits. Turn the stress of the affiliate marketing business focus on cookies and copycats into a business advantage.

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