Comparing Internet Affiliate Marketing to Traditional Retailing

05 Jan

Posted by admin as Marketing

Content
Knights in polo shirts round the coffee table
What is Affiliate Marketing?
Comparing Differences
Setting up shop
Sales Channel
Payment and Delivery of Goods
Risk of Damaged Goods and Goods delivered in error
Pricing
Timing and Mode of Operation
Scale of Operation
Qualifying in Affiliate Marketing and Traditional Retailing
Profitability Margin
After Sales Service
Comparing Similarities
Reputation
Value of Product
Industry Changes
Competition
Outcome of Comparison
Compelling Reasons why I am for Affiliate Marketing

Knights in polo shirts round the coffee table

3 months ago, while having coffee with a few friends at coffee connoisseur, James was exclaiming how some people were making really good money over the internet. Someone then poised the question, “what is Affiliate Marketing?” “Why?” “Because I heard about some lady became a millionaire just doing Affiliate Marketing.” After I have explained what Affiliate Marketing is, the next question immediately followed, “can Affiliate Marketing really make money?” Peter answered, “ from what you just explained, Affiliate Marketing sounds like the Traditional Retailer,”…and the knights in polo shirts round the coffee table gave the affirmative nod!

“So, what is the difference between setting up shop in Affiliate Marketing and Traditional Retailing?” “Coffee for anyone?” Suddenly, the knights became engrossed in serious talks. As we began to compare both business models, the idea of the Affiliate Marketing became very real. It was like uncovering a gold mine!

3 months later, 3 of them including myself became involved in Affiliate Marketing. Last I heard…Peter had already made a cool US$1700 since he started out in late August! Hope you uncover your gold mine in this sharing of our discussion among the knights in polo shirts. Don’t forget to visit my website for the best resource ever for Affiliate Marketing at HERE

What is Affiliate Marketing?

Affiliate Marketing is about selling other people products for a profit over the internet. Likewise, Traditional Retailing also sells other people products for a profit, but offline…over the telephone, television or face-to-face.

Comparing Differences

Setting up shop

Affiliate Marketing:

It usually involves setting up a website or an emailing system to draw targeted traffic to the supplier’s website, through a link with the unique affiliate html code. When the customer buys from the supplier’s website, the sales is traced back to the Affiliate Marketer and he earns his commission. In effect, the Affiliate Marketer finds the traffic and directs them accordingly.

Traditional Retailing:

A physical shop is set up. The Traditional Retailer takes the products from the suppliers and stock up in his shop. The products could have been gotten through consignment basis, subjective to credit terms or cash delivery term. When a product is sold, the Traditional Retailer pockets the entire proceeds. The Traditional Retailer has to keep track of his inventory to avoid excesses that would be costly if sales are slow.

Sales Channel

Affiliate Marketing: The Sales letter of the webpage is the key to whether the customer buys or not. It usually contains explanation of product benefits, personal endorsement, marketing images and pictures of the products. Other marketing tool such as free gifts and useful information are employed to attract sales.

Traditional Retailing:

Direct selling through the sales people and customer service handling enquiries are employed. In retail shops, products are categorized properly for ease of shopping to encourage buying.

Payment and Delivery of Goods

Affiliate Marketing: The supplier collects the money from the customer first through the payment gateway in its website, then delivers the goods. The Affiliate Marketer does not handle the payment and delivery of goods. He only takes care of his commission when the sale is through. However, the Affiliate Marketer must ensure that he(with his supplier) delivers what he promises in his website. His customer can only see and read on the website, before they decide to buy. Quite often, the supplier would have done a good job of the description of the product together with pictures.

Traditional Retailing:

The goods are sitting in the shop. His customer has the chance to see, feel and make enquiry on the spot about the product before they decide to buy. Even in supermarket where the customer seldom has the chance to make enquiry, it is easier to be convinced to buy compared to the online experience.

Risk of Damaged Goods and Goods delivered in error

Affiliate Marketing: Again, the Affiliate Marketer does not handle such risk. In very rare cases of damaged goods or goods delivered in error(e.g you wanted a pink handbag but a blue one was delivered), the Affiliate Marketer may help the customer to claim back the money or the right goods. The customer usually claims directly from the supplier.

Traditional Retailing: The customer goes back to the shop of the Traditional Retailer to make claim or exchange the goods with the receipt. It is more convenient and faster than online purchases.

Pricing

Affiliate Marketing: The pricing of the products is set by the suppliers on their websites, beyond the control of the Affiliate Marketer. Strictly speaking, the pricing should be lower than that in Traditional Retailing for the same product. Why would anyone want to buy the same toothpaste over the internet if the price at the nearby supermarket is cheaper?

Traditional Retailing: Often, the pricing of the products are mark-up and set by the Traditional Retailer themselves. As the products are usually fully paid by the Traditional Retailer and sitting in his shop, he has the liberty to raise or lower the price to move his sales. Some suppliers do limit the Traditional Retailer through contractual agreements.

Timing and Mode of Operation

Affiliate Marketing: As long as the website is up, the Affiliate Marketer operates 24 hours/7 days a week non-stop. Does he need to attend to it all the time? He probably just checks his emails for any enquiry or does his business planning for a few hours a day. Some even fully automated their system such that they only work when necessary!

Traditional Retailing: Most Traditional Retailer operate 9-12 hours in a day on 5, 6 or 7 days per week. When their shops are closed for the day, their customers cannot buy anything from them. When their shops are opened, they have to be at the shop attending to their businesses. Even for the 7-11 convenient store, staffs have to be employed to look after the store all the time. No such thing as automating the system!

Scale of Operation

Affiliate Marketing:

‘www’ stands for world wide web. Affiliate Marketing is a global business, marketing to customers all over the world. As long as a person living in any part of the world has access to the internet, the Affiliate Marketer has a potential customer. Vice versa, as long as the Affiliate Marketer can access to the internet, he can operate his ebusiness from any part of the world. That was what attracted me to the ebusiness in the first place. I could still operate my ebusiness if I am enjoying myself in some remote island as long as there is access to the internet.

Traditional Retailing:

A normal retail shop located in a shopping mall can only target the shoppers there. The Traditional Retailer is always faced with a limited geographical area of operation. To expand his scale of operation to regional or global, it would require huge financial resources, which is often beyond the reach of the normal retailer. If the Traditional Retailer is travelling away, it is hard to look after his business for the period of time.

Qualifying in Affiliate Marketing and Traditional Retailing

Affiliate Marketing:

Usually, all you need to do to join an affiliate program is to copy and paste a unique html code from the supplier, onto your website through a “Click Here to Buy” link. Depending on how the supplier chooses to pay his affiliates, you may have to sign up an account with a payment gateway such as Clickbank to get paid. Registering such an account is free. Other suppliers may make cheque payment to you on a regular basis. However, some suppliers are more selective. They will qualify you as their Affiliate Marketers unless you are their customer.

Traditional Retailing:

There are a lot of considerations when the supplier chooses their retailers. For example, the expected amount of business the retailer can generate for the supplier, the reputation and the financial stability of the retailer. Even if the considerations are not strict, the retailer has to purchase a minimum order size of goods to start selling, on cash delivery or short credit terms.

Profitability Margin

Affiliate Marketing: As the pricing and commission are determined by the supplier, the Affiliate Marketer is limited only by the supplier he markets for. He can always choose to sell for another supplier that gives him a higher commission!

Traditional Retailing:

The Traditional Retailing is free to sell his products at higher pricing and earns a higher profit margin. However, if you take into account his higher operating cost compared to that of the Affiliate Marketer, we do not feel that there is any significant difference to the net profit margin for the same product.

After Sales Service

Affiliate Marketing: It is rarely that the customer goes back to the Affiliate Marketer for complaint or help. As the supplier handles the payment and delivery of the product, it is natural that the customer goes back to the supplier for after sales service. The after sales service is almost non-existent for the Affiliate Marketer.

Traditional Retailing:

The Traditional Retailer would have to handle most of the after sales service. A lot of suppliers only deal with the retailer and not with the retailer’s customer. Failure to handle the complaint or problem would put the customer off and give the Traditional Retailer a bad reputation for poor customer service.

Comparing Similarities

Examining the similarity between Affiliate Marketing and the Traditional Retailing had shed more insights into what works in Traditional Retailing should also work in Affiliate Marketing. The followings are business fundamental that no Affiliate Marketer or Traditional Retailer who are serious to grow his business can afford to ignore.

Reputation

A good name in business will always brings credibility, trust and goodwill which are often more valuable than the physical assets. Even banks also lend money based on reputation of a company or its CEO. Just the name of the company alone can attracts consumers to buy. For example, I bought Rosalind Gardner’s Super Affiliate Handbook without hesitation because she has such a strong reputation as one of the best Affiliate Marketers worldwide. Find out more about it HERE.

Value of Product

When I buy anything, I usually look at the how the product can benefit me. That is, what value I can derive from it. Do you? For example, I was looking to create an ebook cover some time ago. There are professional designers that would do the job on a one-time basis for $97 and softwares that sell for a similar price but do-it-youself basis. Most of the softwares also need me to purchase another software called the Adobe Photoshop to complement it, and the latter cost a bomb! Finally, I bought a standalone software. To me, it offers more value because I can create more ebook covers myself in future and I do not need to purchase additional software to complement it. When the customer goes to a Traditional Retailer, he also buys based on his perceived value of a product.

Industry Changes

Industry changes will impact both Affiliate Marketing and Traditional Retailing. Changes in regulatory, market forces of demand and supply, and consumers’ trend can cause any business to be redundant if it fails to observe, keep up or keep ahead with changes. Can you imagine an affiliate website marketing mobile phones is still promoting a few outdated models when its suppliers has already replaced them with more recent models? Customers can easily sniff out an outdated website in just a few clicks of the mouse.

However, in keeping with changes, it would be easier for the Affiliate Marketer to make the necessary changes. All he needs to do is to change the content of his website. On the other hand, the Traditional Retailer may be stuck with obsolete stocks. It can be very costly, as he may have to force-sell at below cost, to cut his losses.

Competition

In business, competition is ever present. Competition can be viewed as healthy as it will raise the operating standard of the business. However, those who don’t keep up or keep an eye on their competitors could find their customers gone soon!

Recently, a friend exclaimed in exasperation over one of his website. He has only one competitor. However, every time he made positive changes to his website, his competitor will counter with something drastic or even better, almost instanteously. He felt that he was playing chess! Both are obviously guarding each other very closely!

Outcome of Comparison

We felt that both Affiliate Marketing and Traditional Retailing can be just as successful, as long as the business fundamental is strong. Just by comparing both business models, we can learn how to be successful in Affiliate Marketing by taking the cue from Traditional Retailing. These days, many Traditional Retailer have already expanded their businesses online to take advantage of the potential of the internet. Hence, the new Traditional Retailer cum Affiliate Marketer evolves.

Compelling Reasons why I am for Affiliate Marketing

I feel there are compelling reasons that Affiliate Marketing can be as profitable as in Traditional Retailing, if not more. Statistic alone shows that there are billions of consumers online already. There is a whole new generation coming up of which the majority is techno-savvy. These days, if you cannot find something offline, you will probably be able to find it online. The online global trend skews in favour of Affiliate Marketing than Traditional Retailing.