Let’s talk about the various ways you can generate revenue online when you have a website. I’m just going to do a comparison between eCommerce vs Affiliate Marketing vs Advertising vs Subscription revenue streams and we’ll start with eCommerce.
For those of you who don’t know, it’s where you sell a product on your site and send it to them. Generally, a physical product but it can be digital and you can drop-ship (have someone else carry the product for you).
Profit margin breakdown using ‘normal’ retail markup for holding stock on your own compared to drop-shipping is 50% to 20-30%. That is, for every $1 you either get $0.50 or $0.20-30 back.
With digital products of course, if you own the copyright the markup is enormous since your cost of good sold is insignificant (marginal cost that is, not upfront).
- Easier to build a brand, especially if you have products or a product mix that is unique
- Conversion rates can be significantly better as you are not sending traffic away first – that is you get 1-3% conversion from all your traffic, not just the one’s that travel to the affiliate marketer
- More control – you can adjust your site to better convert your traffic and have a much better understanding of the needs of that traffic than an external site
- Lifetime customer value – you are drawing the full lifetime value of each customer especially in a business of repeat purchases. Unlike affiliate sites where you generally only receive the revenue for a fixed amount of time.
- Inventory can be extremely expensive (requiring tens of thousands of dollars)
- Building the website is often much more complicated than an affiliate site
- Developing the brand can be a much longer process
- A more complicated business model as more ‘moving parts’ from inventory, site updates, design, customer service and more.
- Generally not a passive income stream as orders must be fulfilled, customer service completed, etc.
- Ongoing customer service issues compared to affiliate sites (e.g. questions, returns, exchanges, etc.)