Affiliate marketing is nothing new. The concept of paying people to say nice things about your products has (probably) been around since humankind first learned to control fire.
But there’s been a noticeable uptick in search interest around affiliate marketing over the past five years:
So it’s no surprise that over four-fifths of advertisers already run affiliate programs, according to data from e-commerce tech giant Rakuten. Of those that do, more than 80 percent dedicate over one-tenth of their total marketing budgets to affiliate activity.
Affiliate marketing is a big deal and it’s easy to see why. Figures from Awin—one of the world’s biggest affiliate networks, with 225,000+ publishers and 16,551 advertisers on its books—show that in 2020, it drove:
- Six billion clicks to brand sites;
- 182 million sales; and
- $14 billion in revenue.
And that’s only a single affiliate network. There are multiple others out there, not to mention brands that run their own in-house programs, without the support of a network.
If you’re thinking of leveraging e-commerce affiliate marketing for your business too, this guide is for you.
E-Commerce Affiliate Marketing: All You Need to Know
What Is Affiliate Marketing?
Affiliate marketing is a form of advertising whereby you, as a brand, pay third-party publishers (or “affiliates”) to promote your products.
Each affiliate gets its own unique affiliate link. Whenever someone clicks it and visits your site (and possibly makes a purchase or registers as a lead), the action will be tracked to that affiliate and they’ll earn a commission.
There are various models you can choose to compensate your affiliates, such as:
- Pay per click. Every time a potential customer clicks one of your affiliate’s referral links, you pay them a small commission.
- Pay per action. You pay affiliates each time they drive a sale or lead (the action is determined by you).
- Revenue share. Affiliates earn a percentage of the revenue generated from visitors they refer.
The “best” approach for you will depend on your business model and wider e-commerce marketing strategy. I’ll go into this further in the next section.
5 Key Affiliate Marketing Decisions for E-Commerce Brands to Make
Beyond deciding how you want to reward your affiliates, there are lots of decisions to make before launching your own affiliate program. I’ll discuss the main considerations here.
1. Is Affiliate Marketing Right for You?
This is the obvious starting point.
Simply put, affiliate marketing isn’t for everyone. While it can be an extremely effective channel for e-commerce brands, it relies on paying your affiliates a commission.
Clearly, if the margin on your products is relatively low, it’ll be hard to run a profitable affiliate program while still offering commissions that are appealing enough to attract high-quality affiliates.
As with everything in life, you get what you pay for with affiliate marketing. If you’re only paying a pittance in commission, don’t expect to bring in top-tier affiliates who’ll send lots of high-converting traffic your way.
2. What Sort of Customers Do You Want to Reach?
In the same way that Instagram and LinkedIn have very different audiences, different types of affiliates will attract different types of consumers.
To give a couple of obvious examples, comparison sites (like Idealo and GoCompare) are likely to appeal to bargain hunters—people looking for the best deal—whereas magazine-style sites (like Good Housekeeping and T3) are more likely to recommend products on quality and style.
Figuring out the types of people you want to bring to your site will help you define the types of affiliates you want to work with, which in turn will help you figure out the terms of your affiliate program.
3. What Goals Do You Hope to Achieve?
Presumably, the whole reason you’re considering starting an affiliate program is to boost sales.
But while revenue might be the overarching goal, there are lots of more granular e-commerce metrics to consider too, such as:
- Conversion rates. How often do you want people who land on your site via affiliate links to complete the desired action?
- Average order value. How much do you want referred shoppers to spend per transaction? Is this higher or lower than your regular AOV?
- Sales volume. How many unique sales do you hope to generate within a given period?
- Sales mix. Do you want your affiliates to push (or ignore) certain products?
Put some hard-and-fast numbers to those metrics to help you gauge the success (or failure) of your affiliate program.
4. What Are Your Competitors Doing?
Chances are, some of your competitors are already running their own affiliate programs. To attract the right caliber of affiliates, you need to understand what you’re up against.
For instance, say you and your biggest rival sell the same type of product at a similar price point. You have similar levels of brand awareness and similar conversion rates, too. However, they pay a 10 percent commission per sale and you only pay 5 percent.
Guess which program is going to be more appealing to affiliates?
In other words, you need to understand the competitive landscape before making crucial decisions about your own affiliate program.
5. Will You Fly Solo or Join an Affiliate Network?
This is another key decision, and there’s no “right” or “wrong” answer. There are pros and cons to both approaches.
Joining an affiliate network effectively grants you instant access to hundreds or thousands (or even tens of thousands) of affiliates who are chomping at the bit to promote products like yours.
The network also handles all the complicated back-end stuff like tracking sales and paying commissions.
On the downside, they don’t do it for free. As well as paying commissions to affiliates, you also pay a commission to your affiliate network. Say your affiliates earn $100,000 in commission in a year; you could conceivably end up paying a further $30,000 to the network as a kind of “finder’s fee”.
Alternatively, you could do it alone.
This gives you a lot more freedom and control, and it means you’re not beholden to paying a big chunk of cash to an affiliate network.
But to make it work, you’ll need to invest in software and build an in-house affiliate team. And you should expect to do a lot more upfront work promoting the program to potential affiliates before you start seeing any sort of return.
3 Inspiring E-Commerce Affiliate Marketing Programs
Affiliate marketing isn’t the simplest channel to get into.
It’s not like running a social campaign, where you can build an ad, target it at your audience, put a little money behind it, and wait for the traffic (and sales) to come pouring in.
As you can see from the previous section, there are a whole lot of factors to think about before launching an affiliate program—and those are just top-level considerations.
That’s a lot of decisions to make.
To help inspire your own (future) affiliate marketing efforts, I’ve taken a look at three of the top e-commerce affiliate programs and picked out some key insights from each.
1. Amazon Associates
You probably won’t be surprised to learn that Amazon runs arguably the biggest e-commerce affiliate marketing program in the world.
And it’s one of the oldest too, having debuted in 1996, back when Amazon was nothing more than an online bookseller.
Also, you probably won’t be surprised to learn that Amazon generated a fair amount of negative press back in April 2020 by slashing the affiliate commissions it paid across a bunch of product categories.
However, as with pretty much everything the company does, none of that negativity seems to have dented the success of Amazon Associates; it still has more than 900,000 affiliates on its books.
Those products can have vastly different margins. As such, Amazon’s commission rates vary widely across its multiple product categories:
Even if your range of merchandise isn’t quite as diverse as Amazon’s, you should still set different commissions across different categories. That way, affiliates will naturally gravitate toward products with higher margins.
2. eBay Partner Program
Another behemoth of the e-commerce world, eBay reaches 183 million buyers across 190 markets. At any time, it has 1.4 billion product listings, 80 percent of which are totally new items—so it’s no longer the “yard sale” it used to be.
And it’s not just home to small-time vendors; some of the world’s biggest brands—like Adidas, Nespresso, and Philips—use the platform.
As you’ll likely find out during the competitor research stage, a lot of affiliate programs aren’t particularly transparent about their terms and conditions.
Presumably, they’re worried about giving away valuable commercial information to their rivals. But all they’re really doing is putting off potential affiliates. If you’re not going to tell me how much I can earn through your affiliate program, why would I bother signing up?
In contrast, eBay is totally upfront about the commissions it pays and any caps that apply:
You should definitely do the same.
Those two examples focused on huge e-commerce marketplaces, so now it’s time to take a look at a brand with an affiliate program. Adidas, the world’s second-biggest sportswear brand, is a great example.
According to affiliate marketing agency Accelerate Partners, purchases made through the program have an average order value of $100, so it’s clearly doing something right.
Sure, if you’ve never run an affiliate program before, volume probably seems like a good thing. The more affiliates you have, the more sales you’ll drive and the more revenue you’ll earn, right?
In reality, experienced affiliate advertisers will tell you less is often more. Far better to have a small network of high-performing affiliates who send you super-relevant traffic than thousands of lower-quality affiliates who refer tons of spammy visitors.
Adidas has evidently learned this valuable lesson because it’s pretty strict about who it accepts into its affiliate program. To be approved, affiliates must:
- Be passionate about the Adidas brand and lifestyle;
- Create compelling original content and be an established part of a relevant niche;
- Love sport and fashion, and be open to trying new things;
- Have an engaged audience that skews toward the 18-24 age range; and
- Be capable of generating ROI through referred traffic and sales.
You might not have the global cachet of a huge brand like Adidas, but you shouldn’t be afraid to set tight parameters around the types of affiliates you want to work with.
Particularly when you’re just starting out in the affiliate game, you’ll find it far easier to manage a small group of affiliates who are bought into your brand and eager to grow with you.
Affiliate marketing can be a highly effective channel for e-commerce brands.
Get it right and your affiliates will do all the hard work for you. They’ll wax lyrical about your products and send you tons of highly qualified traffic, leaving you to count the profits while smoking a big cigar.
But it won’t happen overnight. Even if you join an established network, expect to put in the hours promoting your affiliate program. After all, if affiliates don’t know your program exists, they’re not going to sign up.
So it’s not easy. But if your margins allow it and you’re prepared to work on promotion, the payoff can be huge.