8 Comments

Dropshipping: The Future For Affiliates?

Jun 8, 2005
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Remember Nexchange? They folded back in 2001 after picking up quite a bit of momentum among catalog companies and a few e-retailers. When they closed down, most marketers I spoke to were disappointed even though they never really saw much from Nexchange’s distribution partners. They believed in the long-term vision of what Nexchange believed in… specifically, they saw themselves with sales channel partners who owned and managed over customer relationships and who they, OEM’s (original equipment manufacturers), simply drop shipped orders to.

Why didn’t Nexchange, or the model in general, take hold? In part because of the early successes of a far more simplistic and, hence, successful model called affiliate marketing. Yes, you hear me right I’m making an entry on the success of affiliate marketing.

I recently stumbled upon an article discussing MyOnlyCatalog – another .bomb venture that ultimately imploded. The article starts:


MyOnlyCatalog.com said today it is preparing to launch a Web partnering program that takes affiliate marketing to the next level by allowing a wide diversity of special-interest affiliates to sell products directly to their visitors rather than clicking through referrals to merchant sites.

Here’s where it got interesting… to me at least… as it relates to the state of the market today.

“Affiliate programs are well established in the dot-com industry and, unfortunately, so are their deficiencies,” said Philip Berlin, CEO at MyOnlyCatalog.com. “The major flaw is that affiliates often give up customers and future revenues to their merchant referrals in exchange for a one-time commission.”

MyOnlyCatalog.com proposes to protect its merchant partners’ investment in building site traffic by opening its catalog inventory to affiliates who may select products appropriate to their site identity, display downloaded photographs with pricing and take orders, which are fulfilled through the facilities of MyOnlyCatalog.com and its catalog vendor partners.

I look around and I see the ultra-successful affiliates diversifying… moving into shopping comparison, user reviews, forums. Each strategy is an attempt at keeping closer with the end user/shopper. Adding fuel to the fire, we live in a world where Google and other search engines are doing battle with affiliates – pushing them out of paid search a bit and seriously quashing SEO efforts. It seems to me that the future of affiliate marketing may very well be on its way back to the “storefronts” of yesteryear. Was this model simply too early, too fast? In the end is it a more valuable model for all parties involved?

Filed under: Affiliate Marketing
  • TrustNo1

    Not really seeing anything new here. People are already doing dropshipping, they even have their own forums like affiliates have their own forums. Also some affiliates also do dropsshipping already. So is it the future for affiliates? For some, so is ebay power selling, so is getting a job again etc. But dropshipping isn't affiliate marketing and most successful affiliates don't want to mess with it.

  • http://www.molanderassoc.com Jeff Molander

    Hi, Trust…

    I'm a little confused by your comments. I'm simply suggesting that for successful affiliates (defined as those who have moved beyond handing out coupons and shuttling traffic – to form some kind of bond with customers – to doing things like newsletters, cash back, forums, etc.) might explore actually becoming a retailer themselves… pushing what OEMs offer. Closed loop transaction on the affiliate/retailer site.

    I'm clear that drop shipping isn't affiliate marketing. What I'm not clear on is why you think that affiliates won't have interest in it. Why wouldn't it be a natural extension of the move toward bonding with customers? Unless you disagree with my premise… that in order to be a successful affiliate, you need to be bonding with consumers.

    If an affiliate strengthens the bond with the customer (by selling to them) and it doesn't have to muck around with managing inventory, order processing, etc. why wouldn't they do it?

    Thanks for any further thoughts you might share.

  • http://NoCookie TrustNo1

    "What I'm not clear on is why you think that affiliates won't have interest in it."

    It's what i see affiliates post when drop shipping gets brought up. Some do have an interest and might try it out but most seem to have no interest in it at all. The ones that do seem to be interested, are usually the ones that aren't doing so well in affiliate marketing. Along the lines of "Affiliate marketing isn't working out for me, let me try drop shipping" Personally, i just don't have any interest in it. I have a shopping site dealing mainly with promotions along with a newsletter and a few other ideas that i like to focus on.

    "Unless you disagree with my premise…

    that in order to be a successful affiliate, you need to be bonding with consumers."

    Bonding in the sense that you need to give your site visitors what they want. And if you keep them satisfied, they'll keep coming back for more. And what do they want? They want different things. Good merchants and affiliates know that. There are some people that will only shop thru the clearance section, will only shop at a sale, will only shop if they have a coupon. Some want nothing more than a working coupon to the merchants they shop with. Some like forums so they can interact with other shoppers. Some want rebates. Some want product comparisons. Some want a little bit of everything. And there are successful affiliates out there doing all of that.

    So i wouldn't call drop shipping the future for affiliates, just something some might try along with what they're already doing.

  • http://www.affiliatetip.com/blog Shawn Collins

    Were there different types of affiliates/partners at Nexchange?

    I was an affiliate with them, and the only difference I recall for them vs. Be Free, CJ, LinkShare, etc. was that they had a wizard that would enable the affiliate to build code around the merchants, so that the resulting pages (hosted on Nexchange) were in the look and feel of the affiliate's site.

    And they were pretty hands on in reaching out to affiliates to help them merchandise.

    According to an old version of their site on archive.org, "Founded in 1998, Nexchange Corporation is the Creator of Syndicated E-Commerce. Nexchange's proprietary technology seamlessly integrates retailers'stores into content websites, enabling consumers to buy from the retailers they trust without leaving the websites they love.

    Syndicated E-commerce is the ultimate e-commerce solution for content websites, because it enables them to add e-commerce without losing their visitors, or having to take on the responsibilities of home-grown retail."

  • http://revenews.com Wayne Porter

    Jeff I think you are saying if you are a successful affiliate why not take the next step and take more of the margin for yourself and forge your own brand so you are not so exposed to the perils of affiliate marketing?

    e.g. revenue concentraion risk

    tracking inconsistency

    payment obstacles

    etc, etc.

    I think for most successful affiliate marketers (small shops) their time is absorbed in marketing with little resources to spare to do drop shipping.

    -wayne

  • http://www.webmasterwear.com Jason Carr

    When I started looking into online opportunities, drop-shipping was what first caught my interest.

    Then I found that, as Mr. Porter points out, I simply did not have the time to dedicate to the building and operation of a drop-shipping e-commerce site.

    So, I ended up going with affiliate marketing. That's been enjoyable, but not as lucrative as I would like.

    For that reason I would still rather sell products directly than simply market them. I would certainly be interested in a system like Nexchange. In fact, I have looked into another system much like it (www.wholesalemarketer.com).

    There were a few reasons I didn't sign up with them:

    1. Too expensive to start out. (I like the idea of drop-shipping because you avoid a lot of normal over-head)

    2. Everyone who signs up will be selling the same stuff, all of which is pretty generic and uninspiring merchandise.

    Here's where I'm going with this: A system that allows me to sell branded or somehow personalized merchandise would be infinitely better than one that simply drop-ships generic 'stuff' that no-one really wants.

    I recently found such a solution, and it almost immediately stole me away from affiliate marketing. My old sites are still around, but don't get much attention any more. Instead, I sell t-shirts. I make up the designs, upload the graphics, organize my store, and market it (putting my affiliate experience to good use). CafePress.com does the rest (checkout, production, shipping, etc.).

    *I use CafePress, but am not employed by them. I would recommend the system to anyone, but would say that it's probably not for everyone.*

    IMO, systems like that could steal a lot of affiliates away from their current activities. If more companies started offering merchandise that could be personalized and sold directly by affiliates, I think it would really change things.

  • http://www.birthdayexpress.com Jeff Nienaber

    I'm shocked. My perception of affiliates that are always pushing the boundaries of online marketing has been crushed. Haven't affiliates been the ones to pave the way in email, SEO & PPC? Haven't affiliates been the ones that have seen past the initial time/cost investment to the long-term ROI? Aren't affiliates the pioneers of this ecommerce wild wild west?

  • http://www.gmdstudios.com Brian Clark

    Jeff — that's why I started inviting drop shippers to participate in ReveNews about 16 months ago. I agree with Wayne: from my business perspective, why not keep more margin and more of the relationship with the consumer? It tackles my old problem with some affiliate managers being interested only in "new customers" as what an affiliate program is about.

    What happened to all those affiliates out there that used to argue they were commissioned sales professionals? Why not do 5% and triple your margins?

    But I also agree with the branded merchandise — that's what I started calling "micro-manufacturing" here in ReveNews for lack of any better term in broad use. I just came back from a film festival where I talked with 8 different filmmakers who are doing their own DVD pressing through places like CustomFlix and Discmakers, which can also fall into that same bucket.

    I've never thought of myself as "just an affiliate," so to me the more options there are, the more ways I can make media profitable.