The Birth Of New Direct Selling Companies Thru E-commerce

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The original E-commerce big bang happened in the 1990’s.

This was the explosion that spit out a niche brand for everything from pet supplies to garden supplies. Side note, a good friend actually invested in garden.com back then. Ouch.

Nothing has been the same since.

Fast forward to today and we have new titans of retail like Amazon, Etsy, eBay, and Alibaba. With massive budgets, reach, and a willingness to lose millions of dollars to simply put you out of business, the independent E-commerce executive is left wondering how to compete.

The answer is not found in the “what to do about the Amazon effect” seminars.

To compete, we must change the old E-commerce business models to incorporate the emerging Direct Selling / Affiliate model, called Affiliate Plus.

Here’s why the hybrid model of Direct Selling and Standard Affiliate model is winning

Community

The direct selling industry gives us the roadmap to building strong, dedicated communities of entrepreneurs and influences.

People intrinsically want to be a part of something that is bigger than themselves. Give it to them with your brand and leadership story. Help them connect with other affiliates to grow and prosper in your community. Provide tools and training to help get them there.

Stand for something

This gives you the edge on bigger brands who don’t have the ability to truly stand for something, especially niche causes.

What do you stand for?

Find that passion and weave it into your products and company story.

Your customers and affiliates will connect emotionally with your products, creating a long-term relationship with the brand.

Invest in software

The bad news is it’s going to cost you more money to run an E-commerce brand as a Direct Selling/Affiliate hybrid, know as Affiliate Plus.

You have to invest in Affiliate tools and Direct Selling programs and that’s going to take software.

The good news is it will only be a small fraction of the cost if you had tried to launch a pure Direct Selling brand. Make the many small investments needed to launch your affiliate plus program, it will pay off.

Compensation plan

You need a specialized compensation plan that will provide all the rewards to the affiliates, for the activities we want to drive, such as sales.

The first thing you need to know is what your product multiple is. To find this out, take the retail price of your product, and divide by the landed cost of your product. This margin or multiple drives the richness and depth of your compensation plan.

Once you know your margins, then decide what level of wholesale commission you will pay. If an affiliate sells $100, will they get a $20 wholesale commission? $25? $35? It’s important to know what your competitors are offering before you decide what’s right for your brand.

When that’s done, decide how many level bonuses you’ll pay commissions on, and how much.

Level bonuses are used to reward your affiliates for introducing new affiliates to your brand. The deeper the levels you pay in commission, the more excited your affiliates will be to recruit and train.

Final Thoughts

The new Affiliate Plus E-commerce model is going to continue to grow rapidly as new startups lead the way with their exponential growth, while traditional, pure play E-commerce companies struggle.

Being a hybrid affiliate is most likely the best way to ensure you can constantly make an online income and now is the perfect time to incorporate them into your strategy.

Brian Palmer
Krato, CEO