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Difference between affiliates and resellers

What do you choose: affiliate or reseller system?

Every once in a while I get a vendor asking: "What's the difference between affiliates and resellers"? I couldn't find a reliable internet resource to support my usual answer about it, so I thought why not make an article of my own and see how well it goes in Google. So here we are. Actually the biggest issue doesn't come from choosing between resellers and affiliates, but mostly from vendors that are questioning the channel conflict that might happen between their resellers/distributors and the affiliates. The questions are especially important in the software industry where some of the sales techniques are shared by both resellers and affiliates. The fact is that we don't actually have a conflict because there are some fundamental differences between them. Not in a particular order:
  1. Affiliates only do online sales and marketing. Resellers have a physical office, they answer phone calls from customers and they take care of invoicing & billing locally and maybe do some technical support as well. Sure, some buyers might get the product online from an affiliate and not from the reseller, but still, the reseller has a different target and this is offline local market. Actually, if you think about it, a buyer that wants to purchase online, he can anyway skip the reseller by buying directly from your site.
  2. Resellers are better for custom solutions/big volume purchases or complex packages that also include services. I can't really see or imagine an affiliate doing corporate, academic or governmental sales, or the way they could provide related add-on services in local markets. Affiliates don't train sales/technical people and therefore they might not be able to compete with the resellers who have in-depth knowledge about your products.
  3. Affiliates mean pre-selling, resellers do selling. Affiliates warm the site visitor and make him confident and willing to make the purchase on the vendor site. So basically, the vendor sells directly to the customer and makes a direct invoice to the purchaser. Resellers should do the sale on their own, they purchase bulk products from the vendor, then sell by retail to customers; the invoice they issue to customers on their account.
  4. It might be easier to get hundreds of affiliates through affiliate networks, but resellers are established companies. Resellers are a much more reliable and easy to control force as they work by the same economic principles as you (the vendor) do. Affiliates might come and go.
  5. Affiliates are more innovative and open-minded willing to try the latest marketing techniques. Acting as a one man show or as small companies, affiliates are less bureaucratic. Also, affiliate marketing is extremely competitive - they need to be up to date and more willing to take risks to keep up their revenues flowing.
  6. It's more costly to have resellers because of the overhead: you need to have contracts, make agreements, or do marketing co-ops.
Let me make a table now:
Affiliates Resellers
Targeted market
Channel Online - affiliate towards vendor's site
The end-user buys directly from the vendor.
Offline & online - physical location.
Resellers buy bulk and sell further to the end-users.
Reach Unlimited
Affiliates reach customers according to the their site exposure.
Focused Geographically
Resellers serve customers in a specific area
Sale Location Vendor site Reseller/customer location
Sale Type Standard products
Affiliates sell products that are available online.
Complex packages
Reseller sell customized packages, including add-on services
Overhead
Costs and Efforts Light
Costs and efforts are usually outsourced to affiliate networks
Heavy
The reseller system needs agreements, contract, invoicing and billing.
Business Model Implementation Easy
In the affiliates case, most tools, know-how and technologies are offered by Affiliate Networks.
Complex
Resellers develop both in-house tools and processes to sustain the reseller channel.
Strengths
Marketing Methods Innovative
The main idea is to stay ahead of the competition.
Reliable
Resellers rely more on proven techniques, under the vendor control.
Acquiring Easy to get
Affiliates have no contracts to sign, no obligation.
Long term partnerships
The relationship between producer and reseller is contract based, there are targets to reach and sustainable developments.
Value Provided Online add on value
Affiliates do the pre-selling and provide additional value to a product on their site while the merchants do the selling.
Active presence on the local markets
This could be recognized from marketing actions, PR, sales/technical support.
Number Big number
In order to achieve better results, a greater number of affiliates is necessary.
Selected partners
Vendors must resort to multiple selection methods to get only the best resellers.
What would I do if I were you? I would try to run both affiliates and resellers/distributors and find the ways to eliminate any potential channel conflict by:
  • Imposing market limitations (i.e. limit online sales in certain countries)
  • Setting up different commission/discounts levels
  • Offering different packagings
  • Providing specific and different know-how for affiliates and for resellers
Happy selling! Resources:

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