a business relationship between two entities where one owns a minority stake in the other company's stock or where two or more companies are subsidiaries to one larger parent company. An affiliate in retail is an individual, group, or firm that provides a service for an organization by that organization or agrees to sell another company's products for a fee.
How affiliate Works
In the corporate world, you can determine an affiliate by the degree of ownership one individual or company holds in another organization, usually a minority stake or a holding of less than 50% shares in the business. However, when two or more firms share a similar parent company, the subordinate firms can call themselves affiliates. Affiliate is also present in the retail sector, especially in e-commerce, where an individual or firm sells other merchants' or companies' products for a commission.
In other words, you can be an affiliate of a company when you offer its products on your website for people to purchase, and you get a commission for each verified purchase. While customers can make payments for the goods on your website, the products are ordered from the manufacturer's website and not from your website. This business relationship is primarily known as affiliate marketing.
When you affiliate with a company, you're usually not part of that company; you're more like an independent contractor. Although the company may affiliate with your establishment through ownership, this ownership doesn't mean total control. Many big companies and organizations offer affiliate programs, including Amazon and eBay.
Real-World Example of Affiliate
When a larger company owns less than 50% of your firm's shares, you and the company are affiliates. For example, in 2014, A&E Networks, a broadcasting company jointly owned by Hearst Corporation and The Walt Disney Company, invested $250 million in Vice Media Group LLC, a Canadian-American digital media and broadcasting company, giving them an ownership stake of 10%. The Walt Disney Company also owns a majority stake (80%) in ESPN, an American multinational cable sports channel, while Hearst Corporation owns the remaining 20% of the cable network's shares. In this scenario, Vice Media and A&E Networks are affiliate companies because the latter owns less than 50% stake in the former's ownership; ESPN and A&E Networks are also affiliated companies as they share the same parent companies.
When you partner with a company to sell their products for a commission, you're an affiliate of that company. For example, Wirecutter, founded in 2011 by Brian Lam, is an online product review platform that focuses on writing detailed reviews on different consumer products and recommends one or two best products in the category. These items carry an affiliate link that points to a product on Amazon, and when you buy any of these items using the link, Wirecutter gets a commission from Amazon. In this instance, Wirecutter is an Amazon affiliate since it doesn't own Wirecutter.
Affiliate Vs. Subsidiary
Affiliate is sometimes mistaken for subsidiary because both terms have to do with two or more organizations' official attachment. But the two terms are different as an affiliate has to do with stakes less than 50%, while a subsidiary is when a parent company owns more than 50% of a company's stocks and influences the subordinate firm's decisions and operations to an extent.