Digital products can’t be held, tasted, or touched, but everyone consumes them—from music to videos, ebooks to online courses, and more.
Due to their popularity and ease of distribution, many entrepreneurs build entire businesses around these intangible goods or launch digital product lines to complement the physical products or services they offer.
What makes them especially appealing, however, is that digital products can be created once and sold repeatedly to different customers without having to replenish your inventory, making them ideal for creatives, artists, educators, and freelancers looking for new income streams that require less effort to maintain.
What are digital products?
A digital product is an intangible asset or piece of media that can be sold and distributed repeatedly online without the need to replenish inventory. These products often come in the form of downloadable or streamable files, such as MP3s, PDFs, videos, plug-ins, and templates.
Digital products have many advantages that make them uniquely attractive to sell:
- Low overhead costs: You don’t have to hold inventory or incur any shipping costs.
- Extremely high-profit margins: There’s no recurring cost of goods, so you retain the majority of your sales in profits.
- Potential to automate: Orders can be delivered instantly, letting you be relatively hands-off with fulfillment.
- Flexible products: You can offer products for free to build your email list, monthly paid subscriptions for access to exclusive digital content, or licenses to use your digital products. You have a lot of options as to how you incorporate digital products into your business.
But digital products also come with specific challenges you’ll need to watch out for:
- You’re competing with free content: With digital goods, consumers can probably find free alternatives to what you’re selling. You’ll have to think carefully about the niche you target, offer premium value with your products, and build your brand in order to compete.
- Susceptible to piracy/theft: You need to take precautions and reduce these risks by employing the right tools to protect your products.
- Some restrictions on how you sell: For example, you must sell physical products through the Facebook and Instagram sales channels, according to their commerce policy.
Despite fluctuations in the economy, eCommerce continues to flourish – and with technological advances expanding the use of online communities and bringing digital media consumption to the mainstream, it’s no wonder that digital products are still on the rise.
Digital products have become so pervasive that nearly all of the top professional bloggers, speakers, and other influential public figures have taken advantage of the trend, releasing sought-after content like PDF guides, eBooks, podcasts, and videos.
Additionally, many independent creators have built entire online stores based around digital products, joining a booming economy of people enjoying greater personal freedom and passive income. So what are the factors and benefits that make these types of products so appealing?
We’ve compiled the following list to illustrate some of the top reasons why selling digital products outweighs physical products (figuratively speaking ).
1. Lower overhead costs
Generally speaking, running a digital product store requires far less overhead than selling physical products – no physical storage, manufacturing, packing, or shipping and handling costs, for example. Compared to brick and mortar stores, you can also skip the rent, electricity, staff, and higher burn rates, too! With a digital product store, many things can be fully automated, from customer accounts and communications to the digital delivery of your products.
2. The internet is a large market
Running any kind of online business gives you the ability to reach a global audience – at least an audience with reliable internet access! But while online physical product stores may have shipping limitations, and physical stores are certainly not easily accessible to the entire planet, digital product stores allow you to do business anywhere in the world, with very few limitations.
Online, it’s easy to find niche communities that will support all kinds of different products, with a vast array of options and needs to fill. You don’t have to worry about the legality and logistics of using certain physical materials, as digital products are, well, digital – and universal in their format(s).
3. Lower barriers to entry
If you have any creative skills – in writing, design, music, video, education, or other fields – there is nothing stopping you from creating and selling digital products. On the whole, they are usually quicker and simpler to make, depending on the complexity of the product, and there are plenty of tools and resources to help you get started. Ultimately, as long as you have a quality product, a PayPal or Stripe account, and either a digital product marketplace account or your own website, you can get up and running with relatively low risk and minimal financial investment.
Depending on your product type, you can also create digital products completely independently without relying on others, which allows you more flexibility to do things exactly how you want and at your own pace. You get as much creative control as you like, and you’re not at the mercy of staff, management teams, suppliers, warehouses, and shipping carriers.
Alternatively, if you have specialized or niche experience in a traditionally offline industry or field of work, it can absolutely be transferred over to the digital world and sold as a service through your own website. Think consulting for any industry, accounting services, real estate advice, bespoke design work, copywriting, and copy editing – you can sell your proficiency as a leader or an expert in your field as a digital product.
4. Profit margins are irresistible
One of the biggest benefits of digital products versus physical products is profit. Without the costs of physical materials and other factors associated with the creation of physical products, the profit margins for digital products can be quite high. And just think – even if you run an online store that sold physical products, you’d still need a website with eCommerce tools, as well as a way to facilitate payments and customer accounts. All of this would be in addition to managing the physical side of your business, whereas selling digital products consolidates all of your business activities into the digital realm, meaning fewer costs and more profit!
5. Digital products last forever
Unlike physical products, digital products are not subject to wear, tear, or deterioration; they may become less relevant over time as technology changes, but they can be updated easily, and they last forever. Digital products can be used indefinitely, remaining in the same condition as they were the day of purchase.
6. Never out of stock
Due to the nature of digital products, you can sell as many copies (read: licenses) as you like, with unlimited duplication and shelf life. Some digital products sell for years and years, bringing in consistent passive income and significant returns on time, energy, and financial investments. Your customers never have to worry about items being out of stock, and except for any limitation you decide to impose on the number of copies sold, the product is always immediately available for purchase.
In terms of benefits over physical products, it’s also easy to release product updates, revisions, or new iterations of your product to customers – and needless to say, recalls are entirely irrelevant.
7. Easier to manage, sell, and deliver
Managing your digital products is far easier than dealing with physical stock, requiring only digital storage and a content management system to keep things organized. There is far less to do in terms of day-to-day management because you’re not replenishing physical goods, and a digital product store can essentially be created and run using just your laptop – or even just your phone!
Selling and delivering digital products also tends to be much more streamlined than selling physical products. Customers can quickly and easily experience your digital product demo, making the purchase process much simpler and more straightforward. The online purchase process is not only the new cultural standard – it’s also the fastest.
Nobody needs to travel anywhere to get your products, nor do they have to wait days or weeks for delivery. Files are typically digitally distributed or available for download immediately after purchase, which means that customers can make use of your products right away! Transactions such as refunds are also easier to manage, as there’s no extra packing, shipping, or handling required.
8. Direct lines of communication
Digital products offer unique ways to communicate directly with your customers and even build entire communities around your products. It’s enticing, easy, and effective for customers to sign up for a mailing list or newsletter in exchange for immediate access to digital downloads (something that can’t be achieved with physical products) and if you are selling products like training courses (for example), you can utilize social media and/or create an open forum for customers to ask questions or exclusive private channels of communication (like Slack), giving them direct access to you – a personal touch that creates extra value for them and sets a foundation for future releases.
9. It’s the way of the future
Modern digital life is a result of technological progress and permanent cultural changes – and there’s no going back! Considering the methods that people are getting used to (like immediately available media via downloads and streaming, etc.), digital products cater specifically to this new culture and provide people with the education, entertainment, tools, and resources they need to enhance their lives in one way or another. It is unlikely that these types of products will go out of fashion anytime soon, so it’s still a great time to get in on the action.
10. Personal freedom and lifestyle
If you want to run your own business, be location independent, have the freedom to be creative, and produce your own products, then selling digital products may be for you! With all of these benefits, as well as the potential for substantial ongoing passive or semi-passive income, digital products can be the ticket to an entirely new lifestyle that is free from the costs and restrictions of dealing with physical products. You can do it from almost anywhere! And with billions of dollars in revenue, there are plenty of opportunities to create something valuable while generating income at the same time.
What benefits have you enjoyed from selling digital products? Is there anything we missed here? Let us know in the comments!