Digital Versus Physical Products – What Should You Sell?
Digital Versus Physical Products – What Should You Sell?
Are you considering starting an online business to sell your products? Do you already have an online presence and are tired of not making any money? Or maybe you are sick of writing blog post after post only to make pocket change from advertising revenue? Perhaps you are making a great income from blogging, have a huge following and you are ready to increase your profits? It is time for you to make the decision of selling digital versus physical products.
Of course, some products just simply can not be provided in a digital format so your decision is made for you! If you have a new product that you want to start selling and shipping, first and foremost you need to determine cost versus profit. Can you manufacture or purchase the items at a wholesale cost so you can turn a decent profit? If the answer is no, you will need to reconsider your idea and go back to the drawing board. One rule of thumb is that you should be able to manufacture your tangible good for 25% of the full retail price. For example, if you are selling a printed book that you paid $1 to manufacture, you should charge $4 for the retail price. This gives you wiggle room to also sell your book at a wholesale cost of 50% to big distributors. If you are unable to squeeze out a decent profit margin selling physical products may not be the best route.
How about selling digital products? Well, no surprises here there, are very minimal upfront costs. You can create a digital product using your computer many times for free (except for your time). Therefore, your profit margins right from the start can be a much higher percentage rate. For example, when I created some Glitter and Stripes Background Images using graphic software on my computer, it costs me nothing to reproduce the item over and over and over again. If we want to get to the nitty-gritty in this example, the software cost me $200 several years ago which I have already made my money back and then some hundreds of thousands more from other digital products I have sold. Therefore, I can say with confidence it cost me only my time to create the digital product. I priced it at $3.00 for resale. I do have to pay web hosting fees, cloud storage services, and credit card processing fees but that cost gets divided among many digital products for sale. The 3% for credit card fees is a definite so that brings the profit margin down $0.09 + $0.30 per transaction. So I am down to $2.91 – hosting fees + cloud storage fees + marketing fees which brings me to around $2.30 as a ballpark figure.
You can host your blog for free if you wanted to and use blauthors to deliver your digital goods (you earn 70% on all sales). Therefore your total profit margin would be $2.10 on a $3.00 product = 70% profit margin! All with no upfront costs to you.
I could go on and on with specific examples of how digital products have a large profit margin with minimal to no upfront costs. Of course, some products are more labor-intensive than others. For example, an online course would most likely take much more working hours to create than an ebook, printables, clip art, photograph pack or digital music. You would need to factor in your time to determine the profitability of the product.
If you want to start to increase your profit as a blogger, consider adding new products to your income stream keeping in mind cost versus profit margins when you decide what products to create. Want to write an ebook? Download our the free ultimate guide on how to write an ebook in 30 days.
