In another article that I wrote, I discussed about making money online by selling digital products. It sounded like a good way to earn income. But as with anything, there are pros and cons. In this article, I share with you What are the Advantages and Disadvantages of a Digital Product?
What Are the Advantages of a Digital Product?
When I created a digital product, I realized that one of the obvious benefits was cost savings. You would save costs because you do not need to pay a manufacturer to produce a large quantity.
Unlike the time when I was doing private label business to sell on Amazon, one of the requirements was to have at least 1,000 of the items in stock. This costs quite a bit of money.
With a digital product, I do not need to stock any inventory. Or pay for warehouse costs. And with no inventory or warehousing, there is no loss of items during any disasters such as flood, fire, or earthquake.
Save Shipping Costs
With a physical product, you will need to ship orders to your customers. This will require a shipping or fulfillment company to do that for you.
Again, this is additional costs. With a digital product, you simply send your customers a link to download the item, or send it to them direct from your server.
As the creator of the digital product, it is all within your control. You maintain the quality of the product to the standards you aspire to. You get 100% of the ownership and profit.
Scale Your Sales
It is also easy to scale the sales for a digital product. Again, with no reliance on another party for production, you can create a product once, sell and deliver it to missions without any worry about logistics or fulfillment.
What Are the Disadvantages of a Digital Product?
A couple of years ago, during a chat with another online entrepreneur, I asked why so many online business people are selling online courses now. In the past, they were selling eBooks. His answer was that eBook sales have dropped.
So, this brings me to one of the disadvantages of a digital product – Competition. There are plenty businesses out there competing with yours.
Many people are either already selling that digital product or have just started selling it. And this competition can make it quite an uphill climb before you start seeing some profits.
People Still Need To Touch a Product
Another disadvantage is that people are still very much tactile in behavior. They like to go to a store, find the product, touch it and feel it before they buy it.
This is especially true for products that have higher involvement; such as high ticket items. With the latter, people prefer to buy at the store.
Digital products reside in electronic equipment. For example, an eBook you are selling would be stored in a server. Any technical issue, for example server downtime, would be detrimental.
When a website is down, it can result in loss of sales and a lot of unhappy customers. For example, back in 2013, Amazon was down for 40 minutes. This cost them 5 million dollars. To Amazon, this may not be much. But to small business owners like you and me, it can mean the year’s losses.
Loss in Brand Equity
More importantly, the unhappy customers can mean a loss in brand reputation. Brand reputation is an intangible business asset that can be very difficult to recover when it is lost.
So, it is very important to get a good and reliable hosting service.
What are the Advantages and Disadvantages of a Digital Product? – Passive Online Revenue Final Word
As you can see, there are advantages and disadvantages to selling a digital product. But does this mean it is not something you should consider? Of course not.
Why do you think there are so many people doing this type of online business? Look at Etsy. Some people are creating digital printables, and selling them there.
More importantly, you have to decide whether selling digital products is your cup of tea?
It is still a product, and you still need to spend time and effort to create it before you can sell it. And if you are selling a number of digital products, that will require a lot of time and effort from you.
For me, I prefer business models that are as close to creating passive income as possible. And that is why, after doing many types of online businesses, I focus more on affiliate marketing.
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If you have ANY questions about What are the Advantages and Disadvantages of a Digital Product?, ANY at all, please submit your questions as comments below. I will be happy to help you out.
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Thank you for reading this.
Best wishes to All!