Digital Vs. Physical Products – The Pros and Cons

Ecommerce is booming. By the end of this year, ecommerce is expected to generate more than $5.5 trillion globally. However, it’s not just physical products that ecommerce businesses are selling; they’ve also shifted their focus to digital products. 

Richard Lazzera defined digital products as, “intangible assets or content that are sold and/or distributed online.” They can be products such as ebooks, courses, games, videos, services, and digital assets like NFTs, that thousands of ecommerce stores are building their business around. 

But why are so many businesses going down the digital product sales path? 

The reality is that digital products are becoming incredibly profitable. For example, this year the global software industry is projected to hit $608 billion, by 2026 the e-learning market is forecasted to be valued at $374.3 billion, and ebook publishing revenue is expected to reach $6.95 billion by 2025.

No matter what form or method, digital products are almost always profitable, which is why so many ecommerce businesses are making the move to selling digital products full-time. But profit isn’t their only incentive. Digital products are also far easier to produce than physical products, require simpler distribution methods, and generally cost less across the board.  

But before you get too excited, let’s take a further look at what can be classified as a digital product, as well as the pros and cons of both physical and digital products, so you can make an informed decision as to whether they’re worth adding to your ecommerce offerings.  

What Digital Products Are Available?

As mentioned, digital products are any products available in a digital and intangible format. As a result, digital products can only be downloaded, streamed, or accessed on electronic devices, such as computers, smartphones, and tablets, making their primary interaction point through personal technology. 

However, what makes digital products so desirable is their versatility. Since they can be accessed on almost any technological device and distributed worldwide without issue. Digital products are available in many different forms and can be bought, sold, and used for various reasons, such as leisure, business, and education.

Let’s take a look at six of the more popular digital product options right now. 

Ebooks, Workbooks, and Guidebooks

Ebooks and guidebooks are some of the more popular digital products out there. They are simple to produce – due to requiring mostly written text and inexpensive images to compose – incredibly easy to distribute, and are also hugely versatile. 

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Their adaptable nature is why so many consumers love them; they can be accessed on multiple technological devices, such as e-readers, computers, tablets, and smartphones, and they are significantly lower in development cost compared to a physical book. 

As a business or a thought leader in your industry, there are a few different kinds of ebooks you could sell online:

• Workbooks
• PDF Guides
• Manuals 
• Textbooks
• Budgets 
• Case Studies 
• Sheet Music 
• Fiction and Non-fiction Books 

Software 

Because modern humans use computers and technology every day and the use of apps has become a norm of day-to-day life, the software industry is booming. Consequently, software is not only one of the more valuable and popular digital products around but is also incredibly profitable.

No matter how big or small your ecommerce business might be, there are plenty of options when it comes to creating and selling software products, such as: 

• Mobile apps 
• Video Games 
• Windows / Mac apps 
• Plugins and Extensions 
• Web-based apps (SaaS)
• Website Themes 
• Code 

Online Courses 

Online courses are extremely popular right now. So much so that e-learning is a distinct industry all on its own. As a result, there is plenty of innovation going on in the space, with traditional educational institutions starting to explore new methods to make their courses available online. 

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When it comes to creating your own online courses, there are many ways you can go about it to best suit your business and industry. For example, some ecommerce stores have chosen to make it their sole business.  However, for others, educational tools are being sold as a complementary product, such as a training guide, to assist with the use of a physical product.

Here are some examples of online classes you may wish to distribute to your customer base: 

• Educational Resources
• Bootcamps
• Social Media Courses 
• Video Courses
• Training Guides 

Video Content 

The internet is filled with video content for a reason; it’s an engaging and effective format for delivering information because of the speed at which it can be accessed. Everyone loves video, and in many cases, are happy to pay for it. 

Whether you’re providing educational video lessons, or simply producing them for entertainment, there are plenty of options when it comes to selling videos online:

• Stock Footage
• Drone Footage 
• Special Effects Templates
• Product or Video Game Reviews 
• Video Courses / Training 
• Animations 
• Advertisements 

Services 

One of the best ways to make money online is by selling your services. Just like having an online store to sell any other kind of product, you can also have one to sell your services, no matter what industry you’re in. 

Some examples of services that you can sell online include:

• Consulting 
• Graphic and Logo Design 
• Branding 
• Web Services 
• Video Editing 
• Data Entry 
• Social Media Services 
• Brand Audits 
• Workout and Nutrition Plans 

NFTs

Chances are you’ve heard about the internet sensation of non-fungible tokens (NFTs); non-interchangeable units of data that are stored on a blockchain and can be traded and sold. However, NFTs aren’t just for artists and digital art enthusiasts. Plenty of ecommerce businesses are selling these digital assets, which is now a $41 billion market. 

As the trend is still relatively new and evolving, ecommerce businesses are just starting to scratch the surface of all the possible ways to use and sell them. Here are some methods you may consider for using and creating NFTs, and where to sell them.

• As pre-launch products 
• Branded digital art collection
• As a reward for your loyalty program 
• Pair NFTs with your physical products 

When it comes to selling NFTs, many brands and businesses use third-party marketplaces, such as OpenSea and Axie Marketplace. However, Shopify recently launched a beta program giving merchants the chance to sell NFTs through its storefronts, which has the potential to be a real game-changer. 

These are just six different examples of digital products you may want to consider selling online, however, in reality, the list could go on forever. 

Physical Products Versus Digital Products – Which Is Best for Your Business?

There are plenty of options when it comes to producing and creating digital products. However, before diving right in, you must establish whether they are a good fit for your business.

To help you figure that out, let’s run through some of the advantages and disadvantages of both physical and digital products to help you make the right decision.

Physical Products 

Pros: 

Higher Perceived Value: Because physical products are tangible and real, they are often associated with a higher perceived value. They are also considered higher in value because a customer can resell the item to others far more easily than reselling a digital product – which can often be forbidden under the terms and conditions of the purchase. 

Simple to Demonstrate: It’s incredibly easy to demonstrate a physical product to a customer due to its tangible nature. Depending on the product, all you usually need are some pictures and a brief product description to explain its purpose. 

Direct Transactions: Because you can easily demonstrate a physical product, it can just as easily be sold. Unless the product is faulty or damaged, there is usually no follow-up required once the purchase has been made, making the overall sale process quick and efficient. 

Unique in Quality: Physical products can’t be duplicated as easily, especially if you’re designing and creating your own products. As a result, people will want to buy your products directly from you as they won’t be able to find them anywhere else. Whereas digital products can be easily duplicated, making them harder to sell. 

Cons: 

Shipping and Handling Fees: One of the biggest cons of selling physical products is shipping, which entails packaging costs, postage costs, handling fees, and time. 

Overhead Costs: Physical products have an upfront manufacturing cost, and demand and require storage and staff to manage and track them, which can be costly. 

Time Consuming: The overall sales process is much slower when selling physical products online. Much more time is needed compared to digital products, due to ordering and receiving, billing, and managing your inventory. 

Scaling is More Difficult: In general, it is much harder and slower to scale a physical product store over a digital product because they require more money, time, and resources. 

Digital Products 

Pros: 

No Shipping Process or Storage Costs: Because a digital product is purely intangible, it doesn’t need to be packed or shipped. Therefore, you’re eliminating the entire shipping process, including warehouse costs, which will save you a huge deal of time, resources, and of course money.  

No Inventory Hassles: Another great advantage of selling digital products over physical products is that you won’t need to worry about inventory. Additionally, your product will never sell out! Not only will this save you manpower, which is always costly, but it saves you invaluable time, especially for startups who often work almost 24/7. 

High-Profit Margins: Usually, when you’re creating a digital product, you’re only creating one version that can be purchased an unlimited number of times – except in the case of NFTs. As a result, they are generally cheaper to produce than physical products, making for a healthy profit margin. 

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Scaling is Easier: One of the greatest benefits of selling digital products is that they are easy to scale. Even if your ecommerce business is based in America, once it’s uploaded online and readily available, people in most other countries will be able to purchase your digital product without any problems. 

Cons: 

Piracy: Just like digital products are easy to produce, they are also easy to replicate, sometimes without your permission. Piracy, copyright issues, and digital theft can be a huge problem for smaller businesses, where people illegally download your products from another website without paying you for them. 

Harder to Demonstrate: Because a digital product is intangible, it can be harder to both demonstrate and sell online. Demonstrating the value of your digital product to your target market will usually take a great deal more time and effort compared to a physical product, which can be costly. 

Competition: One of the biggest challenges to selling digital products is that there is a lot more competition. This means that to have successful turnover, as the product you’re selling is likely already out there, you have to work harder at things like SEO to reach your audience. 

Few Repeat Buyers: Unless your digital product is a part of a subscription service or digital membership, you won’t have repeat buyers. Once a customer purchases a digital product, they have no need to re-buy it as it’s nonperishable. 

Does Your Business Focus on the Physical or Digital Product Route?

If you’re starting an ecommerce store for the first time or are already an established online business, you might still be questioning whether to sell digital or physical products. 

Digital products can be incredibly profitable due to their low entry barriers and simple distribution. But on the negative side, digital products are easily reproduced and replicated, and because they are intangible, can be harder to sell to your audience as you try and pitch their value. 

Whereas, due to their material nature, physical products are generally easier to sell and also hold a higher perceived value. Contrastingly, physical products can be costly when it comes to manufacturing and shipping and are often harder to scale and reach wider markets. 

However, deciding between digital and physical products doesn’t have to be black and white. Why not choose both! For example, perhaps a physical product you’re selling could do with a video instruction guide filled with insider tips sold alongside it. Or maybe you’re selling a niche product that also has an audience looking for online courses in the same genre of interest.

Ultimately, the best way to make your decision is to look at your product strategies and nail down as a team whether it is physical or digital products you’re trying to sell and exactly why. But also, more importantly, what your audience is willing to invest in when it comes to your business. 

FAQs About Digital vs. Physical Products

1. What is the difference between a physical and digital product? 

A physical product is any touchable and tangible product, such as books, furniture, and clothing. Whereas a digital product is completely intangible and can only be accessed through a technological device or platform, such as a smartphone, desktop, or tablet. 

2. What’s best to sell online, physical or digital products? 

The answer isn’t straightforward, as you would have read. Both physical and digital products have their pros and cons, and both have their place in ecommerce. The best way to make an informed decision is to review your product strategy and assess what it is your target market is after. 

3. Is it cheaper to produce a digital product than a physical product? 

Generally yes, digital products are cheaper to produce as you only need to make one digital product which can then be sold an infinite number of times (unless you’re dealing with NFTs). 

4. What are more profitable, physical or digital products? 

Because digital products require low investment, they can be in turn more profitable. Again, it depends on the product you are selling. 

5. What is the main advantage of selling digital products over physical products? 

There are many advantages to selling digital products over physical products, however, one of the more appealing is the potential high-profit margin due to them being inexpensive to produce. 

The Next Step: Create Your Own Digital Product

Once you’ve decided on the type of digital product you want to create, whether it’s a bonus digital item to accompany a physical product, or your business is wanting to sell solely digital products, you’re going to need a plan in place. 

Here’s how you can get started: 

Step One: Brainstorm your ideas, making sure you’re keeping in check with your current product strategy and overall business objectives. When exploring ideas, it could be helpful to ask questions like: are these digital products something your target audience would want and be willing to pay for? And how much time and effort will this product take to produce?

Step Two: Research what’s already out there to validate your idea and decide if there is room in the market for your business to enter. When conducting this research, take note of what other businesses are charging for similar digital products, and if any trends are emerging.  

Step Three: Start creating and selling! If you’re starting from scratch, you’ll want to build your ecommerce site first, and you may also want to consider hiring a professional to help develop your specific digital product. However, if you’re simply adding digital products as an addition to your store, now is the time to get them up on your site. 

Bonus Tip: You don’t have to sell your digital products solely from your own ecommerce store. An online marketplace is also a great option to sell on as you don’t have to work as hard to get customers to your website to see your products. For some suggestions on some of the best online marketplaces available, check out this article.

If you need help finding marketing strategies to scale your business, reach out today for a free 20-minute consultation. Let’s look at solutions that will take your ecommerce business to the next level.