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Why Selling Digital Products Is Better
Than Tangibles

Selling In a Digital Economy - Features and Benefits.
 
Paul Smithson - 19th March 2009
   
paul smithson There are several huge advantages to selling digital products over tangibles.

They’re easier to manage, you don’t have to deal with the hassles of shipping them, and the profit margins are much greater with digital products. 

Another benefit is that you don’t have to deal with physical returns, only the occasional refund, and the customer service is usually much easier to deal with.

With digital products you don’t have to keep an inventory, because your entire inventory consists of a file, or files, on your web server, and you never have to worry about running out of stock, because you’re selling the same file, or files, over and over again. 

And you don’t have to worry about customers getting the wrong size or the wrong color!  You might have the occasional instance of a file not downloading correctly, but easily fixed by asking the customer to try downloading it again, or by sending them a copy as an email attachment.

Physical products, on the other hand, require a lot more work. You typically have to keep a large stock of boxes, packing materials, and tape on hand. You have to deal with stamps or postage meters.  You have to weigh things, and worry about packing them well enough so they aren’t damaged in transit.  Then you have to make a trip to the post office to mail out the products, or arrange for a shipping company to pick them up. 

If you’re selling physical product you also have the issue of returns to deal with, whereas if you’re selling a digital product and someone requests a refund, there’s no need for them to actually return the merchandise.  They just ask for a refund, and you give it.  It’s that simple.  Sure, they could keep a copy of the product if they wanted to, but that’s a relatively minor drawback when you consider all of the other benefits of selling digital goods!

With digital products customer service usually consists of the occasional question about downloading, or questions about the file format of the product, but for the most part, customer service isn’t needed.  If you automate the delivery of your product, most people won’t need any type of additional help at all.

Perhaps the biggest advantage of selling digital products is that profit margins are so much higher than they are with physical products. If you’re selling something like consumer electronics, you have to do major volume to make enough money to make it worth your while, because the profit margins are ridiculously slim, but with a digital product you get to keep all the revenues, which makes reaching profitability far easier, and you don’t risk being left with thousands of dollars of unsold inventory on your hands. 

There are however, several benefits that physical products have over digital products and these are quite large ones.

Firstly, it is very easy to pirate something like an ebook and make it available either free of charge or for a fee. This is far more difficult to do with a physical product.

Secondly, refunds tend to be considerably lower on physical products, because the buyer has to go through the process of repackaging the product and taking it down to the post office of shippers, to return it back to you. With a digital product there are no such hurdles and so it’s a simple process of saying “I want a refund”.

Finally, the perceived value of a physical product can be considerably higher than for the same product in a digital format, which is why some top Internet marketers have, particularly over the last few years, released an increasing number of products in a physical format that is delivered to your house in a box.

The final decision as to which direction you choose to go in will, of course, depend very much on what you are selling and what resources you have at your disposal.

If you are selling an inexpensive ebook and have few or no staff at all, then you may choose to go down the digital route, at least to start with, whereas if you have sufficient resources at your disposal, and you feel your product is appropriate, you may decide that a physical product is the way to go.

About Paul Smithson - Paul Smithson is the founder of Intellimon and the driving force behind the best-selling XSitePro web site development tool. Since graduating in Business Strategy and Direct Marketing from two of Europe’s leading business schools, Paul has set up five multi-million dollar companies, one of which is now owned by the BBC. His areas of expertise include business strategy, e-commerce, on-line and off-line marketing, software development, and maximizing the potential of on-line businesses.


For more information about this, and many other Internet Marketing-related topics, visit Paul Smithson's site, www.xsitepro.com.

Source: http://www.xsitepro.com/why-selling-digital-products-is-better-than-tangibles.html


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