4 ms·

A Micropreneur’s Perspective: Selling Physical Products vs. Digital Products

25 points by rwalling 17y ago

herval 17y ago
"Though I haven’t acquired anything yet (I have my eye on a few), the return on those funds will be much higher with a software product or SaaS website" so he's basically assuming 'digital' is better because your experience with 'physical' didn't sell enough? What about thousands of purely digital sites out there that don't sell anything? Would that disprove the comparison in any way? imho, the assumption that the margin is higher on digital ignores one simple fact: most 'digital products' on the web are free anyway...
- brc 17y ago
  No, digital is better because you own the IP, the distribution and take home almost 100% of the gross. Returns are not a factor because there's no physical product to worry about. He is sharing the bulk of the revenue (40%) with the dropshippers, and if he didn't do that, he'd tie up a lot of capital in inventory and warehousing, plus have to pack and ship orders. None of these are problems with a digital business.
  - netsp 17y ago
    pigs are better then cats I don't mean to be snarky, but any comparison between digital and physical products that's weighing them up in abstract is just silly. There are good and bad business models doing either one.
  - rs 17y ago
    But doesn't digital products actually have an initial development cost that can be really expensive (depends on what you're building) ? Yes, you do (most of the time) take in 100% of the revenue, but you need to allocate some of that back to the development cost, no ?
  - herval 17y ago
    you can also own the IP on physical products. Or you can work with digital stuff you don't fully own (licensed bits and pieces, third-party software)... and don't forget you're sharing revenue with Google when you get your hard-earned 30 bucks a month in adsense. And with Amazon, when you get referrals. And so on, and so on..
- viggity 17y ago
  From reading his previous posts, it sounds like he has already purchased 10 products, including DotNetInvoice. (http://www.softwarebyrob.com/2008/10/03/should-you-build-or-buy-your-micro-isv/ http://www.softwarebyrob.com/2008/10/03/should-you-build-or-...) What he should have said was "I haven't acquired anything new yet"
bemmu 17y ago
http://marketplace.sitepoint.com/auctions/55207 http://marketplace.sitepoint.com/auctions/55207
HeyLaughingBoy 17y ago
My problem with this article is he mentions that to avoid being a commodity, you need to build your own product, then ignores the rest of that path. There is obviously lots of money to be made that way, even by 1-man shops. I do it (sell custom/semi-custom electronics) and my fulfillment and inventory costs are minimal. Sure, reselling most products is relatively low margin (but profit is profit!), but it's not like the only choice is "digital" vs. "resale."
snowbird122 17y ago
Key point here: When you sell physical goods, unless you manufacture the goods yourself, you are a commodity, therefore, margins will always be low.
- netsp 17y ago
  One major benefit of selling a physical product is you don’t have to build anything; the work is all in finding a supplier and putting up a site. This is great because you avoid the 200-400 hours to build something. I don't know where to start.

25 points by rwalling 17y ago

"Though I haven’t acquired anything yet (I have my eye on a few), the return on those funds will be much higher with a software product or SaaS website" so he's basically assuming 'digital' is better because your experience with 'physical' didn't sell enough? What about thousands of purely digital sites out there that don't sell anything? Would that disprove the comparison in any way? imho, the assumption that the margin is higher on digital ignores one simple fact: most 'digital products' on the web are free anyway...

brc 17y ago
No, digital is better because you own the IP, the distribution and take home almost 100% of the gross. Returns are not a factor because there's no physical product to worry about. He is sharing the bulk of the revenue (40%) with the dropshippers, and if he didn't do that, he'd tie up a lot of capital in inventory and warehousing, plus have to pack and ship orders. None of these are problems with a digital business.
- netsp 17y ago
  pigs are better then cats I don't mean to be snarky, but any comparison between digital and physical products that's weighing them up in abstract is just silly. There are good and bad business models doing either one.
- rs 17y ago
  But doesn't digital products actually have an initial development cost that can be really expensive (depends on what you're building) ? Yes, you do (most of the time) take in 100% of the revenue, but you need to allocate some of that back to the development cost, no ?
- herval 17y ago
  you can also own the IP on physical products. Or you can work with digital stuff you don't fully own (licensed bits and pieces, third-party software)... and don't forget you're sharing revenue with Google when you get your hard-earned 30 bucks a month in adsense. And with Amazon, when you get referrals. And so on, and so on..
viggity 17y ago
From reading his previous posts, it sounds like he has already purchased 10 products, including DotNetInvoice. (http://www.softwarebyrob.com/2008/10/03/should-you-build-or-buy-your-micro-isv/ http://www.softwarebyrob.com/2008/10/03/should-you-build-or-...) What he should have said was "I haven't acquired anything new yet"

bemmu 17y ago

http://marketplace.sitepoint.com/auctions/55207 http://marketplace.sitepoint.com/auctions/55207

HeyLaughingBoy 17y ago

My problem with this article is he mentions that to avoid being a commodity, you need to build your own product, then ignores the rest of that path. There is obviously lots of money to be made that way, even by 1-man shops. I do it (sell custom/semi-custom electronics) and my fulfillment and inventory costs are minimal. Sure, reselling most products is relatively low margin (but profit is profit!), but it's not like the only choice is "digital" vs. "resale."

snowbird122 17y ago

Key point here: When you sell physical goods, unless you manufacture the goods yourself, you are a commodity, therefore, margins will always be low.

netsp 17y ago
One major benefit of selling a physical product is you don’t have to build anything; the work is all in finding a supplier and putting up a site. This is great because you avoid the 200-400 hours to build something. I don't know where to start.