The Glory of Digital Goods

There's a lot of things you can sell, but one of the most interesting is digital goods. There are so many unique issues and benefits with going digital. It's one of the odd glories of digital products.

Bricks & Clicks
Back in the day all anyone could talk about was the shift from brick and mortar stores to online stores. Back then they presented a dichotomy, while today it's not one or the other, it's bricks and clicks.

But there was another shift that happened without as much hoopla, the shift from physical to digital products. It started with Napster and mp3s, but it became legit with iTunes. It continued with YouTube, Hulu and Netflix streaming. Then with the iPhone came the app store and a new way to buy software. First it was just for your phone, but pretty soon the App store became the primary place to buy all software. The Kindle is doing the same thing to bookstores.

CDs are going the way of the cassette. The days of DVDs, while still strong, are numbered. Apple's MacBook Air laptops don't even come with a CD/DVD drive of any kind. Ebooks are now selling as many copies as print books. None of these things will entirely disappear, but digital products are a force to be reckoned with.

That shift from bricks to clicks is big. It's been slow and subtle, but it changes everything.

No Warehouses
One of the biggest changes with digital is that storage is no longer an issue. Physical stores have a vast distribution system that involves warehouses and semi-trucks and relies heavily on the Interstate Highway system. Amazon has multiple warehouses and a close relationship with the U.S. Postal Service to deliver their goods to your front door. They're even talking about delivering goods via unmanned drone, making everybody scratch their heads and check to see if they're reading an article from The Onion.

But digital products don't need any of that.

That makes it easy for anyone who's not Amazon to sell their own stuff. Back in the day an author trying to make it on their own had a garage full of books and boxes they sold out of the trunk of their car. They had to worry about inventory.

When you go digital there's no such thing as inventory.

That takes care of one of the major complications of running a store, which puts ecommerce within your grasp.

No Shipping
The other major bonus of digital products is that there is no shipping. You don't have to worry about packaging, boxing and shipping products. Customers don't have to worry about paying for shipping—and best of all—don't have to wait for their goods to arrive.

With digital products you get instant gratification.

Instant delivery means you can satisfy demands immediately. Not only do customers not have to wait days for what they want to arrive, they don't even have to wait the 20 minutes it would take to drive to the store in their car and buy what they want. Digital is instant.

No Cost to Duplicate
While all of those things make digital products easier to sell, one of the most interesting oddities of digital products is the economics of production. There's no quantity with digital goods. They're digital. You can make as many copies as you want without any effort. Can't do that with physical products. No matter how cheap production becomes, there's still a cost to create a physical product.

With digital products the cost of storage and transmission is so infinitesimal it's hardly worth mentioning.

That makes for curious economics where it literally costs nothing to create more merchandise to sell. While the price of a book will need to include creation, production, printing and distribution, an ebook will only include creation. And since that creation cost can be divided over however many books you sell, it becomes increasingly small.

More Profit
What all of this means is there's more money to be made with digital goods. You can have an entire store of digital goods without ever bothering with warehousing, inventory, fulfillment or shipping.

It means you can focus on creating what you have to create and then selling it. Simple.

It doesn't mean you can't still do physical products or do both, it just means there are some big advantages to digital stuff.

A perfect example of the oddity of digital goods comes from Guy Kawasaki. A tech company wanted to buy 500 digital copies of one of Kawasaki's books for a promotion. Should have been simple enough. But the publisher, Penguin, didn't know how to handle it. They referred the company to Apple, which sold the ebook. Apple told them to buy 500 gift cards. Amazon and Barnes and Noble didn't have any better solutions. Someone at the company ended up making 500 individual purchases on a credit card.

The peculiarities of digital even stumped some of the digital trailblazers.

That quantity issue can be confusing for those giant companies who don't have a process for dealing with buying multiple quantities of a product that's infinitely reproducible. It's less a matter of quantity and more a matter of digital rights management and an appropriate way to pay for each copy.

If you run your own store that's a pretty simple solution. You could create multiple copy "packs" that are effectively a single digital file and a license to share it X number of times. You could give a quantity discount and even make a formula available and let customers set their own price and purchase as many licenses as they need.

Kawasaki's frustration prompted him to write APE: How to Publish a Book where he details how to create and sell your own ebook.