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Digital Product Etsy Shop vs Physical Product Etsy Shop

etsy 101 basics starting a handmade business Jan 03, 2023

Today I'm going to be talking about digital Etsy shops vs physical product Etsy shops. I'm going to be giving you lots of honest pros and cons of both shops from having worked with thousands of Etsy shop owners directly. 

I want to preface this blog post by saying that there is no such thing as a passive income Etsy shop. You will pay for it in one way or another, at some point down the line. Whether you're paying in your energy, your time, your money, you will pay for it in some way. There are definitely some shops that require less time and effort than others, but you will still pay for it at some point. 

This blog post is for those people who are unsure about which Etsy shop to start. If you're wanting to start a handmade business or Etsy shop (or maybe another Etsy shop if you already sell on the platform), and you're not sure what type of shop to open, then this blog post will help you decide.


Inventory & Shipping:

Digital shops are mainly for those who don't want to worry about inventory or shipping which can be complicated aspects of running a business, especially to a new seller. 

I have always had a product based business so for me I know how to wrap and ship items, and all about import and export and it doesn't worry me in the slightest. 

Physical shops are mainly for those who want to craft a physical item that will be in a customers physical space. You do have to sort shipping, inventory and storage etc, but if you're already in the groove with this, then it's not something you have to worry about much. 

A lot of this stuff is complicated and overwhelming until it's not. All it takes is a very quick Google search to find out this information. If you're being put off by the thought of having to ship your items, then I personally wouldn't worry as it is honestly straightforward. 



Digital shops are also fantastic for those who have a quick burst of creativity that want to create something new. I often find that with physical shops, we can get tied down with creating one type of product, which is a good business strategy to have, but as creative people sometimes we can get pigeon holed into doing one thing. We can get all these creative ideas and with digital shops, you can release this a little bit more easier. 


Digital Shop Cons:

Saturated Market:

Digital product shops are really easy to start but they are also very saturated because of the amount of listings that you need to have. It's not unusual to see a digital shop with 500-1000 listings.

You do have to have a lot of listings to start getting momentum. Because it's a saturated market, digital buyers expect to have a lot of different choices when viewing your shop because you don't sell physical products so it's 'easier' in that sense.

There will be some digital shop owners out there where this isn't the case for them, but they will be in the minority. In my experience, we've had to list a lot more items to start to gain that momentum and be favoured in the algorithm. 

Trends & SEO:

You have to be on top of trends and SEO research when owning a digital Etsy shop. You have to know your SEO (Search Engine Optimisation), but you have to be on top of trends in order to be seen/ favoured.


Not As Passive:

Owning a digital Etsy shop is not as passive as you might think. You do have to spend a lot of time getting new listings uploaded regularly, and helping customers with troubleshooting, tech issues and sending links. That's something you don't have to worry about with a physical shop. You just need to make the item and send it out and your work is done. 

Lower Profit:

I've also found that digital shops tend not to be able to charge a higher amount for their products compared to a physical shop. Let's say that you make planners. If you sell physical planners, you can charge £30+ for that planner, whereas if you sell digital planners, you'd only be able to charge around £5-£8 for that same planner. Keep that in mind. Depending on your profit margin and the time spent creating that planner, it can be a lower profitable market for you. 


Harder to Build A Brand:

I have found that it is harder to build a brand with a digital shop. I feel like that's because you don't have the physical product to send to customers to enjoy. The sad thing is, many digital products bought will just end up in someones downloads folder and then never get used. It's harder to build a brand because of this because your customer may not use your product daily and get the same satisfaction or brand recognition from it. 

For example, I have a lip balm that I use every single day and every time I look at it I am reminded of that brand, and my brain says 'oh I'm going to go on their website and see what else they have on there'. I bought a digital download planner about 6 months ago and quite frankly, I haven't thought about it since I bought it. That might be why I find it so much harder to build a brand with a digital shop. 



You can't send influencers digital products to try. This is something that we help you with in the Handmade Bosses Success Academy for those who sell physical products. With digital products it's a lot harder to find influencers who are willing to do a vlog/ blog/ piece of content in exchange for a digital download. 

When I was writing my book and I was sending it out to people to read, I gave them the option to have the downloadable PDF version or the physical version, and absolutely no one took the digital download version, they all took the physical book. I feel like we're programmed to think that a physical item that you can hold in your hands is much more valuable that a digital product. 

It's the same as when you are spending money on a credit card vs the physical cash. The physical cash just feels that bit more valuable when you have to physically part with it. Keep this in mind when you're considering digital vs physical product shops. 


Digital Shop Pros:

Easy to open:

The upside to a digital Etsy shop is that they are very quick and easy to open and start. You can be up and running in a day with a digital download shop. If you have the listings ready to list and the branding ready to go, then you can set that shop up and be up and running in business in as little as a day. 

Cheap to start:

It's also very cheap to start a digital shop. All you need is the skills to create the digital products. You don't need a lot of start up cash or inventory, but you do have to spend time in making these items and setting up your shop and making sure that you can digitally deliver the item to the customer.

Easy to Pivot:

You can pivot really easily with a digital shop. If you wake up one day and decide that you no longer want to sell digital nursery art prints anymore, then you can pivot and change what you sell very easily. Whereas, with a physical shop, it is much more tricky to pivot because you have all of the inventory and stock around your space that you have to do something with (or waste it) if you want to change course. 

High Markup:

If done correctly, digital products can have a high markup and big amount of profit. You need to make sure that you are putting a monetary value on your time though. It's really easy to be working 12 hours a day making digital downloads, uploading them to your shop and getting a few sales which you think is all profit because there's no expense involved, BUT, you have spent your time and energy creating that product.

Make sure you put a monetary value on your time so that you can see what that product has cost you and your business.


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Physical Product Cons:

Difficult to start:

Physical product shops are more difficult to get started in. You have to be more committed when starting a physical Etsy shop because you have to think about inventory, costs and storage as well as learning the skill to actually make the product. 

There's a lot of pressure on you to create a physical product that does exactly what you say it will do. It has to withstand being posted and has to be of a high quality so that your customers love it. 

This is also a good thing for us creatives to do. We love to bring our ideas to life and creating physical product allows us that satisfaction. Some people can't get the same amount of reward by creating digital products as they can by bringing a physical product to fruition. 

External Factors:

Physical shops are impacted by last shipping dates (Christmas deadlines), industrial strikes, the weather, and pandemics to name just a few. It's another thing that we have to bear in mind when running a physical shop, and we teach you how to build a buffer into your business in our Handmade Bosses Success Academy course. 

Storage & Fulfilment:

Storage and order fulfilment can be a problem for a lot of shops, especially if you don't have a lot of space. For me, I sell jewellery so I don't need a lot of physical space to create an order, but depending on what you sell (furniture or other large items), then it may be harder for you to store the materials and have enough physical space to make the end product. 

The A-Z process of creating that product might be just that little bit more tricky for physical stores. 

Physical Product Pros:

In-person Events:

You can do in-person events with physical items so much easier than with digital products. In fact, I've never known a digital shop to sell at craft fairs or events. If you do need a quick cash boost, then it's so useful to be able to go to an event and sell your items. 

Gifting Occasions:

Physical shops utilise gifting occasions so much better than digital shops do. It's quite tricky to gift someone a digital product as a Christmas gift for example. Lots of Etsy shoppers come to buy a special handmade gift for their loved ones for Mother's Day, Father's Day, birthdays and Christmas. If you sell physical items, then you can potentially earn quite a lot of money over the gifting period. 

Digital shops may not see the seasonal increases that physical shops see over certain gifting periods throughout the year. The gifting market on Etsy is absolutely huge, and it's a shame that digital shops can't make use of this the way physical shops can. 

Build A Brand:

You can build more of a brand around physical products, and you're not easily forgotten. Going back to my lip balm example above, I don't forget this brand because it's always in front of me, and I use it every day. 

Technology Skills:

You don't have to have a lot of tech skills with a physical product store. With a digital shop, you have to keep up to date with new technology and softwares, whereas with a physical shop, once you know how to make it, it doesn't really change.

If your'e someone who just likes to make something and put it out there and you're done, then I think that a physical product shop is better than a digital product shop for you. 


So there you have it. My pros and cons for digital vs physical product Etsy shops. I'd love to know your thoughts and which avenue that you have decided to go down. Let me know in the comments below. 

If you'd prefer me to visually teach you this blog post, then you can watch it HERE.


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