How to Sell Digital Products on Etsy – The Complete Beginner’s Guide

Do you want to sell digital products online? Etsy is a marketplace for downloadable products. A hit in the USA for a long time.

Starting your own art or design business is as easy as selling digital things on Etsy. You’ll discover how to set up your store to sell things as digital downloads in this post.

With digital products, you can implement many ideas for passive income. The goal for this is maximum automation.

Analision offers the best inventory management software for Shopify

What are digital products?

Digital products cannot be touched, unlike physical products such as mugs, blankets, or jewelry.

Digital products don’t require your presence unlike services like a haircut, massage, or photo session.

Digital products are all products that are in immaterial form and can be sold. This can be anything from various digital media, such as books, music, and pictures. But software, videos, files, and online courses also belong to the category.

Advantages of digital products

Digital products have three substantial advantages over physical products:

  • You don’t need a warehouse
  • they do not have to be sent
  • they can be infinitely scaled

Scaling means that you can increase sales without having to constantly invest in production and infrastructure and increase your fixed costs.

Your workroom, including the warehouse, has the capacity for the production of 100 bags per month. You manage to make the 100 bags by yourself.

If you want to sell 200 bags, you have to invest.

Your working time is not limitless, and neither is your space. It would help if you had more space to store the material for the 200 bags, the shipping materials, and the finished bags.

You need an additional employee for production. Your fixed costs rise and are difficult to reduce again when sales fall again.

With a digital product, it doesn’t matter if you sell 10, 100, or 1000 units per month in terms of costs. Once the product is created, you have no further fixed costs. Digital products have high scalability.

The variable costs such as Etsy selling fees remain for physical as well as digital goods.

Etsy digital products ideas

Which products are suitable for sale on Etsy? Basically all, these ideas are particularly suitable for digital products:

  • Embroidery files
  • Calendar Templates
  • Coloring pages
  • Sticker
  • Sewing pattern
  • Instructions (for sewing, knitting, crocheting, handicrafts, etc.)
  • Plotter files
  • Jingles, beats, ringtones
  • Backgrounds for zoom meetings, mobile phones, etc.
  • Software
  • Checklists
  • Story stickers
  • Printable (art to print yourself)
  • Invitation cards

I could continue the list almost endlessly. If you need more inspiration, just search Etsy with the keyword “download” and you’ll get a glimpse of the huge variety of downloadable products sold on Etsy.

Selling Digital Products on Etsy – Order Fulfillment

By order processing, I mean the process of purchasing a digital product on Etsy. How does the customer receive the product he has just purchased?

So that you can benefit from the great scalability of digital download products and create something like a passive income, the primary goal is to make the sale as detached as possible from your personal commitment.

Once created and set up for sale, a digital product should take up as little of your time as humanly possible.

To do this, order processing must be automated as far as possible. In addition, the product and order processing must not raise any questions for the customer. This minimizes customer support.

You have two options for this: order processing via Etsy or outside of Etsy

Order processing via Etsy

You can easily upload the file to the listing. To do this, you must specify the product as “Digital” under “Art” when creating the listing.

Then a new field will open further down with the heading ‘Digital Files’.

You can upload up to 5 files, each with a maximum size of 20 MB.

The following file types are allowed: .bmp, doc, gif, jpeg, jpg, Mobi, MOV, mp3, MPEG, pdf, png, PSP, RTF, STL, TXT, ZIB, ePUB, iBook

The advantages of order processing through Etsy are:

  1. Everything is automated, you just have to wait for your withdrawals.
  2. The customer stays with Etsy and doesn’t have to deal with anything new.
  3. Easy creation of the listing for you as an Etsy seller.
  4. Billing is done by Etsy.
  5. Sales tax is paid by Etsy.
  6. Simple accounting: you create an invoice for the amount of the respective payments.

The disadvantages of ordering digital products through Etsy are:

  1. Download only works on the desktop, not the in-app or mobile version. This often leads to questions from customers.
  2. The prices are often crooked because you have to enter the net price when listing, Etsy automatically adds the sales tax.
  3. Etsy creates the invoice. (Unlike physical products!). If you sell to a business customer and he/she needs an invoice correction, e.g. because he/she gave the wrong address, you cannot create this if you are entitled to deduct sales tax. Since Etsy collects sales tax for you, you can only create a net invoice. That will not make the customer happy if he is eligible for an input tax deduction.
  4. Digital products are sold in all countries. You cannot limit the countries. This is a problem with instructions, e-books, etc. that are written in German, as there is a risk that someone who speaks a foreign language will sell the product and
  5. You can hardly place profitable Etsy ads because they are displayed in all countries. (You can read here why this makes no sense).

But there are also solutions to most of the disadvantages:

1. Explain that to the customer in a graphic that you put in the pictures. Additionally, “in the message to the customer after the purchase’, which you formulate when creating the listing. Put it in the item description.

2. Calculate the net price from the calculated gross price and set this as the sales price in the listing.

Order processing via Analision

You can eliminate the disadvantages of processing orders through Etsy if you find another way of automatically making the digital product available to the customer.

Conclusion: Selling Digital Products on Etsy

Etsy is perceived as a marketplace for physical products. Many sellers don’t even know that selling Digital Downloads on Etsy works so well. At the moment you still have a very good chance of successfully promoting your products here.