Small Business Tips: Selling Digital Goods Online

Digital goods, also called electronic goods or e-goods for short, describes any item sold to consumers in a digital format. This type of product includes computer games and applications, e-books, music, ringtones, cellphone cards via unique pins, website templates or even crochet and sewing patterns.  

Selling digital goods online can be a good small business for any entrepreneur who authors these types of products, as this type of small business has little upfront costs to start -- with the exception of having your own Web site.

For the ecommerce aspect of the small business, you will need a digital goods delivery system to handle the sale and downloading of the product. When you use an online service provider for the transaction, you're responsible for creating or providing the digital product, uploading the files to the online service, and providing contact and payment details in addition to writing descriptions of each item. 

To sell and deliver the digital goods online, there are a number of service providers to choose from.  Entrepreneurs tend to like this type of small business, as most online delivery services are free until you make a sale. When a sale is made, however, you can expect to pay a commission fee for using the online service to deliver the digital goods to the customer.

The online service will handle the e-commerce transaction for you -- including the invoicing, payment, and delivery system -- taking a percentage of the transaction fee, leaving you to simply concentrate on creating your product and managing your new small business.

While there are a number of digital good service providers online, not all offer the same features; but there are some key things you should look for.  Here are five tips to help budding entrepreneurs choose the right digital delivery provider for their small business.

1. Know the Fees and Pay-out Amount

Transaction and hosting fees will vary from one online service provider to the next.  Some may require you to pay a monthly subscription fee to use the service, while others may take a percentage-based commission of your sales -- or both.  The digital goods service provider will handle the transaction, take its cut and often hold your portion of profits until you reach a set dollar amount in your account before it send you the funds.  Be wary of providers who set this pay-out amount to a high rate, or you might wait a long time to receive payment for the sales you made.

2. Ensure Compatibility with Websites and Blogs

It is important to ensure you can seamlessly integrate the online service you choose into your own website or blog -- especially in the case of self-published artists who often manage their own site for fans. You want to choose a service provider that has a cart system you can customize to blend in with your own Website design. Also, look for easy cut-and-paste code to display the shopping cart buttons or a storefront widget on your own site.

3. Look for a Fully-Featured Shopping Cart

In some cases you may have related tangible goods to sell -- for example in addition to selling digital versions of your self-published music, you might want to sell a CD version, or you might want to sell printed posters of your most popular digital images.  To offer both types of goods you need to ensure the digital goods cart is fully-featured and can handle related tangible good sales.  

Features to look for include shipping calculation, inventory management, sales tax and a packaging-and-shipping cost calculator. These are the standard ecommerce functions that you would need to sell any related tangible products online.

4. Look for Secure, Reliable Product Delivery and Storage 

Any digital goods delivery system must provide instant, secure digital product delivery that protects both the consumer making the purchase and the small business.  After check-out and payment has been completed, customers should receive a secure link to download the item immediately.

To protect you, that link should expire after the maximum number of download attempts (or hours) has been exceeded.  Some systems offer other security features, such as “stamping” e-books with a unique transaction ID so you can track people who “share” your digital good after they purchase it.

You should also ask a provider about server security and what they do to protect consumers from downloading files that may have become corrupt or virus-infected through their storage servers. It is also important to ensure the digital-good delivery provider offers secure back-up of your merchandise.

5. View the System from a Consumer’s Perspective

The final thing you should do is to look at the system from a consumer’s perspective. Make sure the cart offers lost of features for your customers. Be sure to offer a number of payment choices, including PayPal, other online payment services, and different credit cards.  

The best advice for an entrepreneur choosing a delivery system for his or her small business is to test-drive the solution before buying it.  For this, simply make sure that the cart is easy to use and that consumers will be able to make a purchase and download the digital goods in a satisfactory manner.  

Even if the cart has all the features you want as a seller, if it's confusing or difficult for consumers to use, you’re better off choosing a different online service provider.

Starting a Digital Goods Business

The following Ecommerce-Guide.com resources will help you further investigate starting your own small business selling digital goods:

E-Commerce Tools: Five Ways to Sell Digital Goods OnlineAutomated Licensing, Rights Management for Digital ArtistsThree-for-All: Affordable Selling Services for Digital Goods

Vangie Beal is a veteran online seller and frequent contributor to ECommerce-Guide.com. She is also managing editor of Webopedia.com. You can tweet with her online @AuroraGG

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