Challenges of Selling Physical Products Online

Have you ever thought about why some business owners never worry about running out of products or dealing with late shipments? Join me today, as we look into why digital products are often a better choice than physical ones. I’ll share real stories from people who sell actual items and the big problems they face, like sudden stops and shipping or having to find new suppliers unexpectedly. We’ll see why. After years of experience, I’m all in for digital. We’ll talk about how digital products get rid of the big headaches that come with physical products, and how this could really change your business for the better. By not having to worry about worldwide shipping problems or keeping track of stock. Digital products are easier to manage and can grow more easily than physical ones. Let’s explore why choosing digital might be the best decision you can make.

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I’m Igor Kheifets and this is the List Building Lifestyle, the podcast for anyone who wants to build a wildly profitable email list working from home. If you’d like to make six figures, travel the world and help people improve their lives in the process, this podcast is for you. I also invite you to claim a free copy of my best selling book, the List Building Lifestyle Confessions of an Email Millionaire at igorsbook.com. Get the free book plus $3,000 Bonus packages including my best capture page templates, email swipe files, and traffic blueprints, visit www.igorsbook.com for details. And now it’s time to claim your list building lifestyle.

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I’ve been doing digital products my entire life. And because I’ve been doing them my entire life, I’m a little bit biased towards doing them, you know more but, I do know a lot of people who sell physical stuff, and I do not envy the kind of problems that they have to deal with. Because I don’t know what it’s like to not have inventory. Like I don’t know what inventory issues are. I don’t know what shipping issues are, I don’t know what it’s like to negotiate with a supplier in China through a third party, I don’t know what it’s like to do so this is a real problem that came up from my friend, my neighbor across the street. A really nice guy. This guy’s name is Michael, his daughters are, you know, babysits for us. They are the reason we have date night, and so, grateful for that.

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So Michael sells indoor children’s gyms, so you can install it in your basement or in your living room. So comes like a bunch of really cool stuff where your kid can climb around and jump and really cool stuff, good stuff. And at one point he was doing well, he was selling about two units a day, he sold them at roughly $1,200. And I believe the profit on that was again, roughly $300 Maybe. So he was doing well and got a very easygoing business, no paid advertising, all organic. And one day, this weird thing happens. This guy, basically the boss of another country, gets really mad at the bosses of another country across the ocean. And he says you know what, I’m going to spoil your party. And when he picks up a bunch of sticks and stones, he gets in a tank and drives over to a neighboring country to start a war because that neighboring country is friends with the people he’s pissed at. So obviously I’m talking about Vladimir Putin starting the war in Ukraine. 

3:00

Now, the moment that happens, lots of ties with Russia across the world got caught by so many different countries, including Canada and the United States. Now, just so it happens that the suppliers, and the people who kind of shipped the parts for the gym, to the customer’s doorstep, happened to be located somewhere in Russia. And guess what happened to Michael’s business overnight, no action whatsoever, because he couldn’t ship the product. So he had to shut down for one year, and go find a different supplier. He even considered consolidating his business with his competitors’ business. And he only got one competitor, by the way, it’s a really tiny niche, and then eventually found a different supplier in a different country, which I’m assuming China, and that’s gonna, you know, now he’s back selling, but he lost a whole year of momentum. 

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His competitor, though, didn’t because he was getting his stuff from somewhere else. So it’s an issue, right? And that’s just one example of what can happen with physical products depending on what the products are. Regulations can change. If you’re dealing with any kind of supplement. I remember I was doing a call with www.capitalism.com. And they teach how to sell physical items over drop shipping, I believe. And so this guy from Switzerland couldn’t do this one particular supplement because it’s considered to be a drug in his country. So therefore the post office won’t touch it, not because you can only get a prescription, all kinds of stuff like that or Modafinil. 

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So I get Modafinil every now and again, depending on what’s going on in my life, it’s basically a drug that was invented for narcolepsy. So but it’s actually used a lot by The IT Crowd, students in colleges and universities, because it makes you more focused for a longer period of time. So I’ve studied a lot about it. I’ve done lots of reviewing, lots of case studies and things like that. And then I decided to use it. And I’ve been on and off Modafinil over the course of the last five, six years. And so getting Modafinil into Canada is really challenging. Now, what happens is, every six months, there’s a different website that becomes like the go to website for it, because they just catch it, shut it down, and we all have to move on. 

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Alright, so again, you can probably sell it quite easily to some European countries. But then when it comes to Canada, it’s a whole issue. When it comes to America, maybe some states are okay, but some states are not. So you’re having to deal with a lot of stuff. Again, none of this exists in the digital product space, because it’s like the Wild West, there’s no regulation, aside from not scamming consumers, that’s like a big one. Aside from that, like you’re good to go. And you’re not dealing with any kind of crap like that. So it’s much easier to get into it, it’s much easier to scale, it’s much easier to overcome different challenges that come up, because a lot of these challenges have nothing to do with regulations, with third parties, with physically going to, you know, to Frankfurt to some, you know, warehouse, like there’s nothing like that. 

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So I’m very biased. Plus, oftentimes, digital products have way better margins. That’s another issue with physical products, let’s say you’re in the business of supplements, and let’s say, one bottle of supplements cost you, you know, $4.30 to create, but then if you’re shipping it to Alaska, it’s going to cost you $27 to ship. So you’re basically in for $31, just to get it out to the customer before marketing costs before employee costs before anything else. That’s like what’s going on here. And so let’s say you decide to sell the supplement at $35 per bottle, because all your competitors are selling at $35. And you have to be competitive, then you start coming up with different offers. Okay, maybe we can offer three bottles for 90 bucks or for 70 bucks. And what we’ll do, we’ll lose money up front, but we’ll get them on a subscription, and on and on. 

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So in other words, oftentimes, you’re selling a product that doesn’t have any margin to it. I just sold my Porsche to this guy here in Ontario, who sells high end outside, like outdoor furniture, and kind of like high end gazebos or something. And so his costs, especially shipping costs, I think, doubled or tripled in the last year or two. His profits really got slashed, he’s like, he’s got to sell like a $1,500 item or, or even a $10,000 item for like a 10% margin like it’s really challenging for him to keep going that way. Any additional expense becomes a huge problem. Now, guess what happens with digital products. Let’s say you started out and you were selling a digital product at $100 and your costs were like $20 per product, like if you could average it out, let’s say and then something changed. And now you’re like $50 cost per product. And you’re saying, know what, I think I’m gonna raise my price, because the margin got lower, or I’m gonna change my product so the margin actually stays the same by removing or adding different components to kind of rebalance the deliverable, right, like you have so much more control that you wouldn’t believe. So my bias, and I’m really biased for this, is to sell digital products. And another reason, let’s say you are selling physical products. And let’s say you are doing you know, having a margin of just 10%, which is what most physical product businesses have. 

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The upside of this would be that you can sell your business more easily than someone with a digital business can sell it. But that’s really the way you make the money with the physical product business. Like most people who do any kind of physical shipping businesses, they wait for the day to sell the business. Now again, going back to the guy who bought my Porsche, a really nice guy, he didn’t sell it in time. Basically what happened was a couple years ago, during COVID, his revenue was really high, because everybody was home, right? Everybody was spending time in their backyard. People were building pools, everything was up, you know, people were given free money to spend. I mean, there was a lot of stuff going on. So his revenue was about three times what it was last year. And guess what, now if he wants to sell it, they don’t offer him a multiple of the revenue from three years ago. They offer him the multiple of the revenue from last year. So now he’s upset about not being able to sell the business and for making less money. And so he’s a bit stuck. Again, not an issue you experience with digital products simply not an issue because you have a lot more control.

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Thank you for listening to the list building lifestyle. Get access to the previous episodes transcript of today’s show, as well as other exclusive content at listbuildinglifestyleshow.com. Also remember to claim your free copy of my best selling book at www.igorsbook.com. It explains how I made millions with list building starting from scratch. Plus, I’ll give you $3,000 worth of free bonuses, including my best landing page templates, email swipe files and traffic blueprints. Go to www.igorsbook.com now to claim your free package.