Unless you have been hiding under a rock for the last few years, you will have come across an awful lot of Digital Media products whilst online. By this I mean computer software, eBooks, graphics, web site templates and so on. What you may not have done, however, is given much thought to how much profit is actually made from them. In reality such products have an absolutely enormous profit potential to them, far far more than the traditional physical products.

Allow me to give you an example. Suppose you decided to set up an online store selling the latest Nokia ABC123 mobile phone. First of all you would have to make a substantial investment in stock. It is unlikely that you would be able to send an email to Nokia HQ in Finland and ask them to give you their best price for, lets say 5 mobile phones. If you managed to locate a supplier of this particular phone I would imagine that you would have to buy at least 100 to make it worthwhile. Nokia has set the retail price of this phone at $400, you have been able to buy 100 of them at $200 each.

Sounds like you got a good deal, right? Well, your bank balance is now $20,000 lighter and your partner is asking you where the heck you plan to keep all these phones. Of course, you are not worried because you are going to show him or her how to turn $20,000 into $40,000 in a few days. Unfortunately you have not factored in that you probably will not be the only person selling the Nokia ABC123. You thought 100 units was a lot to buy, but your much larger competitors have all bought 10,000. Of course they did not pay $200 like you did, but they only paid $100.

So unfortunately these guys are not playing ball, instead of them selling the Nokia ABC123 for $400, they are selling them at $280 and still making a very good profit. Because you have to compete against them you drop your price to $270, but oh, you forgot about the shipping costs that is another $30 right there. So if you are very lucky, the phone that you paid $200 for will give you a profit of $40, or 20%. It is the initial stock outlay and competition from others with deeper wallets than you that kills your profit margin.

Imagine another scenario. You know quite a bit about the Nokia ABC123, so you create an eBook 101 Tips and Tricks for getting the best out of the latest Nokia ABC123. This takes you a couple of hours to write, you include a few screen shots to make it look pretty. The final step is to burn that onto a CD, put a nice label onto it, put the CD inside a case, again with a nice label on it. Your total production costs say $2. The final step is to offer this for sale via a site such as eBay for $20. That is a profit of 1000%, you have no competition because it is your own product, and because you can print on demand, i.e. create the product whenever you receive an order, you have no inventory costs. THAT is the beauty of Digital Media products.