The Bull Case for Physical Product Ecommerce Over Digital Product

I’ve made it no secret, that I love digital product ecommerce businesses. Actually I just bought one (a digital product ecom biz) yesterday. Literally.

The high margins, the lack of physical inventory, and the freedom from shipping logistics made digital products incredibly appealing. There's no denying that digital products offer significant advantages—no cost of goods sold, no warehousing, and a nearly infinite scalability. However, that’s not to say that, physical product ecommerce offers a compelling case of its own, especially when considering long-term business sustainability and competitive edge.

Durable Competitive Advantages

One of the reasons I’ve grown to appreciate physical product ecommerce is the inherent competitive moat that physical goods can provide. Unlike digital products, which can be easily replicated or commoditized, physical products often involve proprietary manufacturing processes, unique materials, or strong brand recognition. These elements create a barrier to entry that makes more difficult for any schmuck with a lap top to quickly copy or undercut your offerings. This durable advantage can lead to sustained market positioning and long-term business success.

Resilience to AI Disruption

While the digital space is exciting, it’s also incredibly dynamic—and that can be a double-edged sword. Artificial intelligence is advancing rapidly, and digital products are increasingly vulnerable to obsolescence. AI can automate many of the tasks or services that digital products provide, making them less valuable or even redundant. In contrast, physical products are largely insulated from these technological shifts. While AI may enhance the manufacturing or marketing of physical products, it’s far less likely to replace the products themselves. This resilience makes physical product ecommerce a more stable and secure business model in the face of rapid technological change.

Keep In Mind If You're Going to Buy a Physical Product Ecommerce Business

If you're considering entering the physical product ecommerce space through acquisition, there are two critical factors to keep in mind:

• Gross Profit Margin of at Least 50%: A healthy gross profit margin is essential for sustaining business operations, fueling growth, and supporting marketing efforts. It provides the financial cushion needed to weather market fluctuations and invest in future expansion.

• 3PL in Place: A third-party logistics (3PL) provider should already be handling warehousing and fulfillment. This setup minimizes operational headaches and allows the business to scale more efficiently. A 3PL partner can manage inventory, packaging, and shipping, freeing up resources for other critical areas of the business.

On Thant Note

While I still love the appeal of digital products—with their high margins and low overhead — I wouldn’t over look physical product ecommerce businesses. If you’re considering buying a physical product ecommerce business, focus on those with strong gross profit margins and a 3PL in place to ensure you're set up for success.