How To Start An Etsy Digital Product Store In 2023

By Scott Voelker •  Updated: 03/21/23 •  10 min read

Ever since I started sharing the success that my wife was having with her Etsy store, almost a year ago. At this point, I've had people ask me what I would do if we were starting over now.

Although I addressed this topic in terms of creating a new print-on-demand store, like the one that we currently have, I realize that I haven't fully covered the topic as it relates to creating and selling digital products on Etsy.

What's The Deal With “Digital Products”

Before I dive into the full process that I would be using if I was starting a new digital products store in 2023, I wanted to quickly talk about why people get so excited about digital products, a few of the things that people typically forget to mention and give you an idea of what my approach to digital products would be.

Why Digital Products are Great

There are a few big reasons why people get excited about digital products and there's no better place to start than talking about the profit margins.  

Since digital products are well “Digital”, once you account for Etsy fees the rest of the amount you sell a digital product for is profit. 

In many cases, even though many digital products sell for less than physical products in the same niche, you can walk away with more money from each sale because of the high-profit margins.

Additionally, digital products often come with fewer shipping headaches (There's nothing to ship) and you never have to worry about running into inventory issues or manufacturers changing their standards.

The Downside Of Digital Products

Like Even the best things in life, there are downsides to digital products as well.

Because they are easier to create and have high-profit margins, digital products often have substantially more competition than physical or print-on-demand products in the same space.

Additionally, there are typically fewer options for digital products in each niche, meaning that our overall product line is limited if we're launching a digital-only store in a niche.

The Hybrid Method

Fortunately, you can take advantage of digital products and limit their downsides by using what we refer to as the hybrid approach.

Although I don't have time to dive into the full details in this article (you can find them all here) I did want to let you know that that is the approach I would advocate for if you're considering starting a digital store in 2023 and beyond.

Essentially, we will be looking for a niche that could support digital or physical products, even if our goal is only to start with digital products.

With that in mind, let's dive into the step-by-step process I would be using to start a digital products store on Etsy in 2023.

Step #1: Niche Validation

The very first thing I would be doing before I launch a new Etsy digital product store would be to go through the niche validation process.

Although many ” gurus” advocate for using a product-focused approach, such as creating a bunch of mugs with different phrases on them, I prefer to use the niche-based approach for either physical or digital stores. 

At its core, a niche is something people can identify as or say that they “like”.

For example, someone may say that they like to fish or that they are a fisherman.

This would be an example of people interested in the fishing niche.

Additionally, people may say that they are financially responsible or that they are budgeters, which would indicate they'd be interested in things related to the budget or finance niche.

The important thing to note here is that when we identify potential customers by the niche they are interested in, it allows us to serve them a wide variety of different products.

Once you have the idea for an if you are interested in, you would need to validate that niche by looking at the existing demand on Etsy.

The main reason that we do this is to make sure the niche we are interested in can support us in reaching our financial goals.

It's important to understand that different niches can support different goals.

For example, how wanted to make $20,000 a year by selling digital products on Etsy, there are many more niches in that I could potentially make that amount of money in then if my goal was to make $200,000 per year.

To validate your specific niche inside Etsy, you need to look at how many products are being sold and how often.

The Quick Niche Validation Process

The easiest way to do this is by using a tool from our friends over at EverBee.

Even just signing up for their free plan allows us to see valuable sales estimates and quickly understand if our desired niche can support our goals.

Once your browser extension is installed, you can run a quick search for the main keyword that represents your niche, such as fishing, and then click on the product analytics tool inside of the extension.

From here, you are going to sort by estimated monthly revenue to see the top-selling products in the space.

If we're talking about specifically validating a niche for digital products, you would need to skim through the results to find any of the digital products that are selling in your niche and validate their sales and selling price.

If you'd like a more in-depth, look at a few great niches for digital products and to see a more detailed look at our thought process, you may want to check out this article here.

What to Do If Your Niche Isn't Big Enough

As you are going through the niche validation process, you may realize that your initial niche idea is not big enough to support your sales and income goals.

If you find yourself in this situation, you'll want to consider doing what we call niche stacking.

I'll link to the full article explaining the process here, but at its core, the niche stacking process allows us to combine multiple related niches into one big niche.

Essentially, what we would be looking for here are tightly related niches, such as bass fishing and trout fishing, where there are many shared customers.

By combining these into one larger niche, we can reach virtually any income goal.

Step #2: Are There Physical Products Selling In My Niche?

Once I validated that the niche supported my income goals, I would be looking to see if physical products are selling in my niche.

This is important for a couple of key reasons.

Even if our initial goal is to start a digital-only store on Etsy, the ability to add physical products, allows us to stretch beyond our initial goals for the store if we choose to do so.

Additionally, by using the print-on-demand model, we can produce a ton of different products for our store without having to deal with any of the traditional headaches associated with physical products.

The ability to combine digital and physical products into the more hybrid model that I discussed above, means we can sell multiple products to the same customer and have a higher overall transaction value.

Even if our initial goal is to never have print-on-demand or other types of physical products in our Etsy store, the fact that people are purchasing physical products in our niche is a great indicator that we have room to grow and a good bit of flexibility down the road.

Step #3 Launch a Lots of Products

Once I validated that my niche supports my income goals and that people are purchasing digital as well as physical products in my niche, I would begin the process of creating and launching products.

The very first thing I would be doing is launching the easiest products to launch in my space.

Creating the perfect digital product can sometimes take a few days, weeks, or even months.

This is where the flexibility of being able to use digital or physical products in our store really comes in handy.

If you're feeling a bit more flexible, you can often quickly create, launch, and so a few print-on-demand products in your niche. While you are working on mastering digital products, you'll be selling long-term. Long-term.

If you are not open to selling any physical products, I would still suggest taking the low-hanging fruit approach and beginning by creating the easiest-to-create products for your digital-only store.

The biggest reason for this is that we can start bringing in revenue, which not only helps keep us focused and motivated, but also allows us a bit more flexibility in whether or not we need to do all of the work ourselves.

On top of that, by getting products up and launched faster, we're able to start bringing in traffic and getting Etsy all of the positive signals. It needs to understand who we are and what we sell.

This allows us to shortcut the wait time when we launch the products that take us longer to create and can help us reach our revenue goals faster.

If you're interested in what happens when you consistently launch products, you may want to check out this article about what happened when we launched 30 products in 30 days on Etsy.

Step #4 Run a Sale/Promotion

After I have a handful of the low-hanging fruit products launched in my store, I would immediately start running a sale or Etsy promotion inside of my store.

This is where a lot of sellers get tripped up.

One of the most common things I hear is” I can't afford to do that, I need to earn as much profit as possible”.

Although I understand the sentiment and agree that earning a lot of profit is a great thing, we need to remember what drives sales on Etsy to start with.

Having a high-demand product and a well-crafted Etsy listing only gets us so far.

The number one driver of sales on Etsy is getting traffic and sales to start with.

Since we've already validated that there are consistent sales in the niche where we plan to sell, getting initial traffic and sales through something like a sale or promotion on Etsy is perfectly fine. 

Even if we profit a little bit less upfront, this will help us rank higher in anti-search and will drive us more sales, at our full price, for the month and years to come.

My suggestion would be to treat your etsy store like any brick-and-mortar store and run a grand opening sale.

Try keeping the sale to 7 days or less to get the most out of the Etsy promotional system a

Step #5 Run Etsy Ads

The last thing I would be doing to launch a new digital product store on Etsy in 2023 would be taking advantage of Etsy Ads.

As I mentioned, the real catch-22 of a marketplace like Etsy is that to get traffic and sales, we need traffic and sales.

There's no better way to jumpstart your success than using Etsy's built-in traffic source available to us through Etsy Ads.

We don't have to spend a bunch of money to make this work either.

In fact, in my wife's store, we typically limit our Etsy ads budget to around $5 per day.

This is more than enough to kick start traffic and sales coming into your store I just one of the most low-cost and no-brainer investments you can make if you're serious about growing your store.

If you'd like to learn a bit more about Etsy Ads and our experiences with them, you can check that out here.

A Quick Recap

If you were thinking about launching a digital product store on Etsy and 2023, following the simple five steps laid out above is a great place to start.

Scott Voelker

Over the years I’ve helped thousands of people TAKE ACTION to UNLOCK their true potential on building their ultimate freedom business, by developing the skills to make them resilient, confident and FUTURE PROOF. I’ve clocked my 10,000 hours over the years working in the trenches myself and helping others build and grow their brands. I know the power in TAKING ACTION better than anyone and I’ve seen people lives changed as a result of it...including my OWN!