Considering starting an e-commerce business but you do not want to hold inventory? Do you have a special talent or skill that is marketable? Turn your strengths into profits by selling digital products online! But... What exactly is a digital product? What are the best digital products to sell in Hong Kong? How do you sell digital products effectively online? Let us now go through these points with you!
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What Is a Digital Product?
A digital product is an online asset or form of media where the ownership is transferable (either paid or free) from the content creator to the buyer. It can be sold and distributed many times without ever needing to replenish your inventory. Digital products could be downloaded or streamed online, e.g. PDF, audio or video files, software, and plug-ins, and can also be subscription-based, e.g. website membership access, and online lessons. Digital products could be turned into physical products though. For example, a poster could be printed from a digital photograph that you bought, or a 3D print of a mug from a print model you purchased online.
What Are the Best Digital Products To Sell?
Here is a list of the best digital products to sell online:
- Writing: e.g. E-books, online magazines and newspapers, academic papers;
- Audio: e.g. Instrumental tracks, sound effects;
- Video: e.g. Video animation intros, documentaries;
- Design: e.g. Wallpapers, photographs and prints, presentation templates;
- Photography: e.g. Stock photos, Photoshop or Lightroom presets;
- Software and tech: e.g. Apps, domain hosting, games;
- Education Services: e.g. Language lessons, financial planning and consultation, audits and proofreadings.
Here are some examples of popular digital products sold in Hong Kong:
- Minecraft app, HKD $58.28: A top-ranking paid app in Hong Kong; a 3D game where players build and deconstruct various types of blocks.
- Simple Gallery Pro, HKD $8.48: A photo and video browser, editor, and organizer.
- GoodNotes 5, HKD $62.17: A digital notepad and PDF markup tool app which could create and manage notes, annotate on PDF, and convert handwritten words into text.
Where Can I Sell Digital Products?
The best place to sell your digital products is on your own website. You could use tools and plugins such as SendOwl, Easy Digital Downloads, and DPD to generate a buy now button for your website or a payment link for your products that you could display across all of your social media platforms. Depending on the tool, you could even send abandoned cart emails, view sale statistics and generate reports, and opt for upselling and cross-selling for your published products.
If you do not have a website yet, you could create an online store on Sellfy or Selz to sell your digital products. These sites allow you to host and distribute large digital files that your customers would download. You can run promotions, generate discount codes and have access to a basic email marketing platform on Sellfy, while Selz features SEO options like adding a meta description for your products.
All these services range between USD $10 to $200 per month depending on the options and plans that you select.
When you have the download and payment links in order, you could then sell your digital products to a wider audience on online marketplaces such as Tmall, WeChat, Taobao, and on social media platforms such as Facebook, Twitter and Pinterest.
How Are Digital Products Taxed in Hong Kong?
The Inland Revenue Department of Hong Kong revised its Departmental Interpretation and Practice Notes no. 39 (DIPN 39) in March 2020 to update its laws regarding profits tax on online transactions and digital assets. According to the note, an e-commerce transaction could be “a pure online transaction” where the order made for the product and its delivery are both completed electronically —which is essentially what a digital product is.
Profits tax in Hong Kong is charged on a person only when these three conditions are satisfied:
- the person must carry on a trade, profession or business in Hong Kong;
- the profits to be charged must be from such trade, profession or business carried on by the person in Hong Kong; and
- the profits must be “profits arising in or derived from” Hong Kong.
Profits tax would be charged on a digital products seller if its core business and support activities are performed in Hong Kong. As the transactions are all made online, the location of servers, the seller’s business obligations and operations’ locations, and the type of usage of the products (for a purchaser’s own use or for sale) are all determinants in deciding whether or not the transactions are chargeable to profits tax.
If a business has its servers in Hong Kong (i.e. having a ‘permanent establishment’ in HK), it operates in and serves the Hong Kongese (and/or overseas customers), and purchases a digital product with the intention for sale later (either in raw form or manipulated), the business would be liable for profits tax. The current profits tax rate is 8.25% (up to $2 million HKD) or 16.5% (over $2 million HKD) of a corporation’s taxable income and 7.5% or 15% for unincorporated businesses. Do refer to Osome’s Guide to Taxes for E-commerce Business for more details.
Wise Corporation is a Canadian-based paid professional video-editing service provider. Users worldwide could have access to its services after making a purchase for them and receiving a one-time code for the services. Wise Corporation does not specifically advertise its services for Hong Kong, has no office in Hong Kong, and does not employ any staff in Hong Kong. However, its primary data centre is located in Hong Kong, leased from a third-party service provider.
In this case, Wise Corporation is liable for profits tax. This is because the data centre is considered as a permanent establishment in Hong Kong since it is an essential and critical component of Wise’s business activities.
10 Tips How To Sell Digital Products Online:
Quality Text and Images
When you are selling digital products online, the only customer touchpoint is through their screens. Thus, make sure the published text (or copy) on your website is grammatically correct, easy-to-read, and sounds professional and reliable. Never make your customers question the legitimacy of your offerings with sloppy write-ups. Engaging in digital products copy merits the extra time and effort that you need to come up with it.
- Use a tone and style that is consistent with your products and brand image;
- Proof-read your content for an error-free copy;
- Consider engaging a professional copywriting service if writing is not your forte;
- To complement good copy, include high-quality and high-resolution images on your website.
High-quality images speak volumes of the quality and trustworthiness of your digital products. Provide online shoppers with several images of each digital product if possible. High-quality images help convert visits to your website into sales by garnering more views to your site, increasing user engagement, and decreasing bounce rates. All of which would translate into more time spent on your site and increasing the conversion rate. Engage a photographer or designer if you want custom images, or you could also download or buy stock photographs from websites like Getty Images and Shutterstock.
Clear Product Specifications
Digital products such as software need technical product information to be presented clearly and concisely. Customers take product specifications and documentation into consideration when deciding on a big-ticket digital product purchase. Digital products shoppers increasingly prefer searchable online documentation and FAQs over downloadable PDF guides. Think about the questions that consumers would have about your products and make sure that they are addressed. Aid your customers with photos and videos for them to learn how to get your template, software or application, up and running quickly.
Your product information and documentation:
- Uses easy-to-understand, succinct, and not too technical language;
- Has pages with clearly defined sections, is easy-to-navigate and user-friendly;
- Includes SEO-optimized content and is mobile-friendly.
Provide Product Demo and Promote ‘Live’; Showcase Customer Testimonials
Besides recording a product demonstration video, you could also conduct a ‘live’ product demonstration or promotion for your digital products.
- Choose a social media platform that suits your brand image, like Facebook, Instagram or TikTok.
- Highlight the features, functions, and quality of your digital products through these demonstration videos or ‘live’ sessions.
These videos would build rapport and trust with your customers and manage their expectations better. Word-of-mouth recommendations and referrals are invaluable for an online seller, notably for new digital product sellers.
- Customers who had good experiences using your products would most likely write a review for you. Feature them on your landing page.
- Invite or incentivize them to leave a review for you and rate your app on app stores or online marketplaces.
- Use social listening to see what others are talking about your products and brand and listen to their feedback to improve.
Selling products via live streaming is really popular in China and Hong Kong on platforms like Taobao Live, WeChat, Xiaohongshu, and Douyin (TikTok). Live streaming could be hosted by influencers or the brands themselves, conducted by their sales associates. Live streaming is an excellent way to increase brand awareness, clear inventories, and reach a wider range of audiences.
Consistency is the key in live streaming. Peacebird, a Chinese fashion brand, has been running daily live streams for 18 hours per day since September 2020. Over the next five months, its GMV on Douyin saw an average of 78% increase per month, and hit a 1 billion RMB ($156 million USD) GMV only in a single month!
Redefine Value Proposition and Appeal Emotionally
Your value proposition, or how your products or services benefit your customers, should be at the heart of your marketing communications and online content. Check if your value proposition could be easily identified on your landing page copy, and your sales and marketing materials.
- Convey site visitors how your digital products would solve your customers’ problems and the specific benefits they offer. For example, ebooks or online courses would improve a buyer or subscriber’s understanding regarding a certain subject and even his life.
- Differentiate your products’ value propositions and explain how they are superior to your competitors’.
Moreover, you could make a connection with your prospective buyers when you use language that appeals to their emotions. Help prospects visualize how your digital products make them feel good, be successful, or feel secure. Explain to them how your products save their time and hassle or help them gain a new skill.
Engage With Users on Social Media
One of the best ways that a brand can increase customer satisfaction, brand awareness and sales is by engaging with their prospective buyers or current consumers via social media.
- Strive to respond quickly to customers’ queries in a polite and friendly tone;
- Be honest with them, e.g. if you are unable to fulfil their customization requests.
Hong Kong Airlines, for example, has a dedicated in-house social media team to focus on building relationships with their customers and widening their reach. It uses social media monitoring to track consumer sentiment scores and brand mentions across social media platforms. This allows Hong Kong Airlines to respond immediately to customers by monitoring conversations and channelling the correct department to attend to any queries or mentions. As a result, in 2017, Hong Kong Airlines achieved a 6x improvement in customer response time and naturally, brand sentiment increased positively by 212%.
Engage With Users on Social Media
Remarketing or retargeting is an online marketing strategy that promotes your website or products again after your customers have visited and exited your site. A tracking pixel placed on your website allows you to follow which other sites your prospects visit after yours. It would then place an advertisement of your product or services there, as a reminder for them to visit your site again.
- Target recent visitors to your sites, shopping cart abandoners, and/or repeat customers in this remarketing strategy;
- Schedule your ads so that they are not too frequent, else it would overwhelm and irritate prospective buyers;
- Test which part of the ad (visual, promotion offer, or headline) helps convert visits into sales (A/B testing).
Bupa is a Hong Kong personal and corporate health insurance provider. Responding to the COVID-19 pandemic, it employed a holistic Facebook strategy to address the uncertainties of living in a pandemic. Firstly, it launched brand awareness ads through videos and photos on Facebook, alongside its #StayFitAtHome Instagram hashtag and filters. Next, Bupa then remarketed ads to website visitors, ad viewers, lookalike audiences, and those who engaged with its Facebook page from Bupa's initial brand awareness ads. Doing so, it gained a 38% lift in quality leads and a 28% increase in revenue compared to business-as-usual campaigns.
Create a Sense of Urgency
Sales signal a sense of urgency, and consumers would buy more ‘just because it’s on sale’.
Similarly, you could apply the same concept when selling your digital product online. These are some of the strategies that create a sense of urgency for you to employ to sell your digital products:
- Create a sense of scarcity and instil fear of missing out (FOMO). For example, Booking.com prompts that there is just one “last room left” when customers are browsing to book hotels.
- Use short call-to-action words such as “hurry”, “one time offer”, “today only”, “clearance”, etc.
- Set deadlines when giving out discount coupons, and free delivery.
- Incorporate countdown timers to indicate the hours, minutes and seconds that pass by before your promotion ends.
Neuroscience Marketing reported that adding a countdown timer increased revenue by 9% in a test where time left for next-day delivery was displayed. This method is really effective on impulse and repeats buyers.
Use the Voice of Your Customer
It is useful to conduct market research, surveys and focus group testing before launching your digital products online. From there, you gauge the voice of your customer and find out their wants and needs, expectations, pain points and aversions. Take note of the language and lingo of your target market, and use the voice of your customers across your ads and website copy to relate and engage with them better.
Smooth Payment Processing With As Many Payments Methods As Possible
Alright, so your prospective buyer viewed your ad and clicked it. She scrolls and browses through your product catalogue and adds three prints into her shopping cart. At checkout, she needs to select the paper type, confirm her print dimension sizes, agree to the copyright terms, fill in her name, address, email, delivery address, billing address… and her doorbell rings and she abandons her cart.
Try these methods when you sell your digital products on your websites to avoid cart abandonment:
- Make sure that your checkout page is easy to navigate and the payment processing smooth.
- Skip unnecessary form-filling and make sure that any information entered would be saved automatically if the buyer happens to navigate away for a while. This is to avoid them from needing to start all over again.
- Provide as many payment options as possible. Debit and credit cards, PayPal, digital wallets, etc. Ensure that your region’s most popular payment options are included.
Alipay, UnionPay, WeChat Pay, PayMe (HSBC-operated app), Mastercard, Visa, American Express, Apple Pay, Google Pay, (and now even the Octopus Card’s mobile app) are all popular and widely-adopted payment methods in Hong Kong. Ensure that you include them to sell your digital products online in the best possible way in Hong Kong. Consult Osome’s Guide to the Top e-Commerce Payment Gateways in Hong Kong to find out more.
Follow Up, Follow Up, Follow Up
Follow up with your customers after their purchases too. Send them a thoughtful follow-up email to thank them for their purchases. Offer and remind them about your after-sales services and support should they face any problems when accessing and using your digital products. Doing so would increase customer retention and create brand loyalty.
Osome is right beside you to support your digital products online store, with our accounting for e-commerce businesses. Focus on your business, and leave the nitty-gritty admin work to us. Osome’s Hong Kong Chartered Accountants are just a chat away for all your queries.