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Based on my personal experience, I would strongly recommend new sellers to start selling digital products instead of physical products. Here is why:
More Passive
When you sell physical products, there's more preparation involved for each listing. Even if you automate parts of the process, you still need to put in the effort. Additionally, customer service becomes more demanding, especially when dealing with delivery-related issues. You may even have to handle customer inquiries about lost or damaged items.
With digital files, once the buyer buys your product, he/she can download the file and use it right away. That’s why digital products are so popular – customers don’t need to wait for anything.
More Attractive Profit Margin
With a physical product, you're dependent on the supplier's pricing. With a digital product, you can set your own price and have more control over the profit margin. You also don't need to worry about inventory levels as you do with physical products since there’s no limit to how many copies of a digital file you can sell.
For example, with inflation on the rise, the cost of Printify has already increased three times. On top of that, you have to compete with people doing drop-shipping with Ali Express products.
Less Likely to Get Bad Customer Reviews
With digital products, it is less likely to get negative reviews from customers. There are more issues with physical products such as shipping delays, product damage, supplier issues, etc. With digital products, these issues don’t exist, and customers are more likely to have a positive experience with their purchase. This makes it much easier to maintain a good reputation with customers and keep them coming back for more.
Personally, I can attest to this. In my digital downloads shop, with over 250 reviews on Etsy, I have only received two one-star reviews. In contrast, when I had a previous Print on Demand shop, I received a one-star rating on my fourth sale due to a delivery problem. This showcases the huge difference digital products have in terms of customer reviews.
Etsy's emphasis on buyer protection - creating disputes for physical product sellers
Etsy wants its customers to be happy, and unfortunately, some customers take advantage of this.