Drop Shipping and Digital Products on Etsy: Your Next Passive Income Stream?

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Melissa MacDonald

Etsy is no longer just the marketplace of handmade crafts! Yes, you can sell digital products like printables and even drop ship physical goods without ever touching your inventory.

We haven’t really discussed Etsy in detail for a while. But I thought it was time to take a closer look at this platform again, as it’s seen tremendous growth in recent years.

Opening the doors for you to create your own passive products — both through digital downloads and drop shipping physical products.

In fact, since 2015, the number of Etsy buyers has more than doubled — far outpacing the growth of Etsy sellers.

So, if you are currently selling online or have an idea in the pipeline, you’d be crazy to ignore the potential Etsy holds as a “Buy Buttons” platform.

Melissa MacDonald is a long-time Etsy seller who now focuses her efforts on Etsy marketing and optimization for other shop owners.

Tune in to hear Melissa’s process for coming up with new passive income product ideas, her favorite tools for running a hands-off Etsy shop, and how to optimize your listings for conversion and sales.

How to Do Product Research on Etsy

Melissa opened up by saying, “One of the first things I would suggest is — if you’re really looking for a passive income stream — one of the top sellers and easiest [categories] to get into is digital downloads and printables.”

The way Melissa approaches this is to pick something she has experience with, such as a skill or a product that can be turned into a digital download. She then does some research to see what’s already selling well on Etsy and how she can provide a similar product with added value.

Using Etsy Suggested Search

To do this, she starts by typing what she’s interested in selling into the search bar on Etsy. This brings up a list of autocomplete keywords in order of the most searched terms.

For example, maybe you’re are good with budgeting and want to make some kind of budget-related digital product.

When I type “Budget” into Etsy, I see suggestions like:

  • Budget Planner
  • Budget Stickers
  • Budget Spreadsheet
  • Budget Planner Printable a5

etsy search auto suggest

These are all digital downloads that are selling well on Etsy. Melissa said it’s important to look at what’s selling for inspiration, but not to copy what’s already there.

Instead, Melissa told me to be “looking for what you can specifically add your own twist to and add your own bonuses to.”

Think of Seasonal Products

This free ebook will help guide you toward some top-selling seasonal printable ideas.

The Best Etsy Product Research Tools

Keyword and market research is always easier with tools. Here are the tools Melissa uses to do carry out keyword research and optimize her listings:


Also called Etsy Rank, this tool has free and paid versions.


It gives some good insight into the level of demand and competition for keywords and you can track your own search ranking. Melissa said the free version offers enough to get you started.


This is a paid-only tool. It goes into more analytic detail about demand, keyword engagement, and how competitor shops are performing, and more.

Google Trends

Melissa uses Google Trends to look for things trending upwards as inspiration for ideas. Such as cultural and pop trends, things that have viral, and so on.

Etsy’s Blog

This is an interesting one. Melissa said Etsy announces upcoming trends on their blog at the beginning of a new calendar year. At the end of 2018, Etsy predicted that the trending color for 2019 was going to be burnt orange.

(This just so happens to be the color of the Etsy logo, but Melissa assured me that’s a coincidence.)

Melissa said that you should take notice of trends like this as it increases your chance of having your products or shop featured by Etsy. So, make at least some of your items available in burnt orange this year, and keep an eye out for their trending color for 2020.

Pantone, a company known for color matching, is also another place to find color inspiration. Every fall they nominate a color for the year, and in 2019 is was Living Coral.

Etsy also predicts an animal that will trend each year. For 2019, it was the sloth. Something else to try and weave into your products to capture a featured listing or on Etsy.

Etsy Print-On-Demand and Drop Shipping Suppliers?

If you want to dropship or sell print-on-demand items on Etsy, you’ll need to work with a supplier that can fulfill these orders as they come in.

Melissa recommends testing out a few companies and ordering samples to see how they handle customer service from start to finish.

The two companies she works with mostly are:

She likes both of these companies for different reasons. It’s little things they each do differently she’s noticed over time using them to fulfill orders.

(I was playing around with a supplier called Gooten. Their prices tend to be lower, but the interface and support are pretty weak compared to Printful, so I’m making a change. I’m still trying to find a supplier for the Next Level fitted tri-blend shirts though — they’re the best!)

How Do You Make Your Digital Products Stand Out on Etsy?

It’s become so easy to create a design and syndicate it across dozens of products that the digital marketplace has become crowded to say the least.

To help you cut through the digital clutter, Melissa shared a few tips to help you get your products found and stand out from the crowd:

Niche Down and Focus

She said the number one mistake her clients make is not staying focused on what’s working for them. Don’t add your logo to a dozen different products, instead focus on 1-2 types of products and keep them relevant.

Know Your Keywords

Just like Google, Etsy is a search engine for shoppers using their marketplace.

“It doesn’t matter how awesome your product is, the only way you’re going to get found is by having them optimized properly,” Melissa told me.

You can use the autocomplete feature in Etsy’s search bar and the tools Melissa recommended earlier to find the keywords you want to target. She recommends you then include them in your title, tags, and descriptions.

Don’t shy away from using all the characters allowed in your title. Melissa said the more keywords in the title, the better. Just make sure it reads well and doesn’t look like a string of stuffed keywords.

When you’re listing your products, Etsy allows you to add some tags to your listing. Melissa recommends listing your keywords as tags as this helps the SEO of your listing.

Put Effort into Your Shop Presentation

On Etsy, you’re building an online store. The more you treat it like a real store, the better you’ll do.

Melissa said that you should put time into your store presentation if you want visitors to trust you on first impressions.

For beginners, she also recommends putting up 10-25 listings as quickly as you can. Seeing a stocked store with multiple products to browse helps build trust with new visitors. It also helps with SEO and improves your chances of being found organically within Etsy.

If you only have a couple of products, make separate listings for different color versions of your products.

Why You Should Offer Free Shipping on Etsy

Etsy wants shop owners to offer free shipping. This is such a priority for them, they’re even giving an internal SEO boost to products with free shipping.

The problem is that they don’t pay for shipping, so you need to factor it into your margins. Melissa recommended just adding the cost of shipping to your items so you can advertise free shipping.

With this in mind, it’s worth considering how easy or expensive it is to ship items before listing them in your store. You might want to restrict that free shipping to just the US too. Otherwise, you might be caught by an expensive overseas shipment eating up all your profit.

Gathering Reviews on Etsy

Positive reviews are important and help your SEO on Etsy, just as they do for Amazon, eBay, and other online selling platforms.

The interesting thing about Etsy reviews is that they’re displayed at the shop level, not individual products. So, the reviews have an impact on you as a seller more than how good or bad an individual product is.

Customers can leave comments on your items to help other shoppers though.

Offering Customizable Products on Etsy?

Melissa said sellers that customize their products perform better on Etsy.

If you can make your downloadable files editable by the customer, or give them some options on colors or names before buying, you’ll get more sales.

How Does Digital File Fulfillment Work on Etsy?

“Etsy has made it nice and easy for us shop owners,” Melissa told me.

You create a listing for your product and upload your digital file. When a customer buys your product, Etsy sends them the download.

After the initial work has been done to create your listing, that’s about as passive as it gets!

If you’re wondering why someone wouldn’t browse your product and make their own DIY version, Melissa shared a couple of tips to protect yourself.

  1. Watermark any images so they can’t be printed off and used from your listing.
  2. Give a detailed description of your product without showing too much of it visually.

Copycats aren’t something Melissa worries about. Generally speaking, the audience you’re targeting with these types of products are people who want the quick and easy solution–not those who are looking for ways to make their own version.

Melissa’s #1 Tip for Side Hustle Nation

“Choose something that you’re passionate about, that you’re interested in and how can you convert that into a file or a PDF that can help others.”

Want to Learn More?

A couple friends of mine from the FinCon community teach a popular course on selling Printables on Etsy.

(It’s normally only open a couple times a year but they gave me a secret access link just for Side Hustle Nation!)

Or if you’re looking for a little more inspiration on the types of printables you could sell, check out their free ebook on top-selling seasonal printable ideas.

Links and Resources from this Episode



  • Ezoic – Get a Google PageSpeed score of 80 or better with a 7-day free trial!


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Nick Loper

About the Author

Nick Loper is a side hustle expert who loves helping people earn more money and start businesses they care about. He hosts the award-winning Side Hustle Show, where he's interviewed over 500 successful entrepreneurs, and is the bestselling author of Buy Buttons, The Side Hustle, and $1,000 100 Ways.

His work has been featured in The New York Times, Entrepreneur, Forbes, TIME, Newsweek, Business Insider, MSN, Yahoo Finance, The Los Angeles Times, The San Francisco Chronicle, The Financial Times, Bankrate, Hubspot, Ahrefs, Shopify, Investopedia, VICE, Vox, Mashable, ChooseFI, Bigger Pockets, The Penny Hoarder, GoBankingRates, and more.

4 thoughts on “Drop Shipping and Digital Products on Etsy: Your Next Passive Income Stream?”

  1. I had good experience on Etsy a couple years back. Good sales that were growing every month. But then my two stores were shut down with no warning for minor violations that could have been easily resolved. After many emails for another chance, every response I always got was sorry you’re a threat to the Etsy platform. Don’t sign up again.

    I waited a year and decided to email again. Maybe they had a change of heart. Nope. Same response.

    Yet I go there and see so much trademarked Disney stuff selling illegally on there.

    So just be careful. Play by the rules. :)

  2. „ downloadable files editable by the customer, or give them some options on colors or names before buying, you’ll get more sales.“
    I have no idea which file (product) this could be and why customers shozld be interested in this kind of customitation. Do you have some examples for me?
    Thank you.

  3. Hi Melissa ,
    My name is Kim, I recently open an online store . Unfortunately I’m not getting any sales can you give me some pointers .
    Thanks Kim :)


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