What is Gumroad?
Gumroad is a popular e-commerce platform that allows creators to sell digital products such as books, courses, and videos directly to their fans and customers. It is especially popular among creators who make $10,000 or less per year, with a business model centered around providing creators with tools to build product and checkout pages to make online sales and payment processing quick and simple.
How does Gumroad make money?
Gumroad's business model is simple: it makes money by charging a flat 10% fee for every sale made through the platform. Gumroad used to have several tiers of fees based on the creator's lifetime revenue earnings, which allowed creators with more revenue to have lower fees. However, they have recently simplified their fees, charging a 10% flat fee per sale across the board.
The 10% flat fee doesn't include payment processing or Paypal fees, but it is the only fee Gumroad will charge you directly. That is unless you make a sale through Gumroad's "Discover" feature.
Gumroad Discover is a featured page on the website that acts almost like a marketplace, recommending your products to new prospective customers. It can be a great way to get in front of new audiences and boost your sales, but it comes at an additional 10% in fees. So, if you make a sale through Gumroad's "Discover" feature, you'll be charged a 20% fee for your sale.
Keys to Gumroad's Success
So what are the keys to Gumroad's success, and how have they managed to become one of the most popular e-commerce solutions for content creators? A few main factors stand out, so let's take a look.
Sticking it out
Did you know that Gumroad's CEO, Sahil Lavingia, had to lay off most of his staff at one point at the beginning of the company's growth? Despite this setback, he committed himself to continue running the startup in support of the thousands of creators who already relied on Gumroad for their businesses. Because of this dedication and "just keep swimming" attitude, Gumroad continued to grow and became one of the leading platforms for selling digital content online.
Keeping it simple
While there are plenty of e-commerce platforms out there for creators that act as an all-in-one solution for selling online, Gumroad focuses solely on product pages and checkout. This eliminates any extra features that can lead to a cluttered and confusing user experience and the need to charge higher fees.
In fact, CEO Sahil Lavingia, originally built the platform over a weekend to solve his own problem of how to sell a digital product quickly and easily without complicated coding and the need to have his own website to place the code on.
Traditional sales tactics
According to Lavingia, initially, he didn't invest in content marketing, social media marketing, or any modern digital marketing tactics to start building the Gumroad brand. Instead, they focused on using traditional sales tactics like cold emailing.
Lavingia reports that they sent thousands of emails, and "that's the only way, really, when you're young, and no one cares or knows who you are, to get folks to use your product." From there? Word of mouth took over, and Gumroad's growth slowly began to snowball.
How does Gumroad's pricing compare to competitors?
Many other platforms also provide tools for creators to sell their products online. Below we'll compare the fees and business models of three of the most popular e-commerce platforms, Gumroad, SendOwl, and Shopify.
Gumroad vs SendOwl
SendOwl is probably the most similar to Gumroad. They were both built with new and up-and-coming creators in mind, providing a way to quickly create product pages and sell online. While there are some differences, we'll focus on fees this time.
Gumroad's fees are 10% per transaction (plus payment processing fees), with no monthly fees or hidden costs if you're selling directly to your customers.
SendOwl, on the other hand, is a bit more complicated. There is a free monthly plan where you will pay a 5% fee for each sale. However, if you're a higher volume seller, you can upgrade to the growth plan for $19/month, which removes the 5% fee and gives you more customization options.
Gumroad vs Shopify
Shopify is hands down one of the most popular e-commerce platforms. Compared to Gumroad, it provides more complex tools for building online stores, so it's great if you need all those extra features. But how do they compare in fees?
We already know that Gumroad charges a flat 10% per sale (plus any payment processing or Paypal fees).
Shopify, on the other hand, has several pricing tiers, and you will have to pay a monthly fee. For their basic plan (which you can usually get a free trial for), you will pay $29 per month. There are no transaction fees charged directly by Shopify, but you will pay payment processing fees.
Looking at Gumroad compared to both Sendowl and Shopify, Gumroad is an attractive option if you're looking for a simple platform and you're only making a handful of sales per month. However, if you're consistently making at least a couple hundred dollars a month in sales, SendOwl and Shopify may make more sense fee-wise.
