Gumroad Lowers Prices For Artists And Designers

Gumroad lowers prices for artists and designers

In a press release today, Gumroad announced a new pricing structure that streamlines the platform's fees and features, making it easier for creators to start selling products and memberships online. Despite the fact that Gumroad was one of the first businesses to assist people in selling things online, the company's decision to change its business model comes as the online marketplace becomes even more competitive.

A major change is the elimination of Gumroad's free and paid "Pro" tiers, which were previously available. In the past, features such as using a custom domain name or providing HD video streams were only available with a $10 monthly subscription from Gumroad. This caused some consternation among new users, who wondered whether it made sense to pay upfront. Now, everyone has access to the same features without incurring additional costs or running the risk of overcommitting their resources.

In exchange, fees begin at a higher level — though sellers may end up with lower overall fees — than they would otherwise. There is a new transaction fee of 9 percent plus 30 cents on Gumroad, and it applies regardless of whether you are selling handmade comic books or a membership to an online cooking class. In comparison to the previous fees of 8.5 percent plus 30 cents for the free tier and 3.5 percent plus 30 cents for the paid tier, this is a higher rate than before. But as creators reach higher sales milestones, Gumroad plans to reduce its cut, which could eventually be down to as little as 2.9 percent plus 30 cents per sale. 

The following summarizes the various percentages of the various fees

• For earnings between $0 and $1,000, a fee of 9 percent is applied to the total.
• A 7 percent fee is levied on earnings between $1,000 and $10,000.
• A 5% fee is levied on earnings between $10,000 and $100,000.
• Earnings between $100,000 and $1 million are subject to a 3 percent fee.
• A 2.9 percent lifetime fee is levied on earnings in excess of $1 million in a single year.

Gumroad credits the $5 million it raised through regulation crowdfunding for enabling it to experiment with a more creator-friendly setup in the first place. This is money that has been contributed directly by a combination of ordinary investors and 2,800 Gumroad users. (If you're interested in learning more about SEC-approved crowdfunding, Backstage Capital CEO Arlan Hamilton spoke on Decoder about some of its potential.) According to Sahil Lavingia, CEO of Gumroad, the initiative is a "Kickstarter for equity."

Because of the increased flexibility provided by that funding, as well as a subsequent investment, even more features are on the way to being implemented. In the coming months, Gumroad will concentrate on enabling creators to further customize their pages and storefronts, which will be particularly beneficial for the estimated 85 percent of creators who specialize in digital products, according to Lavingia.

Finally

With larger companies such as Twitter and Facebook focusing their attention on creators, Gumroad's competition is only going to become more difficult to compete against. A good strategy for staying competitive is for Gumroad to provide customers with more features at a lower price.