Pricing your goods for sale on Etsy is a sticky subject and so often a personal one. How do you price fairly, yet give yourself a fair wage? Many Etsians are said to be underpricing their handmade goods which affects the community as a whole. There are ways, however, to price your items reasonably, allowing you to earn your fair share, while pricing according to the handmade quality and time it takes to make your products.
So why is it so important not to undervalue the price of your goods? For one, you have to remember that we are making handmade, not mass-produced goods. Because we are not mass-produced, it takes so much more time to do all the requisite tasks of making the item as well as the additional hour or more that it takes to photograph, list, package and ship your items. Furthermore, when you price low, you force other Etsians to lower prices to compete and in turn, hurt the handmade movement. Not to mention that sourcing eco-friendly goods to make our items, as we EcoEtsians do, also takes much more time.
When I was trying to determine the price of my gift tags, I was crushed to see a fellow Etsian charge only $1.00 for 20 of the same size tags for my 15. I knew I couldn’t compete with price, so I focus on making my products and descriptions stand out on the things they don’t â€“ they use a die-cutter which can pop out hundreds of tags in minutes â€“ I hand punch mine individually; they use mass-produced cardstock for their designs â€“ I scour magazines/junk mail for hours each week for one-of-a-kind, usable images that give a second life to paper that would be otherwise tossed. I also give thickness to my gift tags by adhering recycled images onto reused paperboard like frozen pizza boxes and cereal boxes â€“ also giving a second life to paperboard which aren’t recyclable in my community. Upcycling and making things by hand takes time and if I priced my goods based on that competitor, I would effectively bring down my hourly wage to below sweat-shop level â€“ we’re talking cents here.
â€œ I think it’s important to price your work fairly. Don’t underprice yourself. Even if you don’t have much money wrapped up in materials, for example if you’re using recycled materials, you still need to pay yourself as material gatherer, designer, maker, marketer, and shipper,” says Lisa of lilfishstudios.
When determining your price, you need to calculate, at a minimum:
- materials used in making the item
- your hourly wage
- packing materials
- etsy fees
- paypal fees
Of course, this doesn’t even take into considerations additional fees like electricity (for the sewing machine you use all day), the tools that you purchased to make your items, the ink used to print out business cards/promotional materials/shipping labels, the taxes you’ll need to pay out at the end of the year, etc. etc. It can get maddening, but all the more reason to price even higher than you think to cover all these hidden costs that you don’t account for. You might be surprised at what your customers would be willing to pay
A rudimentary way of calculating your costs and retail price is by using the following calculation:
- determining the cost of your materials â€“ example, it costs you $7.50 for the goods to make earrings ($7.50)
- determining the cost of labor â€“ example, you want to be paid $15/hour (most Etsians want to be paid between $10-$30/hr.) and it takes you two hours to design the item, make it, photograph it, list it and package it for shipping ($30.00)
- determining your fees â€“ example, 20 cents posting fee plus 3.5 fee on Etsy and 2.9% fee on PayPal + 30 cents (using the $37.50 already calculated above, fees would be $3.51)
- Determine total cost ($7.50 + $30.00 + 3.51) = $41.01
- Determine retail price â€“ your total cost x2 = $82.02
However, some sellers feel that using this type of calculation prices their product out of range. To these sellers, the opportunity to make money on a craft they would make anyhow and to see someone use and love their product is worth it. For others, they are looking to support their hobby and turning a profit isn’t as important.
Using my aforementioned gift tag story as an example, if I really calculated the costs associated with making them using the above calculator, I would have to price them at $45.22 â€“ for 15 recycled paper gift tags? Though I don’t want to undervalue my work, I can’t imagine anyone paying that price, or a quarter of that price, for that matter. Does this mean I shouldn’t make an item I enjoy making while watching TV with my husband? I don’t know the right answer.
But how does this notion of thinking impact the handmade market on the whole, especially those looking to support themselves and their families with their work? Lisa of lilfishstudios states that,
â€œ When you underprice your work, you’re kind of bringing the value of the neighborhood down for other crafters. Handcrafted goods should be valued above mass-produced goods, and we shouldn’t try to compete with them price-wise. I avoid having [reduced-price] sales for this reason. I don’t want people coming to my work looking for a bargain, I want them coming to my work looking for something they love.â€
Lori of OneShadeGreener states, “I’ve read a number of models on pricing theory and I think you need to find the one that feels most comfortable for your business.”
The calculation she uses and that feel right for her business is as follows:
Price of materials + Labor + Profit = Price. Here’s how I define those categories.
Price of materials â€“ I have a unit cost for each piece of material â€“ ie. 10 beads purchased for $3.00 = $0.30/bead. I even estimate the cost of the wire used in each jewelry design.
Labor â€“ I determined my â€œHourly rateâ€ that I was comfortable with and divided it by 60 so that I have a per minute cost. So, if you use $60/hour it is $1/minute. $30/hour = $0.50/minute, etc. When I create a piece, I check how much time it takes and add this as â€œLaborâ€
Profit â€“ I use a 10-20% profit on retail sales and a 5-10% profit on wholesale orders
Though none of these are endorsed by EcoEtsy or Etsy, here are some online tools out there that might help you with figuring out your pricing:
Online calculators (Allows you to determine how much you’d make on an item after plugging in cost, etc (no labor though) or you can plug in the amount you want to make and it will determine for you the cost you should charge): http://www.rolbe.com/etsy.htm
Etsy seller created spreadsheets (I don’t personally know these sellers, but checked their feedback on these items – all positive – and it’s always good to support a fellow Etsian if you want a shortcut to help you with figuring your pricing): JessieGrace, LLDesign, and inspiredillustration
Keep in mind that many tools only account for hard costs and not your time â€“ the most important thing â€“ so keep this is mind!
Uncertain about your prices? You have the whole EcoEtsy community to support you yet give you honest answers. Feel free to post on the Yahoo group or here and ask for team members to check out your shop and give you some feedback on your prices!
Here are some more questions to continue this discussion:
- Do you price lower in the beginning to get yourself out there and raise them as you become more in demand or do you price higher out of the gate to set a platform for your business going forward?
- Have you had anyone tell you that your prices were too high or low? How did you respond?
- Have you found a pricing method or middle ground that has worked for you?
Please share your answers in the comments below; let’s keep this conversation going. Oh, and if you wouldn’t mind checking out my tags and giving me a price check, I’d certainly appreciate it as I, like many others, struggle with this issue!
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