Pricing your work

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.

A lil' self promotion from the author never hurt anyone ;)

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 – they use a die-cutter which can pop out hundreds of tags in minutes – I hand punch mine individually; they use mass-produced cardstock for their designs – 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 – 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 – we’re talking cents here.

“ 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.

From 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 – example, it costs you $7.50 for the goods to make earrings ($7.50)
  • determining the cost of labor – 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 – 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 – 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 – 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,

“ 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.”

From lilfishstudios

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 – I have a unit cost for each piece of material – ie. 10 beads purchased for $3.00 = $0.30/bead.  I even estimate the cost of the wire used in each jewelry design.
Labor – I determined my “Hourly rate” 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 “Labor”
Profit – I use a 10-20% profit on retail sales and a 5-10% profit on wholesale orders

From OneShadeGreener

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 – the most important thing – 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!

This post was written by

Greenearthgoodies – who has written posts on Eco Etsy.

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Comments

  1. This article is fantastic! That conversion calculator was saved to my favorites immediately. I have long struggled with fees because I sell so few items overall so I never seem to remember what the rate / $ is for Etsy, PayPal, etc. Thanks for including that along with so many wonderful tips.

    I have struggled with price too, especially because many of the materials that I acquired to make my items I didn’t have to source at all, they came to me when clearing out my grandparent’s estate. To me its like paying it forward to keep the cost of each item really low because I got the materials (except thread) for free so why charge something rediculous? I charge what my labor & design time are worth.

    Doesn’t always translate to sales (not that I’m alone in that realm, I know) BUT, it does make me feel good about what I put out there and how it is marketed. :-)

  2. Right, my blog post wasn’t about the chiropractor’s success or lack of success or whether he could or could not afford that car- I also don’t assume people can afford something just because they have it- it was just about my working through my feelings about seeing the new, red jaguar at the time his prices had increased coupled with my lack of insurance for chiropractic care – just a little lesson in self-righteousness for me that I wanted to share there. The point of the post is that since I am expanding, why would I begrudge someone else their own expansion- whatever that is to them.

    I would agree that if we price too low our items will look cheap. And I don’t think the Etsy customer is cheap, but I do think there is alot of stuff on Etsy that is underpriced and we have kind of trained our customer to expect certain pricing that doesn’t always reflect the actual work and skill of the maker.

    If someone sells a scarf that takes them 4 hours to knit (I have no idea if this is how long it takes to knit a scarf!) and an hour to ‘market, sell, ship’ and they only think about the cost of their yarn and they sell the scarf for $25.00 and I am another knitter and I want to pay myself more than $5.00 an hour and I have to sell next to this person and I determine I need to sell my scarf for $60.00, well then I have to do a really good job of talking about my process, my materials, my experience, marketing my item and connecting with that customer (not to mention actually producing a high quality item), and it can be done. I might sell half as many, but I will make more money in less time.

    I think many of us sell ourselves short and we need to support each other in not doing that. Many of the scrabble tile sellers have been in a race to the bottom for years (I expect them to be free soon) and it’s just a race nobody wins.

    This is a great topic- thanks for this post GreenEarthGoodies.

  3. jennifer says:

    kat,

    this is something i’ve been hearing a lot, and i think for most people it is true:

    “If an item is priced is too low, I’d think, “What’s wrong with this item?” By the mere fact that something is priced at a competitive price, I’d think, it’s well made and worth the price”
    if the artist/maker doesnt feel confident enough in the product, why should you? i get it, i think, finally! thanks….

    interesting comments about the chiropractor/jaguar thing as well. i think i must be in a minority here, as i never look at someone who is outwardly showing signs of success and assume this to be the truth. in fact, i often think the opposite! (( which im guessing is why you were taught to lease cars on sale, to give the “appearance” of success)). yes. this is an interesting topic, capturing all of the many faces of marketing/advertising/economics today.

    thanks, jennifer

  4. Cat and Jennifer,
    That Jaguar in Cat’s blog is a symbol of how great the chiropractor is. And by the way, he could have been a plumber, an electrician, a carpenter (who can make 6 digit income with benefits and OT) or a HANDMADE artist. Would you want to go to a chiropractor who dresses worse than you and drives an old clunker?…which can signify that he is NOT a successful doctor because he’s not a great doctor? But FYI… it’s also a possibility that he got the Jaguar with no money down and during a deep discounted monthly leasing program sale. It’s ALL about the outward appearance of a “successful” doctor. I know this because they used to teach us at the Practice Management Seminars to lease expensive cars (during a sale, if you have to) to make you look successful…..which leads me to the pricing topic.

    If an item is priced is too low, I’d think, “What’s wrong with this item?” By the mere fact that something is priced at a competitive price, I’d think, it’s well made and worth the price. I wouldn’t question the quality or the value. I recently bought something on Etsy and I questioned it’s quality even before I bought it because it was too cheap. And guess what? My gut feeling was right. It is unraveling at the seams after having it for less than a month.

    So, don’t sell yourself too short. Price your items to their true value and how much work you put into them, even if you used recycled parts. What does Meredith Baxter used to say in the Clairol Hair Color commercial? “We are WORTH it!”

    *I am a retired Chiropractor who drove a BMW when I was able to lease it at $399/mo. with no money down. Don’t hate me.*

  5. Hi

    This is an excellent article, I have long thought that many makers work is underpriced and have often wondered how to price myself competitively in this market. It is hard to change the customers (and other makers) judgements on pricing and articles like this help a great deal.

    For us UK etsians out there, some pricing guidance that incorporates the ever-changing exchange rate would be good.

    Many thanks

    http://www.twitter.com/_oblue
    http://www.facebook.com/HandmadebyOblue

  6. There are some more good posts about pricing on Megan’s blog here:

    http://www.craftmba.com/

    and about the difficulties of pricing within a community that supports both hobbyists and businesses. I agree with Tammy that we shouldn’t price with our own pocketbooks in mind!

    And Jennifer- to tell the truth that Jaguar still annoys me!

  7. Cat:

    Thanks so much for the link! Just finished watching/listening.

    Of course: my first reaction with these marketing things is (usually) aghast at the manipulation and dishonesty involved….For instance…if Apple’s “why” REALLY about going against the status quo (or whatever he said)? I guess Im not sure…..I don’t know that I could ever truly know…

    Second reaction is probably more realistic and useful, thinking about the weight and responsibilities we all have in our communications. Certainly, we can all express our “why” in an honest and compelling way, in a way that allows folks to support things that they…well…want to support!

    As a side, and related note, I was just reading your blog Cat, and happened upon your entry regarding the chiropractor’s new jaguar! Quite fitting to this discussion/topic, I believe!

    In talking to other designers about pricing, I think “confidence” comes up a lot. Like, people don’t often have the confidence in their products to price them appropriately. Certainly, that applies to myself: and for right reasons, as I feel I have not yet “solved”, or come close, the challenge of selling a cohesive group of clothing on-line.

    Anyway, thank you Cat for the mind-stuffs today! Much appreciated.
    Sincerely, jennifer

  8. This is a hot topic at the moment, as well it should be. Pricing is a skill that we artists/craftspeople have to learn. I sometimes hesitate to tell buyers that I work with remnants because they may think that I charge too much for a scrap of (very luxurious decorator) fabric. But so much goes into pattern making, sewing and finishing that I end up spending a lot of time on even the smallest piece. The other consideration for European sellers is the strength of the euro. We get only a percentage of our dollar price once the conversion is done on paypal. Pricing for an American buyer is tricky because of the Walmart mentality prevalent in the US. Prices are generally higher in Europe, so buyers don’t expect things to be super cheap. But I suppose our target customers are not those looking for super cheap products, anyway.

  9. When pricing, I sometimes balk at putting a higher price on my items – but I then remind myself that I’m not trying to sell to ME. I wouldn’t/couldn’t spend money on the things that I create – but there are people out there that appreciate handmade and aren’t crafty themselves. Those are the people I price to and my local boutique sales have never suffered.

  10. Jennifer – here is the link http://www.ted.com/talks/lang/eng/simon_sinek_how_great_leaders_inspire_action.html

    I listen to Ted talks all the time- there are so much inspiration there.

    I heard this talk the same day that an article written about me came out in which the writer said that I “SIMPLY take an old car part and solder a hook to it- how easy is that”. Now, she meant me no disrepect in saying this and she was talking about simple design and ingenuity, but it did get me thinking that I do a terrible job explaining my process which is actually – clean it, drill it, cut the hook, ‘solder it’ with a propane flame, sand it, paint part of the inside so it doesn’t rust, clean it again and seal it. Not that I am going to say all this- but maybe something in my item’s descriptions a bit more than “I solder” would be a good thing (one of my summer goals as my prices move up from $20-$24).

    And when we work with recycled and lower cost materials we need to do a good job of explaining our process and we need to explain our vision- WHY we do what we do. Eco sellers have a real advantage with the WHY. I think if we do these things well – people will connect with us and they will pay us more. We will always miss out with the shopper who is looking for the cheapest thing, but she is not our customer anyway and if we try to connect with her- and take our prices lower than other sellers to do that- we all lose.

  11. I think this was a very helpful article, and the price on your tags is very fair. I just sent my tips via email – ha! That’s me, a day late and a dollar short! (-:

  12. This is a great article, and I’ve been struggling with this as well. One of my goals is to make beautiful things people can afford, but you run into a real problem when you want to sell the items through a store. The markups add up so fast.

  13. Great article! Thanks for all the helpful info and the prices on your site look great. :)

  14. Cat: I’d be interested in hearing a bit more about this talk you bring up:
    “People WILL pay us more for handmade if we give them a reason to- I just saw a great TED talk titled- People Don’t Want Your What- They Want Your Why.”

    In general, pricing does seem to be an interesting challenge! I tend to think that since my lifestyle is simple and my expenses seriously low, that I should not charge much for items….But that neglects any “true” value of a piece!

    Any comments (on pricing, etc) are much appreciated: http://www.feralfinds.etsy.com

    Much thanks…jennifer

  15. Very good article. Pricing is a complicated process and it is totally up to us as makers working with recycled and lower cost materials to educate people about the process that goes into each piece and the unique design behind the piece that adds to the value. Handmade can not compete on price and if we do that to each other- we will all lose. I don’t want to shop/work for Walmart and I don’t want to BE Walmart either.

    People WILL pay us more for handmade if we give them a reason to- I just saw a great TED talk titled- People Don’t Want Your What- They Want Your Why.

    It is also important to price with wholesale selling in mind if you ever want to be able to do that-a mistake I made in the beginning that I am in the process of correcting- ugh!

    Mary Ellen- I would say raise them now and not before the holidays- I have been raising in 10-15% increments and have not had one complaint or drop in sales.

  16. Great article, and very helpful. Now I want to raise my prices a little bit, so how do you do that? Incrementally? All at once? Wait for an opportune time such as right before the Christmas holiday season? Do it now while there is a lull in buying habits?