Pricing Strategies

Posted Saturday, July 25, 2009


In the forums, both Etsy and EtsyKids there are always questions about wholesale pricing. As a rule shop owners expect to pay half of your retail. Now - if your retail price is very low then half of that sounds ludicrous... I hope that this post will encourage everyone to take a look at how much their work is really worth. And also let consumers understand the value of hand made goods!

The wholesale price is figured from adding the cost of materials, cost of labor and hourly cost of doing business.. (Many sellers use a wholesale price for the retail price - which makes it impossible for them to maneuver in the wholesale market).

For example lets say you weave rag rugs and want to know what your wholesale price should be. Materials for rags and thread are $5.25. Next add cost of labor - we'll say you pay yourself $15/hr and it takes you 2 hours per rug for a total of $30. Now you add your hourly cost of doing business (also known as overhead) - include etsy fees, PayPal fees, electricity, etc..(if you don't include all of your indirect costs in figuring your prices, any financial projection you make about your business will be unrealistic.) For this example will say our hourly overhead is $8.81. This gives us a wholesale cost of $44.06 per rug. To get your retail price, in most cases you double your wholesale price. Most shop and gallery owners mark up 50%-60% - so if you double yours then you will be close to the shop price. (the reason for this is a shop owner cant sell what she bought from you for $80 if your selling it in your shop for $40.)

This is just a spring board for pricing. You have to know your market and know if the market will bear your prices AND LET ME SAY THIS- Your market IS NOT Walmart . Hand made things should never be in competition with Walmart or large chain stores like that. When people are shopping for hand made items they expect to pay boutique prices, not discount store prices. If your prices are cheap they expect that the quality is as well. Your market should be consistent with what you see in high end boutiques. Educate yourself about your market, research, never stop learning!

The BIGGEST mistake new Etsy vendors make is setting prices too low. And I did the same thing in the beginning. I sold dresses for $10 for 3 years. And I wish 100 times over that I could get all those dresses back - I actually had one honest customer email me later that she had sold 2 of my $10 dresses for $75 each at a swap meet! That email changed my life - as you can imagine! LOL! I unlisted everything in my shop - re-priced and re-listed and felt much better about selling. Granted stuff didn't sell as fast as it was at $10 (of course) but when I sold something I didn't fell like I was giving my time away.

Just thoughts from my head to yours! I hope everyone enjoys this fab weekend! XO

8 comments:

TheFancyFritter said...

Great post! This is one thing I always battle with. Sometimes I find myself feeling guilty to price my stuff for what it is really worth...All the time, fabric and love that goes into it is worth it...Thanks for the encouragement boost! :)

Welcome to Piggy Tails! said...

Wow! I really needed this. I've been slowly raising my prices as my business has grown. I still work really hard to get my supplies for the best price to keep my bows affordable for ever mom BUT I have started making a collection of 'fancy' bows that I charge more for...I've been finding that it hasn't really changed my sales! I still offer basic bows for a low cost but I love how you said I'm not in competition with Walmart. Very true. Thanks for the encouragement and tips!

Penelope Anne said...

WOOT WOOT!!! Rock on Ladies! ROCK ON!!!

Nicole said...

What a great post! This is just what I needed. I have so many vendors asking about wholesale pricing, and I'm more than willing to offer them a discount, but I try to keep my prices low anyways! Sometimes I think I'm selling myself short, but I just need to rise above my "feeling" and start to charge what I know the stuff is actually worth! Thank you! :)

kristin said...

wholesale was a thorn in my shop during my first etsy year - simply because i couldn't offer the 50% price reduction. at best, i could offer 25% reduction - and that turned off 99% of any potential wholesale opportunities.

today my wholesale price is still the same. i have found businesses locally and thru etsy (that 1%!) who like and respect my work enough to create a wholesale agreement that works for both of us. once i took the pressure off myself to 'wholesale' - i was able to move on and put the focus back on my work + shop.

thanks for the post (and reminder), penelope anne!

Petit Debutant said...

Not only does pricing too low make you no profit, it also ruins the market for everyone else!

Penelope Anne said...

That is a point that I totally forgot to mention! Thanks!

Atasha said...

Thank you so much for posting this.

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