Wednesday, August 25, 2010

Tips for Etsy Success- Pricing

It is obvious to most sellers (and buyers) that the retail price of an item is important. Too high and you won’t get any sales, too low and you won’t make any money (or worse, you could lose money).

While the importance of pricing is obvious, setting the perfect price is not easy, especially for new shop owners. When determining what to set your retail price at, it is important to consider the following things:

How much does it cost to make your item?

If you do not know the answer to this question, then you need to figure it out immediately. Make sure to include all materials AND your time into the equation. When adding the cost of materials, don’t forget to include packaging and paper materials such as business cards, hang tags, tissue paper, etc.

Adding up the cost of materials is easy. Figuring out what your time is worth is a little more complicated. The best bet for setting a dollar amount for your time is to pick a number (I started with $20 an hour) and use that across the board for all your creations. Work through making one item and time yourself. Then take that amount of time and multiply it by your set dollar-per-hour amount. If it took me 30 minutes to make an item at my $20/hour rate, then I added $10 to the overall cost of my item.

How much do comparable items on etsy retail for?

Do your research! Look around on etsy for similar items made by several different shops. Make a spreadsheet with your findings for comparison. Some items will be similar but have more or less features or differences than your items. Put all of these notes into your spreadsheet for comparison. When you are looking at similar items from other shops, it is also a good idea to look at the shops success rating. Personally, I like to research from shops that are well-established and successful. They are obviously doing something right, so why not take lead from them?

Set your price

Your retail price should be a balance between the true cost to make your item and the researched retails on etsy. If you have planned your items well, you should be able to set the retail at a reasonable price and subtract the cost of your item and have a profit (even if it is very tiny). If you run across the problem where your cost to make the item is higher than the retails you found on etsy then you need to re-think your materials. Are there items that you can buy in bulk at wholesale prices? Are there ways to cut costs on packaging materials? Are you charging too much for your labor?

On the other hand, if you come to a retail that you think is too high, take a minute to review it before lowering the price. If most comparable items on etsy have a similar retail, then you are probably okay. As a crafter, it is hard to look at retail prices for handmade items because we tend to look at them with “I could make that” glasses on. I used to have the same problem. I kept thinking that no one would pay $30 for my personalized baby blankets because I would not pay that for one. Well, I had to keep reminding myself that people that are not crafty don’t look at things the same way that I do. Turns out that my $30 baby blankets were my best sellers- I have sold hundreds of them and truthfully I probably could have sold them for a little more!
When you come to a number that you think is suitable for your retail price, review it again. Compare it to other shops on etsy. You don’t want to be the lowest priced item out there because it makes your shop look unprofessional. Charging $10 for a baby blanket when the average is $25 makes you appear to be unaware of the competition and not very business savvy. You also don’t want to be the highest priced shop out there either (unless your product is truly that much higher in quality). Setting your retail price at the highest end will not get your business off the ground because of the simple rule of comparison shopping. Most people want quality and a good price from a trusted shop. Seeing your shop with the highest retail and zero sales will not get you any business.

Pricing is a tricky thing and it often takes time to get it just right. In the course of 2 years in my etsy shop, I have modified (raised and lowered) retails a couple times. I am always staying on top of my competition and watching their moves and I am sure they are doing the same with me.

For additional help, here are some etsy articles on pricing.



Garilyn said...

Thank you! Pricing is probably the toughest thing. It's true about how you look at the pricing. I'm fairly frugal and have a tendency to think the same way...I wouldn't pay that much when I could figure it out and make it myself. I forget that others out there will pay more for something they don't know how to make themselves!

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