Wednesday, June 13, 2012

Let's Touch on a Touchy Subject...

sylvie's perspective
...from the


It's been a regular topic of discussion all these 5 1/2 years I've been selling on Etsy.  And has recently come up in some topics of conversation I've been part of here and elsewhere.  Pricing is an inescapable part of selling, whether it is handmade products, services or even supplies.  Being no expert on the subject, I can only discuss what my experiences have been and what I've seen others tell about their experiences.  What is undeniable is that we all have to contend with pricing our product.  But why is discussing the subject sometimes so touchy?

Because it's a personal thing.  Even though we are in business, how we price our items is an individual personal experience and different for all of us. 

Let's start with how we define ourselves.  Some are self-described hobbyists.  Others are artists by the true definition of the word, with formal training in the fine arts.  And then there is that wide middle ground between the two, where the vast majority of artisans fall.

So just what is a hobbyist?  This is what the dictionary says:  hob·by:  noun. an activity or interest pursued for pleasure or relaxation and not as a main occupation.

I know many hobbyists and even started out as one myself.  I think this describes many of our beginnings.  A love for making and creating.  So we keep making and then start giving away our creations.  Then people start telling us we should be selling them.  So we find a way to sell.  But how to price?  This is the fork in the road that separates the hobbyists from those who wish to make a profit. 

Most hobbyists I know state they just want to recoup their cost in materials.  This formula is easy:  2 x 'X' = Selling price.  Which is fine.  For the true hobbyist.  Because while that formula recoups your cost in materials, it also ensures that you will lose money on every single item you list and sell.  You may be recouping your cost in matierals, but what about the listing fees?  The sales fees?  And the packaging for shipping?  What about overhead?  Your hourly wage.  It's fine if you know all that when you price.  After all...skiing is a hobby too.  And it costs money.  We all have hobbies that cost us money.

On the other end of the spectrum there is the seller who's bottom line is a profit margin.  They are selling to pay their bills, put food on the table or simply to earn a living wage.  They might have items hanging for sale in galleries or boutiques.  It is imperative that they make a profit from their sales.

And what is a profit margin?  pro-fit-mar-gin:  noun.  the amount by which the revenue from sales exceeds costs in a business.  These sellers already know how much profit they need to make.  Pricing will be based on that.

Then there are those who fall somewhere in between.  And where prices vary wildly from what I've seen.  How do we put a price on an item we have created with our own hands.  What value does it have?  How much are people willing to pay for it? 

I am one of those who does want to make a profit, is not making a living from those sales but am beyond the hobbyist stage.   The only way I have been able to price my items in such a way that I cover all of my costs, pay myself a modest hourly wage and still make a profit is by using a formula.  This formula is for jewelry makers but I think can be adapted to other types of product.

It's pretty simple:  (materials + packaging) x 4 + (hourly wage) + 10%

Example:  ($5 + $1 = $6) x 4 = $24 + $10 (1 hr at 10/hr) = $34 + $3.40 (10% overhead) = $37.40 selling price.

Because I don't want to pay selling fees on the packaging, I have taken that element out of the formula.  But you can see how this works.  Now the formula doesn't mean this is the price you MUST sell your item at.  It is a price that ensures you are making a profit.  But you can adjust it up or down, depending on the type of item you created, the venue you sell from and who your target market is.  Better yet, it also gives room in the price to go down to wholesale price and still make a small profit. 

I can't tell you how many times I've seen sellers in the forums state that their prices are already at wholesale.   So what happens if a wholesaler inquires about purchasing in bulk from you.  Most of them expect 40-50% discount off your price.  If you're at wholesale already, you have no room to give the expected discount and that wholesaler will move on to the next person and you have missed out on what could become a lucrative aspect of your business.

So as you can see, there are too many variables for us to all have the same pricing on our items.  And I have barely scratched the surface.  But if you aren't a hobbyist and are serious about making a profit, don't sell yourself short.  Do some research and use a formula.  It's the only way to really guarantee you are covering your costs and paying yourself more than $2/hour. 

Here is the source of the formula I use:

Etsy even recently had a pricing workshop but I did not attend.  They do have a pricing worksheet here:  You have to scroll down quite a ways to get to the worksheet part.

As I said, I'm no expert on the subject and only know what I have studied and experienced.  And that's what each of us should do.  Look at different formulas, be honest about your product, know who your target market is and consider the venue you sell from.  These are all important aspects of what your final price will come down to.  It's OK to experiment and adjust the prices.  It's the only way to find price points that work for you and the market you are targeting.  Just remember two things:  1) It's easier to start a little high and come down than the reverse.  2) buyers often associate price with quality.

And that's all I have to say about pricing.


  1. Right there...Buyers associate price with quality and I also believe in the materials X4 formula but haven't though about the hourly wages. I must consider that too.thanks Sylvie.

  2. This is a well written post. I think it's important that even hobbyist take the time to come up with a more profitable formula. After all, more money for your hobby is a great thing!