Are your prices too low? (or How to Price Your Products on Etsy and beyond)

April 10, 2013

how to price your productsHow to price your products – this is a question I get ALL the time. And every time I browse Etsy (and many other sites) I see it ­– the shockingly low price. Too many sellers think low prices mean selling more. The reality is that savvy shoppers looking for handmade goods disagree. Pricing low could mean pricing yourself out of the sale. Your price communicates your product’s value to the consumer and is a major factor in your success.

How do you choose your prices? Do you look at competitors’ prices and chose a comparable price, or do you aim lower? Do you factor in labor, materials and profit? Do you keep your prices low because you’re afraid pricing higher will mean selling less?

Women make up the vast majority of Etsy sellers, and woman, by and large, tend to under value their time and efforts. Instead of asking themselves what an item is worth, they ask what will consumers pay? Not only are they cheating themselves with their unfair prices, but also other Etsy sellers. When too many sellers in a niche under-price their products consumers grow accustomed to the low price, and feel cheated when asked to pay a fair rate.

It’s time to change that.  If you’re looking for a way out of the bargain basement and into profitability, here are some tried and tested tactics that work for how to price your products:

  • Price your products according to the market: One simple way to ensure your prices are fair to you (and other artisans) is to look at sellers in your niche. Find 3-5 who are selling items similar to your and find the average price.
  • Introduce a new line: Many Etsy sellers many fear they’ll loose steady customers if they suddenly raise prices. I suggest they try an experiment instead. Create a new line of items priced fairly and leave your old prices alone. You might be surprised how much faster the newer higher priced items sell.
  • Pay your way: If your price includes only material costs, you’re not paying yourself for your labour costs. Increase your prices to add a small profit on every item, and take that money out of the pot every month. Seeing the result of your efforts will keep you motivated.
  • Think about a wholesale price: Your business may be just you right now, but down the road your hobby business could become a full-time job. At any moment a boutique or e-retailer could contact you to carry your product. Would you know what to charge?

How to price your products – handmade, Etsy and beyond

This is the simplest formula you can use – (Labor + Materials) x 2 = Wholesale price

The x2 takes into account your profit and overhead as well, so you’re covered.

And to set your retail price, use this formula – Wholesale Price x 2 = Retail Price (or MSRP)

So if each set of earrings you make costs you $2, and you pay yourself $15 for the half hour it takes to make them, then your wholesale price is $34 and your retail price is $68.

I hope the tactics above will help you figure out how to price your products and bring your prices to a level that treats you fairly and rewards your creativity and efforts.  Pricing your products fairly tells consumers that you have a quality product to offer, so start spreading the news.

In the comments below, I’d love to know about your pricing strategy. What pricing formula do you use and how is it working out for you? Leave a comment and let me know.

41 Comments. Leave new

It’s worthy to note that there was an experiment done (Stanford I think?) and customers actually preferred speed over discounts.

Offering a shipping upgrade or a quicker processing time would be much better than under-pricing.

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Wonderful article, Andreea. I see so many producers and professional craftspeople under pricing their product. And as ridiculous as it may sounds, sometimes sales increase when the price is increased!

We have a FREE email course on Pricing Your Products that may help readers get into the nitty-gritty of appropriate pricing. Sign up here: http://www.selltogiftshops.com/

Thanks again for the great blog!

Sandy Dell
‘GiftRepSandy’

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Thanks for sharing, Sandy! It’s so true – when I increased my t-shirt prices, my sales actually increased, too!

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Thank you for the great information.

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Thanks for checking it out, Kimberly!

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Great article! And great comments! I will actually try Blaire’s suggestion about shipping upgrade specials!!

I’ve had customers buy something AFTER a discount special has gone off or customers not use a coupon code on their order purposely. So I do agree that people will buy want they want no matter.

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Pricing my products has always been difficult for me, even after 28 years in business. When I first started my Custom clothing business I notoriously under charged,35.00$ for a blouse?!? I was always trying to figure cost,time and what I thought the client would/could pay until a dear friend pointed out to me that I was being very judgmental and how dare I assume what someone can afford!
Let’s face it if you want to survive and thrive in business you need to pay your bills and make a profit.
Andreea,your simple equations are very helpful,I will pass them on.

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This is exactly what I needed this week. Thanks Andreea!

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Thank You for that information! What would you consider a reasonable amount per hour to be?

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Bonnie, it really depends on how much YOU want to get paid… I know some entrepreneurs who give themselves $10 an hour when they first start and then $50 an hour after a few years, so it all really depends on you!

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thank you for this formula! i have typically taken my cost of materials and tripled or quadrupled it. that seems to take it to what other similar shops / items price theirs. so, if i applied this formula, it would raise my prices significantly. for example, a necklace cost me $11.68 to make (using GF and SS materials…but a very simple piece). it took me 15 minutes to make. i charge $38 for it in my shop. based on this formula, that should be my wholesale price and i should charge $77 in the shop.

couple questions:

1. even if this takes my prices above what other similar items (on etsy) are priced, should i still do so?

2. does it look bad to go through your shop and drastically raise prices? or should i do the increase slowly, in increments?

thanks for this great formula! pricing is always so tricky!

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Patricia, great question! You don’t necessarily need to go and change all of your prices now… but you can adjust your prices for future items that you make. If it takes your price above what other Etsy sellers are charging, that’s ok, but you want to make sure that you’re offering something “extra/special” so they are more likely to go with you. Maybe a gift with purchase or faster shipping… Also, if you don’t plan on selling your products to other stores/wholesale, then you have a lot more room in your pricing formula!

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thank you! the “extra / special” has been a hard one for me to come up with! i don’t know what i would include with jewelry. i do already wrap it up in a gift box, but i don’t know if that really counts.

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Great post and you hit the nail on the head, women undervalue their work and time, I wish everyone would read this!

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Great article and information, I know I’m still underpaying myself and have even increased my prices slightly. With my slight increase I’ve seen more sales trickle in. I’m going to try your pricing strategy on a couple of my newer products and see how they do as an experiment. I also like the idea of discounting their shipping Blaire, think I’ll try that after my first experiment is complete!

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Great idea, Melissa! Keep me posted on how your experiment goes :)

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I follow the pricing strategy you outlined above. When I started to get more wholesale inquires, I raised my prices by a couple of dollars…just thinking about the future and if I would ever need to pay someone to help me. It was uncomfortable for me at first, but honestly, it hasn’t hurt sales enough to make me feel like I made the wrong choice. I read somewhere (and probably common knowledge) that if you raise your prices, you may be selling less at first, but in the long run, you may be making more. I thought of that as I raised my prices and it made the decision a lot easier for me. Great article, and one that makes it easy for others to follow.

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Well thought out strategy. Easy to calculate. I’ve discovered that I am about 1/2 of what I should be.
When I revamp my site, I will revamp my pricing structure, too.
Thanks so much for your helpful formula.

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Great post!

Every item I sell seems to have a “magic number” and when I find that price, I can really sell a product. I am happy to report that it’s usually a higher price than where I think it should start. I use the standard formulas to get the starting price and usually tweak it over two or three weeks. Then I review pricing over time and make those tweaks again – always higher.

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I use 4 times my material costs is my whole sale price and 2 times my wholesale is my msrp.

I find this works pretty well for me and keeps me competitive with bigger companies.

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I have a very hard time deciding what to price my art at and I’m not 100% sure this formula will work for me. But I’ll give it a go–it’s better than what I’ve been doing, for certain!

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Thanks Andreea for another great article. I have been told many different ways of pricing like 2.5 wholesale x 2.4 retail, 2.5 Wh x 2 retail or 2 wh x 2.5 retail.

Is 2 x 2 considered to be the norm ?

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My site is so niche-y that that aren’t comparisons. The
one that did show up recently seems to be gone. I’ve had my original site for over 11 years (www.belly-jeans.com) and an Etsy shop for 3 years. I know my material costs and what I expect for my labor, but I think, since it is so original, I could add a few $, especially since I haven’t raised prices, even shipping, since the bad economy rolled in.

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Thank you for this informative post, Andreea! I feel like my jewelry is priced a lot higher then others in my niche on Etsy (but priced “low” if you were to find it in a specialty boutique/catalog). According to the formula in the post, most of my pieces are $15-20 under-priced. PS – I would really love to start wholesaling but my retail prices aren’t high enough to cut 50%. So, I have to decide whether I want to raise retail (and *really* outprice similar pieces on Etsy) and do wholesale or keep things as is …It gives me a lot to think about ..

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Great article!!!
But I have a dilemma when you are entering a market with new product on a mission to give the community a cheaper price on a particular product with a great taste to compete with my competitors.
My company will be producing a product that will cost us $0.70 (all expenses inclusive) and plan to sell at $0.85 to Wholesalers and $0.95 to Retailer while the consumers buys at $1.
While our competitors sells at $1.30 to end users.
putting this into consideration that we will produce about 4,000 units of our products in a month.
Please advise,is that a good pricing?

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Thank you for this article. In the past I have always offered my products for less then they are worth. Mainly out of feeling insecure about my creations. I equated sales with approval. And luckily I have sold a lot. After figuring my taxes this year, I reflected about how much time and effort I have invested and how low my profit margins were. I now feel like I cheated, and undervalued myself. Bottom line is raising my prices is no longer optional. If I want to keep operating and offering I must do it. Tomorrow is my first wellness fair where I will proudly offer my product priced for its value, not out of my fear. I am a little nervous but, I keep reminding myself it as a way of honoring my business and myself.

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Thank you for a great article! I recently ventured out to starting my app business and I was struggling with how to price it. Although I am not on Etsy, there are great tips that I can take away and apply it with my business. Thank you once again!

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Great post and I learned a lot from the comments and your replies, Andrea. It is hard when your competitors charge whole sale price for retails. My jewelry is labor intensive, and I don’t want to pay my self $10 an hour. Now, these marketing strategies you all mentioned are worth thinking. Thank you.

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I have had comments that my prices are too high compared to some other sellers and that’s when you need to educate buyers what they are actually getting when they buy your handmade product, in my case jewelry.
I only use precious metals and quality gemstones and pearls in my work. So, yes, I will charge more than someone who used silver colored metal and glass and shell pearls; I have lost sales to someone who charges less, but I am in business to make a profit. Gradually though, my sales are increasing and I hope what I learn from your course will help them increase even more.
My biggest gripe with Etsy is that they do not police who sells what on their site – there are now a large number of “handmade” jewelry from China that sells for under $10. So, I am looking at other sites now for my jewelry.
One thing I did notice was that people do not like to pay for shipping. So, I increased my prices to cover shipping and shipping is now “free” and people like that. It’s very funny sometimes to figure out what is keeping people from purchasing from you.

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Andreea,

Thank you for your wonderful approach. You make things look simple and that’s a great gift! I would also to ask your opinion on the following. I ‘ve started making appliqué jute tote bags and sell them on ETSY since 2011. My problem is obviously pricing. I knew that the selling price is not the right one. So, I follow your instructions how to price and I realized once more that the price I am charging is definitely tooo low. My shop has the following standards . All bags are 100% handmade, designed, appliqued, embroidered and , sewed .I use only high quality jute and fabrics. I never repeat the same design twice and moeover it takes me about at least 8 hours work for each one of them. And the question is “Do you think that anyboby would buy a jute tote bag for at least USD 120 ?? What would be my marketing approach??

Thank in advance for your time
Apopsis

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I always have a problem making the typical pricing formula/labor charges work for me. For example; my most recent creation – chunky cable knit earwamers cost $5 in materials and 3 hours to make. If I priced this according to your formula my wholesale price (if I charged $30 per hour for labor) would be $190 and my retail price would be $380. There is NO WAY on God’s green earth any sane person would pay that much for this item unless it was made of pure solid gold. The pricing formula that I use is; cost of materials (I buy a lot of my yarn on sale but I base my pricing on the highest retail price) + labor (I pay myself $7 per hour)+ a little bit extra for profit. When I do this it prices my items competitively but not too low either. Also I am not trying to live off of my shop, it is just a side business to make a little bit of extra money.

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This very informative for me. I am currently working on inventory for a shop on etsy. As this is new to me, pricing has got me intimidated to say the least. Reading the comments has been very informative as well. Thank you everyone, this gives me a real good idea how to go about this.

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Hi,

Such a lovely simple articl.

I am not sure it if it worked well for me.

I want to sell a set of 8 cards.
Wholesale price came to £32.60
Retail Price £65.20

Which price should I be using for Etsy?

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Great question! If you plan on selling wholesale, then your etsy price should be 65.20

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Thanks for the clear, concise advice! Sharing this with lots of creative souls.

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Thank you for such helpful advise. A little help for all the maths challenged out there is this site http://craftscalculator.com/ I think the formula is similar, and could help work things out based on your skill level.

I hope that’s helpful :)

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Great information. We will certainly make good use of it as we are selling handmade clothing and leather boots for women. Thank you for sharing, would love to hear your thoughts about our products.

Gypsy Dharma

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This was definitely some thought-provoking information. I’ve struggled with pricing lately, mostly because by this formula, I would need to charge $52 for a set of 4 charms. That seems outrageous to me, and nowhere in line with industry standard (even at retail stores). So…..that leaves me sort of lost and confused! =)

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[…] 2) Pricing formula from Andreea at Launch Grow Joy (read article): […]

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I too never know what to charge people, this is the biggest problem I have. And this post has helped me some. I also make clothes but what I have been doing lately is alterations on just about everything. Now someone wants me to make them some skirts from old skirts that they have
and someone else wants me to make them some dresses, which they will provide the patterns and fabric. So I really need help pricing that

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I enjoyed reading your article. I have made jewelry for about 20 years but I have very little confidence in my work. I like your formula but I’m terrified that if I charge that much no one will buy from me. They can always buy similar items from places like Wal-Mart at a much lower price. I currently just take my cost X 2 for the selling price and people say they love my stuff but even at that low of a price some say it cost too much.

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