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