When Aimee asked for volunteers to help educate her clients about handmade pricing I jumped on board with no hesitation.
This past June marked my second year selling handmade online. When I started selling my handcrafted goods I had absolutely no idea how to price my items. I simply looked around for similar party-ware and priced competitively below those retailers.
At the time that was great! I worked a full time job in the medical field and was only selling my items online because friends thought I should and heck, if I made any money from it I was stoked. With the turn of several amazing events, The Flair Exchange is now my primary job.
When I made the choice to turn my fun crafting hobby into a business I had to establish several things, one of them being a pricing structure.
I did a lot of research, read a few books and did a competitive pricing analysis to come up with my current formula for pricing. This pricing structure allows me to sell my items retail in my storefront, but also allows me to sell my items wholesale. Wholesale – such a scary word, I know! Retailers will approach you in hopes of selling your goods in their shops and storefronts and it is crucial that you have a solid pricing foundation so that you can enter a relationship with retailers.
I’ve worked with several Etsy shop owners in establishing a wholesale and retail price. I find almost always that Etsy sellers under price goods – and by a long shot. Your pricing structure must allow for profit. Without profit a business will never expand – because you don’t have the funds to do so.
Establish your wholesale price first! Cost of goods + Labor + profit = wholesale
I find most handmade shops forget to pay themselves! You must establish an hourly rate at which you or an employee (someday you may have to hire help) is to be paid to calculate your labor.
For example, Cost of goods ( $4.00 ) + Cost of labor ( $12.00 ) + Profit ($8.00) = Wholesale ( $24.00 )
Establish your retail price second! Cost of goods + Labor + profit x 2 = retail
For example, Cost of goods ( $4.00 ) + Cost of labor ( $12.00 ) + Profit ($8.00) = Wholesale ( $24.00 ) x 2 = $48.00
There is no exact formula for establishing your retail price, but generally the suggested value is twice your wholesale price. The most important thing to remember is that even though you may be one person crafting these items you are still a little business. You still manufacture the items and most likely package them, ship them, perform invoicing and provide customer service.
If you under price your goods you are not only doing a disservice to yourself but you are also devaluing similar goods. Take the time to create a pricing structure that plans for wholesale and retail to assure your product is being sold at the appropriate price point. If you need help establishing a pricing plan feel free to contact me!