Etsy Labor Pricing Magic Numbers

Yesterday I talked about the number of items in your shop. Today I would like to talk about another magic number, price. One of the more difficult things to do is price your work. If you are selling vintage items it is a bit easier but for those of us who make our products it is a pain coming up with pricing.

First off, let me say your prices are probably too low. You are probably not paying yourself a fair wage. What is a fair wage? Let's look at it as if you were getting paid by someone else. When you first start a job with no experience you usually get paid a minimum wage. Let's say today minimum wage is $8/hr. So, everything you make when you start out, should have a labor price of $8/hr straight across the board. One item takes you an hour to make has an $8 labor price.

After working at a job for 6 months or a year you should be up for a raise. Your raise should be based on how far you have come. Let's say that item that used to take you an hour to create now only takes you 30 minutes. You have doubled your efficiency in a year. Does this mean that your labor for the original items is now $4? Of course not. You are not going to drop your price just because you are better at it now, that would be counter productive! Nope, your new labor cost for an item is $4 but you are still going to pay yourself the original $8 for it. You just got a $4 an hour raise, congrats!

You won't always be able to give yourself a 50% increase in your hourly wage. At some point you will eventually level out on the time you spend on an item. That is why it is important to give yourself a yearly raise and/or a cost of living wage. The cost of living is always going up, always.

What? You say you are not even making minimum wage? What is wrong with you? When you pay yourself less than minimum wage you are saying you are not as good as the kids working a summer job flipping burgers. Give yourself a raise right now! You are worth it! Period. End of discussion! Seriously, if you are not paying yourself a reasonable wage what is the point of doing what you are doing? You can offer a million excuses but the bottom line is you are worth it.

I look forward to the comments on this one so bring them on. Got a question? Email me MarketMyShop@gmail.com

P.S. The Fibonacci Sequence is one of my favorite 'magic numbers' an that is why I put the picture up, it has nothing to do with Etsy and everything to do with me being a nerd.

How To Price Your Handmade Items

There has always been an ongoing discussion on how to price your handmade items. While there are several formulas for doing this, they may or may not work for you. I wrote this article in hopes that it will help you to price your items so that you can make a profit without overpricing to the point no one wants to buy.

First you must establish a baseline break even price for your items. Take into account the material cost + the cost of shipping to get the materials to you + fees from Etsy and PayPal + your minimum wage. By your minimum wage I mean the amount of money that you feel you deserve for your craft. I will give you a hint here. NEVER work for less than you would at a minimum wage job otherwise you are just doing what you're doing as a hobby. Other things to take into account are fluctuating pricing on materials. If you are working in Silver or Gold your baseline pricing will be based on current market value. When pricing your materials you need to price it not as what you paid for it but as what it would take to replace it.

For example you are making a pair of earrings. The cost for materials is $3.85 including shipping and fees, you spend 1/2 an hour making the earrings. You feel like you are worth $10 an hour. (This is assuming you are relatively new to crafting. People with over 10 years experience charge a craftsman wage which is anywhere from $25 to $100 an hour) So, in this example your baseline is $8.85 for your pair of earrings. Now we figure out your wholesale price. My wholesale formula is baseline x 1.5 so, this would be $8.85 x 1.5 = $13.28 This allows you to make a small amount of profit on your wholesale orders.

I also have minimums on wholesale orders to keep individuals from buying 3 or 4 pieces and expecting a huge discount. I set mine by dollar amount usually and will not accept a wholesale order for under $250 wit the exception of my higher priced items which are only available for wholesale on a multi-unit situation. Meaning my $350 chainmail coif is not available for wholesale unless they are ordering 5 or more of them. You can set your wholesale any way you like but make sure you are still making a profit.

Retail is simple. Just at least double your wholesale price. In some cases you may be able to multiply your wholesale by 2.5 to 3. It depends on what the market will bear. In our example the retail price would be $13.28 x 2 =  $26.56 I generally round up to the nearest $.25 so these would be $27.75

The main point is that people expect to pay more for handmade. They do not mind paying for the knowledge that someone made the item by hand and it is a better product than one that is mass produced. If you price your items too low people will think that you probably did not make the item and that you imported a mass produced product.

I hear a lot of people say that they will price low to undercut the competition and make it up on volume. That is the mentality of importers and resellers. Don't undersell yourself with the hopes that you will make it up in volume because that is not the case. You'll lose out on all the customers that appreciate handmade goods.

One final note. I see people who have sales where they put everything in their shop on sale for 50% off. I think that is pretty silly. The message you portray with that is that you do not value yourself or your product. Even if a few people jump on the sale it can hurt you in the long run by sending the wrong message. I would never offer anything more than a 20% discount unless it is a closeout item that you will never produce again.