Tuesday, April 15, 2014

Shop Talk: Pricing Your Items

Shop Talk Pricing Your Items

This post is the third in my ongoing series about being an Etsy shop owner. My previous posts can are: Etsy & The Stay at Home Mom, Developing Your Product and Six Etsy Tips (an older post).

***In this post I’m going to share everything with you about my process—down to how much I value my time at. Not because I want to be told I’m under or over selling myself, but more because I would have loved to see an example of a starting point from other sellers when establishing my own prices.***

Figuring out how to price my items was a big challenge for me initially in my shop. I would look around at similar items on Etsy, factor in how much I spent making the item, and then talk myself out of a price because I knew how much I would actually be willing to pay for something similar. A lot of my prices were landed on because that was where I felt comfortable, but then I ran into the issue of not being able to translate one price point to another with different types of products. I found it very difficult to price consistently.

So then I went looking online and saw lots of equations for how to price an item, but often times they left my item priced much higher than I felt comfortable. I think this was because many of them were time + materials = whole sale price, whole sale price x 2 = retail price. I just couldn’t justify charging $15 for a headband. Or I wondered if my product wasn’t as nicely made as other sellers’. I read all about pricing integrity and undervaluing your product, but felt like everything was pushing me to price higher than I could justify.

So I set an hourly wage for myself ($10/hr), and stuck to the equation of TIME+MATERIALS+FEES=PRICE. And I started tracking exactly how long it would take to make something, tracked my receipts to know exactly the materials costs, and got a good feel for what the Etsy and Paypal fees would be for different price points. I’ll address how I factor in profit later in the post, but for now let’s look at how I maintain a good pricing system now that my equation is in place.

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I bought this cute spiral notebook at Target and use it to keep track of pricing, time, materials, crochet patterns, and any other notes I feel like keeping permanent for my shop.

blue and white bow tie garland

When creating these BOW TIE GARLANDS (or any product for that matter), I made my first one to make sure I had the process/system down for it. I didn’t want to time myself in case there was a lot of trial and error that would happen (I account for the process of developing a product in my hourly wage). When I make the next one I use the stopwatch on my phone to keep track of how long it takes me to make the item.

timer

I timed myself to cut 9 bows and then hit stop so I could keep going with my cutting and cut the remaining bows. Then I simply hit start again when I begin the next stage of the process. Photography and the time to create the listing get added into the time tracking as well.

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Then I write in the notebook the cost of the time, materials and fees (any item over $5 I add $2 for fees, less than that is $1, and over $20 depends on the price of the item). This way, if I need to go back and look at how I priced something I won’t have to rely on my memory.

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For my SMALL ZIPPER POUCHES I am dealing with a fabric vendor and a zipper vendor, the shipping charges on the materials, and buying for several pouches worth at a time, so there’s a little more math involved.

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…but in the end the equation is the same.

It may seem like I’m valuing my time a little low since the rate for minimum wage (at least in Oregon) is pretty close to what I’m charging for my time. But I felt like I needed to establish myself and get the reviews to back up increasing my rate. I wasn’t sure how to go about doing that, though, until I read Gina’s BOOK and realized I should set goals for myself. I could have set a goal for x number of sales to justify a raise, but I preferred to have a goal pattern of business. After all, business certainly spikes over Christmas for me. I wanted a goal for my year round sales. So right now I’m working toward averaging a sale each day. Last month I had 20 sales in 31 days. The month before it was 15 sales in 28 days, so I think I’m on the right track. I’m hoping to reach my goal and raise my rate to $12/hour in August, and then continue on the pattern to get to my goal wage of $15/hour in February.

I like the idea of my prices reflecting my experience, my reputation, and my business approach. But I don’t want to raise my prices too much since one of my priorities for my shop is to be a place people like me can afford to shop. Since I’m not paying anyone to work for me, my profits are seen in what I am paying myself. I can use it to reinvest in my business or to take my family on vacation or to pay for Christmas.

I’m sure there are so many flaws in my equation or system, and other sells might find this crazy—after all, I look at other sellers who have similar products for half the price of mine and wonder how they can feel like it’s worth their time—but this works for me and their system must work for them. How about you? How do you figure out your pricing? What are your hang ups or successes? I do my best to respond to comments within the comments.

Thanks for stopping by!

9 comments:

  1. Thank you for helping out us new Etsy sellers!

    www.puresweetjoy.co.za
    www.etsy.com/shop/PureSweetJoy

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    1. Thanks Deborah! I enjoyed checking out your shop!

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  2. Great tips! And not just for etsy sellers. I just did a craft fair and I always struggle with pricing!

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    1. Thanks! Craft shows are so hard! I've decided there are only two a year that I will so since all the others I've tried haven't been profitable for me. I hope yours did well!

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  3. I really appreciate this! I don't sell on Etsy yet, but I've always had trouble deciding what to charge when I make custom dresses. This definitely helps. =)

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    1. Thanks Charity! I'm glad it helps! I bet your custom dresses take a lot of hours!

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  4. Great series! I have really enjoyed reading your posts.

    I totally agree with your concept for pricing. I do the exactly the same thing. (You keep better records but my process is the same!) The reason I don't sell quilts on Etsy is because many quilters have totally devalued their price. I sell my quilts for substantially more than I often see listed on Etsy and I sell as many as I make but I sell them directly. My goal this year is to get my shop to 100 items. Boy, I sure do have a long way to go!! I sell fairly well locally so those sales dip into my inventory before I have the chance to list them. Sometimes I "hide" new items just so I have something to list. It isn't a bad problem to have but it is a hinderance to achieving my goal.

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  5. Hi, Jill. I'm new to your blog. I'm slowly teaching myself how to sew, and I initially came here to see how to you made your beautiful yellow and blue gathered dress. However, I think you've now helped me with an even larger current mental struggle: pricing for Etsy. I'd been researching different formulas and was having the exact dilemma that you described. Most of the formulas I saw included factoring in wholesale... which I don't think I'll ever use. I think my store will always be smallish; I make my items as more of a form of therapy since I'm chronically ill and needed something that I can check off at the end of the day as an accomplishment. I had basically decided on the same formula you use, but it was very helpful for me to see how you recorded things, as well as be reminded that I need to incorporate fees into my price! Thank you for the peek into your business. You've helped me get one step closer to opening my shop!

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    1. Hi Lauren! I'm so glad this helped! I'd love to see your shop when you open it!

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I appreciate comments so much! I'll do my best to reply to you here in the comments section, especially if there is a question so future readers can see the answer.