TEST Etsy Newbie Bootcamp: Class 10 The Dark Art of Pricing

Welcome to our Etsy Newbie Bootcamp! If you want to take part in Bootcamp and get one-on-one mentoring, or answers to any of your questions, please drop us a line at TorontoEtsyST@gmail.com.  

If you want to open an Etsy shop, just follow this link!



 
Then, be sure to check out:

TEST Etsy Newbie Bootcamp: Class 1 How to Open an Etsy Shop
TEST Etsy Newbie Bootcamp: Class 2 Branding & Shop Banners
TEST Etsy Newbie Bootcamp: Class 3 Shop Profiles Bios and Photos
TEST Etsy Newbie Bootcamp: Class 4 Make Listings Tempting
TEST Etsy Newbie Bootcamp: Class 5 About Pages
TEST Etsy Newbie Bootcamp: Class 6 Shop Policies
TEST Etsy Newbie Bootcamp: Class 7 Communication
TEST Etsy Newbie Bootcamp: Class 8 Shipping and Packaging
TEST Etsy Newbie Bootcamp: Class 9 Social Media

Remember: If you already have a shop, or you open one today, please let us know how to find it! We will be featuring some of our favorite newbie items right here. 

So this week's class has a cheeky title, because shhh! let me tell you a secret... I think all  Etsy sellers struggle get pricing right and yet it is arguably the top priority of running a success business. There are several formulae out there for how to price your wares, but there may not be an objective 'right answer'. There are however, some important things you must consider, and you can find a formula that works for you.

Let's start with two very basic formulae, from Etsy's blog post 'A Simple Formula for Pricing Your Work':

Materials + Labour + Expenses + Profit = Wholesale

Wholesale x 2 = Retail

Wholesale? Retail? But you just opened your shop! That's okay. You should be fair to yourself from the beginning and be prepared to grow, if growing your business is your goal. In my experience, most Newbies underprice their wares. I'll often write a quick convo to a fellow seller if I think they are being unfair to themselves. You want to be posting your listings at a fair RETAIL price (not wholesale!).

Arithmetic can be fun! Check out DomistyleAprons
Oven Mitt, Pot Mitt & Apron sets

So, let's break this down. Materials are the sum of everything: what actually goes into the item itself, all your packaging materials and you can even include something to cover lost materials through say items you make but don't list because they don't meet your standards, or prototypes or artist's proofs.


Labour: your time is valuable. Even if you are making your wares simply because it gives you pleasure, that doesn't mean you should be a slave to your  Etsy shop. As mentioned in Class 8 Shipping and Packaging your packages won't mail themselves, so don't forget to pay whomever does your shipping (which, is likely you!).  Etsy includes a great suggestion: you can look up the typical salary, for instance a seamstress in Toronto, or a woodworker or designer or whatever hat you wear in your business. PAY YOURSELF FAIRLY!

Make sure you're including profit in your pricing - no one wants an empty wallett!
Vintage 70s/80s black leather ladies wallet from BremenBlue

Expenses or Overhead includes your other costs. Include something for wear and tear on any equipment or tools you use. Do you need to rent studio space? Do you pay to have access to special equipment? Do you need a special license? You can, and should recoop these costs.  


Profit - hello! This is one of your motivations; even if you aren't much of a capitalist and are running your shop for the sole reason that you wish to prevent your home does from drowning in your crafty creations, you want to make a little something, or how else are you going to buy more craft supplies!? Your success in running your business is tied to how you think of your business; take your work and your business seriously and others will too. Some seller are working towards building a business on Etsy which will be their day job... and they know that they need to appropriately build profit into their pricing schemes.

Underpricing goods doesn't do anyone any favours! You can hurt the business of your fellow Etsy sellers offering goods at a fair retail price - but you can also hurt your own business, and the way it's perceived. Buyers are going to wonder about unusually low prices. They may conclude you are are real amateur, not producing quality work or that you are a reseller trying to pass off mass-produced goods as handmade!

Consider this diagram from Etsy's Art of Pricing Worksheet:

It can be possible to increase sales by increasing prices! You want to perceive yourself as a professional and you want others to perceive you that way too.

Tip: It can be useful to have a look at what other Etsy sellers are doing. Type your category of listing into the search bar and then sort the results from highest to lowest price. This is a good way to get a sense of whether you might be in the right ballpark - though your peers might be underpricing. The research view is especially useful!

Market Research Tool


Edited Tuesday, February 11, 2014. Please note, the Market Research Tool has been discontinued since it was underused. Currently, there is no simple way to look at the distribution of prices in a given category... but you can still use this sort of thinking to find a niche for your products in a given price range.

You can also see how things are selling on Etsy using the Market Research Tool! If you are logged in, and search for a category of item, you'll see in the right hand corner that there are three options for how to display items. If you click on the rightmost one which looks like a bar chart you'll enter the 'Research view' which provides some statistics about what sells on Etsy, the prices and the top tags.

This can give you an idea of the full range of prices (note: for the example above, the lowest price point the top tag is 'pattern', and patterns are obviously less expensive than completed, handmade items). You can see popular tags which you might want to add to your listings. You might see opportunities too. Most things in life are 'normally distributed' which means the follow a more or less bell-curve shape. When you see a distribution which is lopsided in some way, it might indicate a lack of options at a certain price point - including the higher ones. An educated guess about the distribution of baby blanket prices shown above is that it represents two peaks: one near $10 for patterns, and a wider peak at roughly $30 for small baby blankets. But, you'll see that the proportions of sales in the $22-$32 category and $33-$43 category are quite similar and then there's a steep drop to the porportion of blankets in the $44-$54 category (where we start to see tags with hints about what makes a baby blanket more valuable: organic materials and personalized gifts). This reduction in the proportion of sales, which doesn't really look like a smooth bell curve, might suggest there's still room in the market for more options (particularly custom or organic) in the $44 to $54 range.

Strategies

Multiple price points can be very useful. While you don't want to underprice just to lure customers to buy, you might want to add products so that you can have an entry level price for a simpler product and a high end price for special listings. Be ambitious!

Some items just go together like Newbie seller
StoryFolk's Alice and White Rabbit

Deals on groups of items. You can set up your Shipping Profiles so that buyers are encouraged to buy muliple listings ans get a rebate on combined shipping.

Sales and Promotions warrant an entire class of their own - but note that if you are selling at a fair retail price, you have room to offer a little break for you customer. Offering a coupon code to return buyers can be a nice incentive to keep them coming back.

Once you've been selling online for a while, you may find you don't really need to formally add everything up, that you have a good idea of your costs, needs, goals and the market value of your work. But, examining those ideas carefully and revisiting your prices is something you'll want to do regularly. Like all things, there's always more to learn and you can edit and amend prices as your business evolves and grows.

So, do you have any secret pricing tools or tips to share? Want some feedback on your shop? Have a comment about what you've read? Let us know! Leave a comment below or drop us a line!

 The Toronto Etsy Street Team loves Newbie shops! You can find some of our favorite listings from talented Newbie sellers, including those featured in this class in our new TEST ♥ Newbies section. Be sure to stop by often to see what's new in this evolving, curated treasury of amazing Newbie finds!