A most frequent aspect of selling any handmade product is pricing. Even if you have a great formula and strong market research, it can still be a tough issue especially if you are just starting out with a brand-new product line.
The most commonly used formula
The following formula is the most commonly used formula for pricing crafts. With a retail conversion, it allows artists to make at least 50% profit margin. It’s always a good idea to keep a wide profit margin so you don’t risk losing money through sales or any other promotion.
The most common use formula on pricing crafts is:
Materials + time + overhead costs (warehouse space, office supplies) = minimum base price.
Here’s an example using this formula.
Card making materials ($2.70) + time ( 15 minutes…$3.75 for a $15/hour rate) + overhead costs ($1.00… There are minimal overhead costs here) = $7.45.
Be honest about the cost for all of your materials and how much time it takes to make a piece and how much your time is worth.
To figure the retail price, many people recommend multiplying the base price by 2.5 or 3.
For the above example a 2.5 multiply would be $7.45 X 2.5 + $18.62.
You may want to round this total up to $19 to keep things simple
Other pricing aspects to consider
The above formula does not take any of the following fees into consideration. You may sell online or at local events or at craft shows but it’s important to take any additional fees into consideration.
Easy and PayPal fees
When you’re selling items through Etsy it is important to consider the fees and the easiest way to work these in the initial base formula is:
Minimum base cost ($7.45) + Etsy fee (3.5% = $0.26) + PayPal fee (2.9% + $0.30 = $0.52) = $8.23
The new retail price for 2.5 will be $8.23 X2.5 = $20.58 (again, you may choose to round us up to $21)
Taxes and credit card fees
When you are selling at a craft show or another local event, it is important to consider whatever state taxes and credit card fees there are. Sales tax does vary from state to state. The information can be easily accessed online. The type of credit card reader that you choose will determine what your credit card fees are. Typically state sales tax + credit card fees= almost exactly what Etsy and PayPal fees costs so I keep craft show fairs and Easy prices the same. It may not be true if you run the math so to try to do this before setting local pricing.
Compare prices for similar items
When you’re first starting out selling crafts or offering a new product line, it is helpful to compare prices for a similar item. Anything handmade recommends not lowering your own prices to meet the prices of your competitors unless you can find a way to meet this price point and not lose money.
Sometimes competitors are offering cheaper products than you are. You may stay ahead by providing a higher quality alternative. On the other hand, some competitors offer expensive one-of-a-kind versions. You will be able to provide more affordable and just as high quality alternatives. But don’t sell yourself short.
Bulk and wholesale pricing
A number of artists offer bulk and wholesome pricing. This is applicable for consignment deals or local boutique offers, large events, weddings and more. It’s up to you to offer this and what your pricing scale will be. Here are some common options.
One of the most common formulas for wholesale pricing is to multiply your base by two. If we take the earlier example your wholesale price would be as follows:
Minimum base price ($7.45) X 2 = $14.90.
Some artists choose a wholesale pricing scale. For example:
Orders of $0.25 or more will get the X 2 pricing per box.
Orders of $0.50 or more will get a X 1.75 pricing per box at $13.03 per box.
Orders of 100 sets or more will get a 1.5 pricing per box at $11.18 per box.
The advantage of purchasing wholesale supplies
A good way to keep your prices down and still make a profit is to purchase wholesale supplies. If you are just starting out, it may be rough if you haven’t narrowed your focus. If you know though there are materials you will use in large quantities, such as fabric or card stock, do some research and find your wholesale purchase options. Take advantage of any other sales or deals.