Thursday, December 2, 2010

Dear Miss Mignonette - The Price is Right

Miss Mignonette - A Savvy Coquette

Dear Miss Mignonette:
I've been on Etsy for 6 months now, and I've barely had any sales. I think that my work is really cute and well-made, and I don't understand why all of my sales have been to family members and friends. I've looked at other Etsy sellers who have tons of sales, and my work is much cheaper.  What gives?

Dear Miss Mignonette:
Last week I had a booth at my first craft fair. It was really frustrating - I sat all day and hardly had any sales! I did have tons of people coming over to my booth and talking to me, but hardly anyone bought!  I took a break and walked around and my prices were much lower than other sellers, and they had people lining up to buy!  What am I doing wrong?

It happens every time - I go to a craft fair and an amazing booth catches my eye.  Here is an artist who has it all: an incredible product, a catchy name, and a booth display that will knock your socks off. I want one of everything - and the super-low prices mean that I can afford it. Yet the prices also put me off, and more often than not I leave empty-handed. You've probably done this too, or had it happen to you.
 I know it sounds counterintuitive, but trust me: your felt mustache on a stick/ narwhal wallet/ Gocco print doesn't cost enough. It is so cheap that consumers are suspicious of it on a subconscious level.

As a former buyer and a craft fair veteran, I've met my share of crafters who are clueless about the worth of their work, or just don't understand its value. A few months ago a lovely, super-talented crafter crossed my path and had the unfortunate luck to tell me that she was charging around $3 an hour for work that, if it were sold at a specialty store, would retail for $200, and even worse, her sales were stagnant. I gave her such an earful that she was too terrified not to take my advice, and now her business is booming.  I won't chalk it all up to re-pricing her work, but once she made it clear that she was taking her business seriously on all levels, the buying public had no choice but to take notice and give her the recognition she deserves.

In retail there is a little something called 'perceived value'; we know that when we walk into a truly amazing store, we are paying for ambiance and  overhead, and that's before we even get to the product,  while stepping into a no-frills discount store means that we don't expect much, therefore we don't expect the products to cost much, or last long, even though they might be high-quality. The same goes for your work.

Let's compare two tee shirts - one from Target, the other from a boutique for a considerably higher price. Both are cute and simple, but  you wouldn't think twice about wearing the less expensive one until you trashed it, while the pricey one would be hand-washed and treasured, right? Think of your work the same way.  The cheaper you treat it, the cheaper it will be treated by the customer.
Let me explain, because I can feel the objections forming:  "I want to sell!  I don't care how much it sells for, I just want it out of my house!  I just want people to have it!  I'm not in it for the money! " Be honest with yourself:  You wouldn't be selling your work if you didn't want to make some money from it. Otherwise, you would give it away and you wouldn't even be reading this. Embrace the fact that you want good money for your art, and you'll be okay with pricing correctly.

The Nitty-Gritty of Pricing
Let's say that you make wire-wrapped jewelry with semi-precious stones, in the shape of signs of the zodiac , and you're getting your materials from a local supplier instead of ordering them online, and you are spending at least three hours per necklace, and by the end of the day your feet hurt from walking all over town to get your materials and you are up to your eyeballs in Virgoes and Capricorns, all in the name of art. That's great.  The bummer is that now you are going to log on to Etsy and try to sell  all of your sterling silver, carpal tunnel-causing, amazingly creative and well-made work for $25. 

How long did it take you to find the materials to make it, and how much did they cost? And then once you found them, how many hours did it take you to actually make the item? And now you're photographing it, writing clever descriptions, listing it on Etsy, and then if it doesn't sell immediately you're going to take it to sell at a craft fair and merchandise it and then sit all day and try to sell it to customers? For $25?

A Numbers Game
If pricing is driving you up a wall, a little time spent with an Excel sheet (or just some lined paper divided into columns) will work wonders in helping you get a clear picture of what your work should cost.

For each new item, open a new sheet in Excel (or find clean lined paper) and create a column marked "cost" , listing all the materials in the item, next to their costs.

1) Materials
Take into account the materials that you had to purchase to make just that item (silver wire, clasp, beads, etc).

Wire-Wrapped Jewelry
Silver Wire     $10
Beads             $4
Silver Clasp   $3

Materials  =    $17

2) Skilled Labor, i.e. how much time did it take to make?
This is a two-part question.
A) Assuming that you work steadily from start to finish of a piece, with no breaks to check your email, walk the dog, log onto perez hilton, or suddenly bake a loaf of bread, how many hours did it take you? 
B) What is the minimum that you are willing to pay yourself?
Picture this: Imagine that you are offered a job selling ice cream.  You have to stand for at least 6 hours a day, ring people up, wear gross latex gloves, and not eat all of your product, and at the end of each day you've only earned $30 before taxes.  You'd quit that job pretty quickly, right? of course!
So make sure that, when you price your items, you aren't paying yourself even less than you could earn by slinging ice cream.
If you are having what i like to call 'crafter's guilt' about paying yourself a fair wage, i find that consulting your state's guidelines for minimum wage are a good guideline.  In California it's $8, but crafting is skilled labor, so if you want to raise your wage,  I say go for it!

Now multiply your answer from A by your answer from B. Awesome!

Time spent = 3 hours
CA Minimum wage = $8
Labor costs = 3x8=$24

3) Now let's think about added costs. 
Are you shipping that item, and do you offer free shipping in your Etsy store?
How long does it take you to list the item?

These little costs add up, but they should be taken into account. For the sake of not twisting your brain into a pretzel, let's say that you do offer free shipping, and that it takes you 30 minutes to photograph, upload, write about, and list an item. If shipping is actually $4.5, you need to account for that in the price of the item, and that 30 minutes that it took to list the item needs to be calculated with the formula that you used in step 2. 

Shipping = $4.5
Listing =  1/2 hr x $9 = $4.5
Added costs= $9

So let's see: For one necklace, materials ($17) + Labor ($24) + Added costs ($9.5) means that your necklace actually costs $50 to make!

Now that you've got a good idea of how much you actually spent to make that necklace, figure out what sort of profit margin you'd like to make (20%, at least, so if your item costs $50 to make, multiply it by 1.2, i.e. $60, or, it you're feeling really punchy, multiply it by 1.5 and charge $75). 
Now you've got an item that is worth putting your name on.

And if all this math is giving you hives, put down the calculator and do the most important (and fun!) step - Research (i.e shopping).
This is something that you should always do when starting a business, but it doesn't mean that you should ever fall out of the habit of checking up on your competition's pricing either. This means not just on Etsy but also in the non-virtual world. See how much similar items cost in boutiques, and department stores that seem like places where your target customer shops, and take detailed notes.

Once you've got all these systems in place, your work will be ready to present to the world. 

What has been your biggest challenge, or solution, when pricing your work?

What guidelines do you use when pricing a new item?

Add your response in the comments below!

If you're an Etsy seller in the San Francisco Bay Area, contact Jen from Mama's Magic Studio about joining SFEtsy!


heathered said...

Thanks Miss Mignonette, is a great tool for this too, once you know your COG.

I charge $15 felt Narwhallets (narwhal wallets) and think it's a fair price. I'd love to be able to charge more but they just don't sell as well at $20.

felt = 15c
thread = 5c (estimate, i don't use a lot and get my thread at a discount)
velcro 10c
Materials = 30c

Time spent = .5 hours
SF Min wage = $9.79
Labor costs = .5 x 9.79 = 4.90

Shipping = $4.90 (paid for by customer)
Listing and photos = .16 hr x $9.79 = $1.63
Etsy fee = .73
PayPal fee = .74
Added costs= $3.10


There are also 62 results for "felt wallet billfold" (1,414 for just felt wallet" on Etsy. I am the only one selling Narwhal Wallets (which is awesome).

$20 would be a nice price but I sell more at $15. Any comments/ideas?

My Dear Darling said...

Thank you! I think I need to really go through my pricing since my products take a long time for me to make and I feel like I'm not even making minimum wage. :)

Tisha said...

Thanks for the great advice on the math. Can you speak to attitude and appearance as it related to sales? I have been doing fairs for years (20)and my sales sored when I took the time to psych myself up with visualization and mediation before the show.

Rylos said...

This is a really cool post. Thanks for writing it! I,ve had problems with pricing my work and this really helps me out.

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