Pricing your crafts
Putting a price on your crafts can be one of the hardest things to do and many people worry about pricing their goods too highly that they lose sales. But price your goods too low and not only are you undervaluing your own work but you’re also undervaluing handmade arts & crafts as a whole.
So, here is a popular and sensible pricing strategy to help you work out a retail cost for your products:
It’s really quite simple – you need to take into account the cost of your materials, the cost of your time, the cost of your sales & marketing etc. to find a wholesale price, then add a retail markup on top to find your true retail price.
Why do you need a wholesale price? At the moment, you may sell direct to your customers – that’s great. But in the future, you may find yourself in a position when a high street shop or another online store wants to buy products from you to sell onto their customers (known as a ‘wholesale customer’) . They will add a retail markup to the price they pay to you – often, they will sell a product at retail for double the price they paid you for it, to cover their own costs & make a profit. They will not expect you to charge your customers less than they are charging their customers for the same product – this is known as ‘undercutting’ and is a great way to lose your wholesale customers quickly.
So, if you currently sell your jewellery for £10 a piece which allows you to break even (or make a small profit) and you are approached by a business who would like to buy your products wholesale, you’d have two choices:
- Sell your products at £10 wholesale. Your new wholesale customer may then want to sell them online for £20 and they will expect you to do the same. Your existing customers will come to your site only to find your prices have doubled overnight! How well do you think that will go down?!
- Reduce your wholesale price so that your wholesale customer can sell the products for your current retail price of £10. It is likely that your wholesale customer will therefore want to buy your products for £5. Is that still going to be profitable for you?
Here is an example of pricing a piece of jewellery:
Materials
Cost of base material (metal, resin, etc.)
Findings (e.g. chains, clasps, jump rings)
Packaging (e.g. do you package in an organza bag? velvet pouch? fancy wrapping paper? gift tags?)
Time
This can be tricky! You have to set yourself a reasonable hourly rate – this will depend on various factors, including your experience and salary expectations – so it’s a personal figure. But don’t undervalue yourself and for goodness sakes don’t pay yourself less than national minimum wage!! Once you know your hourly rate, simply take a note of how long you spend on each item – use a timer if necessary – and work out your time cost as hourly rate x time spent. If you make your products in batches, you could time how long it takes to make the whole batch, then divide it by how many products are in each batch.
So, if I set my hourly rate to £15 per hour and it took me half an hour to make my item then my time cost is 0.5 x £15 = £7.50.
The cost of a sale
Make sure you cover your known costs here, e.g. Paypal transaction fees, commission to selling agent (e.g. Etsy). You should also consider your other business costs – e.g. website hosting fees. It can be hard to split that into a “cost per sale”, so just try to average it out roughly, thinking about your sales expectations (or history) over a monthly or yearly period. You may also choose to include postage & packing charges in this, but some prefer to build that into a separate postage fee that is charged to the customer.
Add these totals together and you have an initial wholesale price.
Marketing & business growth
If you want your business to grow (and I assume you do!) then you’ll need to give yourself a budget for growth. The amount can vary depending on your type of business, but it’s common to add a figure like 10% or 20% onto your wholesale price. So, if your wholesale price has come in at £10, and you have decided to give yourself 10% for marketing & growth costs, you would add 10% of £10, which is £1 and makes your new wholesale price £11.
Retail markup
As I mentioned earlier, it’s not unusual for a wholesale customer to retail a product at double the wholesale price. This will depend on the type of products you sell, so you should do your own research to find out what a reasonable markup is for your niche.
If doubling is the norm for your industry and your wholesale cost is £11, then your retail cost becomes £11 x 2 = £22.
This might sound like an awful lot of work to simply come up with a selling price! But if you want your crafting business to stay alive in the long-term, it’s important that you make sure you are covering your costs and giving yourself room to grow.
