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Nature Manipulated (NM) creates visual, wearable and practical art that reflects upon nature and all of its elements. At NM, we believe that everything is a part of nature, some things are just "nature manipulated."

NM specializes in one-of-a-kind handcrafted jewelry, handmade greeting cards, nature photography and other unique accessories.

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Saturday, May 17, 2008

Pricing on Etsy - Math by Butterfly Chic

This post is made possible by Butterfly Chic. To read more on the Secret to Selling visit Butterfly Chic's blog.

One of the hardest thing for many sellers is pricing. Many things on Etsy are servely under priced in hopes of getting sales. This doesn’t always equal sales, as many shoppers equate a low price with low quality product and will pass your shop on by. If it does sell for the low price, once you add in PayPal and Etsy fees and overhead and supplies, you don’t really make any money.

There is an art to pricing. It’s called a formula.

So many times people ask, “how’s the price on this?” This tells potential customers you aren’t sure of yourself, your product, your skill, your talent, or your price.

Let’s look at an example. You might see that you took $5 worth of supplies, made it into something, list and sale it on Etsy for $10. You think you made a $5 profit, right? Easy math! They math is easy enough, but the formula is flawed. Let’s take a look:

You list it and Etsy then takes their $0.20 listing fee $9.80
You sale it for $10 and Etsy takes their 3.5% equaling $0.35 leaving you with $9.45
PayPal takes their fees equaling $0.59 leaving you with $8.86
Minus the $5 for supplies you are left with a $3.86 profit, correct?
You spent $0.04 each on business cards and, like any good seller put 3 in the package totaling $0.12 leaving you with $3.74
You put your item in $0.10 Organza bag or cello bag leaving you $3.64
You wrapped your item in $0.05 worth of tissue paper and $0.20 worth of bubble wrap leaving you $3.39
You then place your product in your $0.10 mailer and tape it up with $0.10 worth of shipping tape leaving you with $3.19
You then use a $0.08 PayPal Label and say $0.05 worth of ink to print it leaving you with $3.06
So you took $5 worth of supplies, sold it for $10 and spent 30 minutes assembling/creating and 5 minutes to photograph it, 5 minutes to edit photos and 5 minutes to list it. Then you go on the forums and spend 5 minutes promoting it in various threads and another 5 minutes blogging about your new creation.

So for an hour of work you made $3.06…..would you take a job making $3.06/hour???

3 Simple things to consider when formulating your prices:

Materials
Labor
Overhead
Sounds easy enough, right? Think you got it down? Check the detailed list below.

Thing based on each product:

Supplies/Materials
Labor
Actual production
Photographing
Listing
Promoting
Emails/Convos
Packaging
Cello Bags
Tissue Paper
Bag
Tape
Business Card
Tag/Label
Box
Ribbon/String/Raffia
Card
Mailer
PayPal Label/Printer Ink/Address Label
Selling Fees
Website Fees
Etsy Fees
PayPal Fees
Market/Fair Entry Fees
Including Shipping in Price
Yearly overhead costs to be evenly divided between all products you make:

Tools
Computer
Camera
Craft Specific tools
Printer/ink/computer programs
stamps/pens/ink
brushes/brush cleaner
pliers/bead board
storage/organization containers
Button machines/sewing machine/cutting machines
glue/adhesive/tape
Studio/workspace Rent
Electric/water bill
Internet Connection
Phone Bill
Office Supplies
Printing
Accounting Fees
Advertising
Insurance
Display Costs
Subscriptions/Dues/Memberships
Travel Expenses
Taxes (usually 25-35% for small businesses)
Now that you’ve considered everything, you have to put it together. There are tons of formulas out there you can use, here are just a few….

(supplies + packaging) x 4 + Labor + 10% = Base Retail Price
10% is for overhead, normal overhead is 10-20%
x4 is your value factor, lower for wholesale raise for high end fairs
2 x (supplies + labor + overhead) = cost of sold goods
Wholesale price: 2 x ($2 + $3 + $1) = $12
Retail price: 2.5 x $12 = $30
I’m not a big fan of these formulas, but if you don’t want to put a lot of time and effort into it and are not doing your Etsy shop as an income, I and other sellers like me who do this for a living would much rather you use one of these simple formulas than to price $5 worth of supplies at $10! :0)

Labor + Materials x 3 = wholesale
Labor + Materials x 4 = retail
Formulas that use percentages are best as they are easily adjusted to fit your venue as some venues will allow a larger mark up than others.

You overhead should be adjusted to fit your needs and your hourly wage should fit your craft, Jewelry makers can easily charge $20/hour while someone who crochets or quilts could not.

My hourly rates are as follows $10 for paper crafts, $15 for graphics and $20 for jewelry.

The above formulas won’t work for everyone in every field, but they are a great place to start. Try them out and compare your prices to fellow Etsians selling the same items and adjust them to suit your needs.

The easiest thing to do is set up a spreadsheet in Excel (or buy one off Etsy) and use it to simply input your data, adjust your overhead, hourly wage and value factor and let the spreadsheet do the work for you!

To calculate Etsy and PayPal Fees etsy.ppcalc.com/

To calculate paypal fees without Etsy fees (if selling elsewhere) use ppcalc.com

7 comments:

Beat Black said...

pricing is a really tough thing to calculate, thanks for this post!

. said...

Fantastic post!!! Sooooo many things that I did not think of. Putting a link to this on my blog:
www.TulipsTalking.BlogSpot.com

WoW...

Thanks!!!

Crochet and Stitches said...

I think pricing is so hard for many people. I know when I first started etsy, I had no idea how to price and was shocked when I did the math. I had to raise many of my prices. Actually I was surprised that once I raised prices, some of my items began selling better. So, if you need to, don't be afraid to raise prices in fear it will drive buyers away.

There were a couple of things I still hadn't considered, so thanks for the tips.

storybeader said...

I've been making jewelry coming on 2 years. At first, I charged $10/hr, but I feel more confident now and switched to $20/hr.

Thanks for the Etsy/PayPal calculator. I always had a hard time figuring. This will help - I'm horrible in math!

industrialpoppy said...

Very true! Many seller's work is very underpriced-and worth so much more!

praveen said...
This comment has been removed by a blog administrator.
Tracy said...

Excellent post - really something to revisit!!

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