Friday, September 19, 2008

Need Your Input, Please!

I posted these earrings in an earlier blog post and received some great comments. I always appreciate my commentators!

Interestingly is that a couple comments mentioned that it's a steal. One even suggested the earrings would sell quicker for me if I raised my price from the listed $8.00.

This is where I need input from my readers. How do you feel about prices of items that interest you? Do you avoid prices you may feel are low? Would you be more interested in buying those earrings if they were priced at $10? $15?? $20???

Because I'm able to buy wholesale, the materials used to make this pair of earrings cost me $1.75. It cost me $.20 to list in my Etsy shop. If and when they sell on Etsy, I'll pay a total of 7% in commissions totalling $.56. That brings my cost of goods sold to $2.51. That's a gross profit of $5.49. The overhead that normally comes into the accounting play is extremely negligible because I work from the home. The percentage of overhead "spent" directly on this small pair of earrings is too tiny to account, but for the sake of argument and a nice round number to work with, let's give it a value of $.49 which also includes self-employment taxes. Profit is now $5.00 which pays for my time spent making the earrings. The earrings took 2 minutes to fashion (I've been doing this for years, speed comes with experience). That would give me the equivalent pay of $150/hour!

Not a bad wage, huh? Yet this well-meaning critique that my prices are too low has come to me from more than one place. "Under pricing" is a frequent topic on the Etsy forums. So now I'm asking you, dear reader, should I raise my prices?

Do you personally want to pay $13 for something when the designer is offering it to you for $8 while still making a comfortable profit margin?

When I started making my own line of jewelry, I had it in mind to have a Mission Statement for my business. I've never put it in writing, so I guess I'll do so now.

The Mission of '57 Design Studio is to provide quality handcrafted jewelry made of quality materials direct to the customer at prices that are friendly to the budget.

However, I would really like my business to succeed so I'm beginning to feel the pressure to raise prices, even in an economy that is on a roller-coaster of confidence. To be honest, I've already increased my prices ... two years ago I would have priced those earrings at $5.00.

As for the necklace, that IS a steal. That pea-pickin' thing took me three hours, but I seriously doubt anybody would pay $528 for a piece that is basically costume jewelry (no semi-precious material was used so I can't classify it as "bridge").

I welcome and appreciate any and all input. If someone would kindly Stumble this post, I'd appreciate that, too, since I'd like to get input from a variety of sources. I'm too "shy" to Stumble my own post!

Oh, and has anybody else been glued to a financial news network these past few days? I think I'm happy to hear of the possibility of mutual funds being insured by the government, especially since the major insurer of securities has defaulted and is in the process of being bailed out only to get sliced up into a gazillion pieces.

No short sells for 30 days, that's interesting too. I was wishing I had some spare change yesterday when the market opened with a huge plunge. Not only did it end on an up note, it opened up and is currently soaring. Time to raise 6 flags over Wall Street!

Stumble It!

49 comments:

Christopher And Tia said...

Pricing is such a difficult task. I struggled with pricing in my card shop especially. I have a special technique to making my cards, yet I have to keep my prices low enough to compete with other card makers. Well, I ended up lowering my prices, and the shop still isn't getting the business I was hoping for. In the end, I figured nobody can really help me when it comes to prices. I'm the one that knows how much time and effort went into my product, and thats how I'm going to price it. Don't sell yourself short, and at the same time, don't rip people off? Gah. Its hard.

Christine said...

You have a problem similar to many in that you are retailing your work at its wholesale price.

Your pricing formula is pretty much correct (materials + overhead + wages + profit), although you really need to be adding your wages into the price equation, not taking them out of the profit.

The pricing formula above will determine your wholesale price (the price you would sell your work to a store). Let's say your materials and overhead are $3. You decide that you want to make $20/hour and the earrings take you 15 minutes... add $4 for your wages. Because you're starting out and you want to keep prices low, you determine that you will be happy with a profit of 10%, which equals 70 cents. Your total price now is $7.70. THIS IS YOUR WHOLESALE PRICE.

Now, multiple that amount by at least 2 (in most cases now, mark-up is 2.5, however). That gives you a retail price of $15.40.

There's a lot of flexibility in this model... you can pay yourself differently for different types of work, determine that you can lower or increase your profit margin on certain pieces, etc. That limited flexibility should be enough to accomodate what you think the market will bear, while still maintaining price consistency through your line.

Tina said...

I'm using Beading Manager Pro software to help me price my pieces. However, some of the prices it's coming up with just doesn't sound right with what I would be willing to pay for that particular piece.

I can understand where you're coming from for sure & sympathize with ya. Wish I had an answer, though do remember that people expect to pay a bit more for handmade jewelry items as apposed to those items they can get in any retail store.

Sayo said...

Here's a link that might help you. a jewelry pricing formula by Rena Klingenberg http://www.home-jewelry-business-success-tips.com/jewelry-pricing-formula.html

I more or less figure my prices like that except I multiply by 2 not 4. (I found a few different formulas on the web and tweaked em to fit my needs)

Good luck!

Designing Hilary said...
This comment has been removed by the author.
Michele Reed said...

very interesting post....i really like christine's comments on how to arrive at a wholesale price, and then double it.

Designing Hilary said...

I'm trying this again ... when I read my comment to Christine, one of my statements sounded snotty and that was the last thing I wanted!!

I appreciate everyone's comments, especially Christine's. But I have an accounting background, both in education and experience so I know how to figure prices.

My question is (and I amended my post to reflect this):

If you had the opportunity to buy a pair of earrings from the designer at $8 when the "retail" price is $13, would you? If not, why?

Christine said...

There's a couple of things to consider with that question...

If I knew those earring were in a store at $13, but I could buy them from you at $8, I probably would because I have knowledge of the actual value of the earrings and would be enticed by the savings.

However, the store carrying your earrings at $13 is going to be mighty annoyed with the fact that their customers can buy the product that you are supplying them at essentially the same price the store is paying, and will probably stop carrying your work.

So is it worth it to undercut the retail price? Probably not, especially because if you sell them at $13, you're making even more profit, plus keeping your wholesale buyers happy.

And there is definitely something to be said about price as it relates to perceived value, particularly with handmade work. Underpriced items are often viewed as either poorly made or imports being resold under the guise of "handmade."

I have tons of artists who have stories of raising prices and finding their sales increase.

kim* said...

yeah i am terrible at pricing earrings....

HammelmanArt said...

I agree with all said betwwen you and Christine, but I would emphasize "what the market will bear." What is your competition selling for in the same market? This is "market value" and this is what you can expect to get. Selling for less could be accomplished by running specials and sales. But pricing under market can backfire because there are those who feel that they need to spend a certain amount to get something of value.

I would be willing to buy for the lower price if I could determine that the same quality was offered.

All that being said, Etsy must be the world's largest market for fine handcrafted jewelry. Your competition is fierce and probably the most defining factor in your pricing.

fragileheart said...

Avoid pricing that seems too low? Never! I snatch those puppies up like it's my last hour to live! I think it's admirable that you're being so honest about how much things cost you - but... you're an artist, you SHOULD be paid for your labour and your talent. Jack it up baby!

Babette said...

As a consumer, I will buy anything that is beautiful to me. It does not matter if it's cheap as long as it does not look cheap. :)

Jolene said...

For myself I wouldn't pay $13 for earrings. I won't pay more then $10 for earrings unless they are sterling silver or at least 10K Gold.
That's just me though, I'm cheap lol, I just can't afford to spend a lot on myself so if I do it has to be cheap(in cost, not in quality lol). And I know I'm not the only one like that.

I think if you are making what you said you are off the earrings you have no reason to increase the price. You are making good money on each pair for the time it takes you to make them. I don't agree that increasing your price will mean more people will buy, I think your prices are good as they are.

TrishaRitchieNC said...

I totally appreciate your honesty about your pricing and costs. It is very refreshing to see someone lay out the costs as you did.

Michelle Gartner said...

I struggle with pricing issues all the time on eBay- now I don't make my own jewelry but sell a lot vintage and Victorian, Edwardian sorts... I make my prices low no one buys, I raise them no one buys. back and forth, then I have a rush of buyers...

The best thing for me is to run auctions for the most part and let the market settle the price, but on somethings that are really special one of a kind - it's hard to start at that low auction starting bid. I can only imagine pricing your own work.

I do know that once you get a buyer to buy once and they are impressed- they will buy again and again. You wouldn't think that low pricing items would be a problem in this economy but it is, people think low price = junk. And they are very careful about spending even a little.

Lynne said...

I personally think $8 is a great price! I'm not sure why it is thought that increasing the price would increase sales.

Sales are tough right now though, for everything.

PurrPrints said...

Pricing is a challenge--I appreciate your honesty about exactly what your materials and time comes to, and I would rather pay less for something as long as I was sure it was quality. I think the problem with low prices is the automatic assumption that something must not be a quality product if it's a low price--that it must be sloppy, etc. Do your descriptions reflect the quality of your crafts(wo)manship and materials?

The other factor, to me, would be whether you'd like to wholesale your jewelry--you're basically selling them to etsy customers as if they were buying them wholesale, which is a nice deal for us but hampers your ability to ever wholesale anything. If you ever want the possibility to wholesale, I think you should raise your prices (or if you want to do craft fairs, etc.--anything that will raise your overhead) so that you don't undersale your retailers.

If this is something you only want to sell online yourself though, then the price things gets trickier. You might try making your mission statement and policies more "public", make sure everything in your shop reflects your high professional caliber, and make everyone else frustrated that you're driving prices down--lol ;)

Mekhismom said...

This is a great conversation. I personally don't worry if something is priced low -if the pictures allow me to see the details and I am assured of a quality product.

Laane said...

Pricing is difficult.

I don't have much money to spend on my own, so I'm very critical.

I want to fall in love with an item.
So buying to me is kind of an emotional issue.

I won't buy when an item is outside my financial reach.
So I land by people who're not making things for money, but who make it as an creative outlet.

I can't pay for the effort, but I know how much effort it takes to make something and that means I won't throw earrings somewhere in a corner when I'm not wearing them.
I tell my girls about them, so they know they're special.

So yes I would buy them for 8 dollars and they will be more special to me because they're 8.
In fact, I would probably keep a close watch on new items and maybe treat myself with another pair.

Thyme2dream said...

You have wonderful "branding" and a very professional look to your blog and shop, it seems to me that potential customers would look at that as much as the price of the item when it comes to making a decision to purchase.

Like others have said in comments, if the quality is the same for your $8 pair of earrings as for the $15 pair in another shop Im buying yours!

Do we really need to focus on price as a way to communicate quality, or are there other ways to do this with equal effectiveness? Im not sure I have the answer to this, but I think subconciously this is where I have put the focus in my own shop as I have continued to expand.

Interesting post- thanks for opening this up to discussion:)

Carol said...

It has always been my opinion that people would sell more in volume if they would keep their prices low, but still be able to make a profit. I think your price on this item is very reasonable. If you are comfortable with it, then leave it as is. If you think you would like to make more profit, then raise it up to $10.

LizzyT said...

I think as long as you are making a good profit, which you seem to be doing, you are happy with your prices and your items are selling, then I would leave them as they are.

Grr, Midnight & Cocoa said...

I don't make or sell anything - I'm a consumer only, plus I have 3 teenage daughters. If I came across some pretty earrings priced at $13 or more, I might buy one pair for myself. If I came across the same pretty earrings priced at $8, I'd call the girls over and let them each pick out a pair too. We love a great deal!

Momstart said...

I prefer cheaper prices, but I know that in surveys that I take, they always ask, at what price do you think is so cheap that it couldn't be a quality product. I think that you could probably get 15 for them or more, but would you sell less. I didn't like taking economics in college and this definatly fall into that catagory.

Elizabeth Channel said...

Well, I'm in the dark here because I sell books and the pricing for them is so different. That being said, they are darling earrings and I'd certainly buy them at between $8-$10. I don't think raising them to $10 would scare buyers away.

BeadedTail said...

Pricing is something I struggle with all the time. I am not to the point where I can buy wholesale plus I spend a lot of time looking for the materials in the first place, not just in making the item once I have everything purchased, that I have so much time invested in everything I make. Maybe this will improve as time goes on - at least I sure hope it does - so I can adjust my prices accordingly.

But, I feel that if you are pleased with what you make from the sale of your earrings then by all means you should price them whatever you want to.

SolSisters said...

I'm impressed that you even know your material and time cost down to the penny like that. I guess I should keep better track of these things.

I think $8 to $10 is fair on those earrings.

Rachel said...

Hello stranger, lol

Thanks so much-- you have beautiful jewelry!

zyriana.com said...

I went into some horrid jargon of a response, then re-read your question. I'm an accountant as well.

Okay, if the retail price of the earrings are $13 and I see that it's on sale for $8 - yes I would buy it! It might even make me buy it because it looks like a deal.

Same is true if you had it at $20 retail, on sale for $13. :)

As long as it's something I like.

Monica

Rayne said...

Oh boy. Well you have to just figure out what is best for you. All of your jewelry is beautiful and I feel a higher price justifies your skill. Obviously, you can't go crazy high. lol But hey if your eight dollars makes sense then stick with it. It actually looks like it does after you showed your materials cost and the rest of your math calculations. I use a program that tallies up my materials, labor and other charges and shows me the direct, wholesale and retail price. So that's what I go by. However, I don't sell anything since I am not legalized. lol So I just get to look at the stuff I've made and then decide to give some away. :s

Triz Designs said...

I personally would not be put off from buying something because they were "too cheap", on the contrary I would think that it was good value for money and would appreciate your honesty in pricing them! :-)

Beadsme said...

This is a hard question. I would increase but go with your gut instinct.

Melissa said...

For me my motto, is similar to your mission statement. I try to make beautiful jewelry, at beautiful prices. If I get a great deal on supplies, I give a great deal on a price. If something is very time consuming, or materials cost more, my price will reflect that. If something is more rare and exotic, that will reflect in my price as well. I think there are some things on Etsy that are way over priced, and I would not buy them. I also think you have to stay competitive, rather than just going along with what everyone else is doing. Even if you put your price higher, and then put it on sale, people will think they are getting an awesome deal. When I have gone to a few craft fairs, I know one of the biggest complaints from buyers, was they thought the items were way over priced. I think people assume, handmade means it is cheap to make, which sometimes is true, and sometimes is not at all true.

Melissa said...

After I commented, I went back and read, your other comments. To answer the question revamped in your comments, yes I would pay 8 dollars for something that sells at retail for 16 dollars, because to me that is an awesome deal.

Heathen's Hearth said...

First off, they are gorgeous earrings. Secondly, if YOU are comfortable with the price, then that's all that matters.

I would buy them for $8. I would buy them for $13. I personally will not buy earrings for more than $20...just a personal preference (mostly because I've had more than one fall out of my ear, lol).


-Misty

Susan Helene Gottfried said...

As a buyer only and not a jewelry maker, all I can add is that I like the lower-priced items -- basically, it stretches my budget further.

The best way to expand the shop might be simply to network and get your name out there. But again, I don't know.

rockcreekcreations said...

Yes, I'm glad that you are happy wiht your price right now. You have to decide how "big" you want to get. If a business came to you and wanted to wholesale these earring, would you sell 10 of them for $4 a piece?

If not, then you need to raise your prices....

I had to do the same thoughts for my stuff also.

Scott said...

"My question is: If you had the opportunity to buy a pair of earrings from the designer at $8 when the "retail" price is $13, would you? If not, why?"

My answer would be yes, as I would feel I was getting a good deal.

DhoyM said...

I agree with Christine's formula. You can sell it at a retail price of $15 (for example) and later when you plan to have a sale (ex. 15% on all items)to attract buyers, you can still get your expected profit.

Tammy Warren said...

I would stay at the market price. Sometimes when the price gets too low...people just wonder why?

Margaret said...

You have a good formula for pricing your items although I would add in a cost for my time and talent. Probably in the $25/hour range then double that for price. I think that will still bring you in less than the $16 price suggested.

I did stumble your post for you as it's a significant issue with people selling hand made items and needs to be discussed.

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Lady Language said...

Their lovely, handmade and personally, I would pay up to $15 - 20 may be a bit high considering your costs. Usually jewelery markup is x3 in the retail industry once you pay the wholesale price so take that into consideration. You are the wholesaler and the retailer. Christine has a VERY good formula and puts you at the price point I would pay :-) Don't leave out your wage!

Lady Language said...

Okay, just read farther. I agree with Christine in making retailers mad if they are carrying your product for more than you offer it. I deal mostly with clothing but usually designers with their own sites, stay slightly above their retail site pricing.

If you have your own store and are not wholesale, then I see no problem setting the price at whatever works for you and the business :-)

Alicia aka "Fashiona" said...

pricing is hard but you should not undercut yourself either. from one designer to another, your time and creativity are worth a lot.

alicia
www.todaystyle.today.com

Lynne said...

Hi Hilary! Just wanted to let you know I've passed along an award to you and your blog! :-D

Leet said...

I found pricing is a difficult task as well. I'm not good at it - most of the time I end up by giving my artwork.
Certaintly I would love to have $8 especially from designer - but then I wonder, why are they cheaper? Are the qualities the same?... and so on..

Lynne said...

I think your post says it for itself...you were going to make a high profit on the earrings, while the necklace ends up a wash (timewise)

Laura said...

As artists, we have a hard time judging price for our items. We have so much heart in them.

Sometimes I think we miss the point. It's not price, but VALUE. What is the value to the customer? If you're selling hand made goods made of excellent quality materials, and you put your heart into them; what is the value of that?

Two friends of mine corrected me on the issue. They said I wasn't charging enough, either. One of them says I should still charge more, even double, what I'm charging now. (I'm booking her for a home show;) I think they're probably right, but I have the smae old quandary between what I paid for it, what I WOULD pay for it (keep in mind I know how to do this stuff so I never buy from anybody else) and what other people would pay for it.

It's such a sticky issue.

As for the earrings in question, I'd charge no less than $15, and I didn't even catch what you made them with.

You'd pay more in a department store, and they wouldn't even be as nicely made with nice quality materials.

Elizabeth said...

Sigh...I feel your pain. I had the same problem when I first began selling my jewelry. Not only did my jewelry not sell very well, but I had other artists and customers telling me my prices were too low.

But I wanted people to be able to afford my jewelry! With much hesitation, I raised my prices. And guess what...my stuff sells, no one complains about prices, and I'm actually being paid what my skill is worth.

It also gives me the flexibility to offer special incentives to my customers. I can list things on sale, which is irresistable to bargain hunters.

I can also afford to offer "added values" to purchases. My most loyal and most spendy customers get free gifts--much like a simple pair of earrings that only costs me $3 to make. They feel great for getting something free, so they spend more over time. And because I make a decent profit on regular sales, I'm not hurting my own pockets. We all win.

Maybe you can come up with a set of incentives that works for you. For you, that may be keeping your prices low, but explaining to your customers that you're passing savings along to them directly.

Good luck!
Elizabeth