I was so excited to see the all the responses to my latest blog post! Normally, I don't post more than once a week, but
A Pricing Experiment part 1 sparked a lot of discussion, so I thought I'd come back today and expand on my last post. There was a lot of responses, and in this post, I'd like to talk about one of the most common--competitive pricing.
But first, I really want to talk about is this question that I think everyone should be asking themselves. It's important, because your answer is really going to determine your pricing strategy. What is your
long term goal for your business? I'm not necessarily talking about
just your Etsy shop here either. Do you want to sell to stores? At craft and trade shows? In your own brick and mortar shop?
If you want to just make enough to buy more materials, because your joy comes from creating your beautiful work, that is absolutely a valid choice. But...your pricing strategy is going to have to be a little different than someone who wants to supplement their income, or have this be the primary source of their income.
In this blog, I'm really talking about creating a financially sustainable business. If that's not your goal, there's a chance that some of this information might not apply to you, but I encourage you to keep reading, because you never know what the future might bring.
Another thing that I think is really important to consider is something I kind of glossed over in yesterday's post, and that's the idea that you really need to develop your brand to match your price point. Your brand is pretty much everything about your business. Things like your item photography, your website layout, your packaging, your marketing, and your customer service; they all combine to communicate an overall image to your buyers.
If you have a really great product, but your photos are lack-luster, you're going to have a hard time convincing people to pay that scary high price. If you have an awesome product, and great photography, but you communicate like an 8th grader texting her bestie, you're not inspiring confidence in potential customers. Developing your brand can take some time, just like developing your product probably took some time. It's super important that you invest that time, create an environment that reflects the quality of the work you do.
Something that was brought up a whole bunch in the discussion thread I started over on Etsy was along the lines of "I can't do that! Everyone else on Etsy is priced at X." Time for a little tough love guys--
stop thinking like that. If you're trying to grow your business, make money, and eventually sell other places than Etsy, you need to break out of this bargain pricing mentality. Even if you're only going to ever sell on Etsy, you need to
stop competing on price alone.
I talked a little in the thread about competition, so let's look at that a little more closely.
FragrantOffering512 said
"Candles are not really a unique piece of art as are the other beautiful things some of you make, so I'm not sure this would work as well for me. I used the formula and my 12 oz. candles would retail for $26, when everyone else is around $12, like mine."
She's right, if I do a quick search on Etsy for "12oz soy candles"
most prices are between $10-$15.
BUT if I do a Google search for the same thing, there is a much bigger range of prices, actually anywhere from $15-$30. That's a really big difference. I'd also like to point out that in the Google search, almost all the candles priced under $20 had words like "deep discount", "on sale", "for less" and "cheap" on their site or in the taglines.
 |
| These candles are both pure soy hand poured 12 oz candles found on Etsy. The one on the right charges almost twice as much, but their branding supports this price difference |
Those of you doing price comparisons, ask yourself what you your brand associated with. Do you want to be known as a discount shop? It is perfectly okay if you do, but just know you're probably going to have to sell two times more than full priced shops to make the same amount of profit. I'll repeat that, because it's important. You'll have to move twice the product just to make the same amount of money as shops charging retail prices.
For those of you who are so resistant to the idea of raising your prices to full retail because your full retail price is so much higher than your competition, it's time to change your way of thinking. The shops and people that are way under charging
are not your competition. Let that sink in for a moment. Going back to the candles--if people are selling their candles for $12 and your candles are worth twice that, the $12 candles
are not your competition. I know, that's a confusing idea because, hey, they're selling candles too, they must be your competition. But think of it this way--Wal-Mart and Victoria's Secret both sell underwear, but they are most definitely not in competition. There's a whole wide world out there, and the reality is, you determine who your competition is by how you set your price.
Kristen from
SnowFallStudio says:
I mean no disrespect and I agree that undercharging is rampant on Etsy, but I suspect that the category of items makes a difference. People expect to pay a good amount of money for fine jewelry. It's not the same with children's toys, as I sell in my shop.
Several weeks ago, I raised my prices. Since then, sales of my bestselling item (custom mermaid doll) have plummeted and sales of my smaller, and therefore cheaper, toys have risen. Not many people are willing to pay $75-$100 for a toy.
I think she makes a good point, that your category will have some effect on what you can get away with charging, but maybe not as much as one might think. There is definitely a limit on how much profit you can make on any given item, and that profit margin is going to vary from item to item, and category to category.
Also keep in mind that, as the makers of handmade goods, we really have our work cut out for us. Because so many people under price their work, buyers have no real expectation of what prices
should look like for handcrafted items. Because of under pricing, buyers expect to buy at lower prices, and because buyers expect lower prices, artists and crafters are under pricing. It's a vicious cycle that won't be broken until sellers start pricing more accurately and we really start to re-train buyers' expectations.
If you put in the time to research other prices (both on and off Etsy), and find that your retail price is significantly above average, then it might be time to re-visit your item.
- Take a look at your material costs--can you buy more effectively, maybe save by buying in bulk?
- Take a look at how long it takes you to make your item--how closely are you tracking your time? Is there a way you can work more efficiently to cut down on your labor costs?
- What is your experience level (because that should be what's determining your hourly rate)?
- What is your profit margin? Remember you probably won't be making the same percentage of profit on every item.
If you taken a fine tooth comb to your costs and have reduced them as much as possible without short changing yourself, but your item is still pricing significantly higher than average, it might actually be time to reconsider that particular product. You really have to ask yourself, if you're not breaking even, is this really a viable product? Again, I'm speaking to those trying to run a financially sustainable business. If you're making enough to buy new materials, and that's what matters to you, keep on keepin' on :)
I think that's enough for now. Tune in later this week for further discussion, and feel free to stop by this
forum thread on Etsy to talk with other sellers and hear their thoughts and concerns. Thanks for reading! Happy sales!
A big thank you to everyone who participated in the
Discussion Thread over on
Etsy. A very special thank you to the following shops for their contribution:
Rachels Rustic CandlesPure And Simple CandlesSnow Fall StudioFragrant Offering 512
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