I’ve been around long enough to see many shops come and go, along with many trends and tips, and if there’s one major thing that bums me out in the Etsy world, it’s watching sellers of good work under-price their items.
The logic is there, I know – especially for American sellers. We live in a consumer-based world, where competitor pricing is accepted at most retail stores and corporations compete over low pricing in order to win more customers. In reality, though, it doesn’t work like that in the Etsy world. We make handmade products, often custom made. Our customers are unique. Our products are unique. Our prices should reflect these things.
The good news is that you can always change your prices! The bad news is that a lot of Etsy sellers are doing just that, but not doing it in their favor.
Here are the top 7 reasons NOT to lower your prices. In fact, raise them!
1) You have to consider ALL of your costs.
Costs do not only include basic materials. Remember to include everything down to paper, post-its, lighting, internet-usage, and gas to get to the post office. Are you remembering to include Etsy and PayPal fees? A lot of it is tax deductible. Every single thing you use in your business should all be broken down by cost-per-item and added into your final product cost. Remember, if you don’t add the cost of all materials, the cost is coming from your profit, and we don’t want that!
2) Make room for discounts!
Sometimes, you have to consider actual market rate for the awesome wholesale deal you’re getting, because that deal/wholesaler/dealer may not be around forever. If you get your supplies 10% cheaper than most other sellers, you can absolutely pass that savings on to your customers. However, also consider that you may not be able to get your supplies 10% cheaper forever. Are you going to be okay with suddenly raising your prices later? Or would you rather invest that 10% into expanding your line, creating branded packaging, or investing in more materials now? And, what are you going to do when you offer discounts and sales to your customers? Take a hit on your profit? Not a good business move! Build room for discounts and sales into your prices, as well.
3) Pay Yourself. Seriously.
There is not one single logical reason to put time and work into customer service, marketing, products and running a business, and not pay yourself a fair wage. Most Etsy sellers are not working 8-5, so paying an hourly wage based upon how many hours they work doesn’t make a lot of sense. While I know I can make X number of bracelets in an hour and can, with that number, calculate a price based upon an hourly wage, it doesn’t come out profitable in my end. If I stamp 10 bracelets an hour, 20-30 bracelets a day…that’s only three hours. We all know we work more than three hours – time goes into every aspect of running our businesses. Instead, I know how much I want to make per week/month, how many bracelets I can (and usually do) make per week/month, and then I priced according to my income goals. I cannot meet my income goals with $12 bracelets. I can with a variety of $18-30 bracelets. Easy decision!
Sidenote: Charge for your time as well, though! It takes me longer to hammer bracelets than it does to make anything else in the shop. I now charge $1 extra per hammered bracelet to make up for that time. $1 isn’t a lot for the single customer, but when you consider that around 50% of my customer orders are hammered, it really makes a difference in my profit vs time ratio.
4) You are not a retail store!
Do not lower your prices to beat the competition. You are not Wal-Mart. It has been proven in several studies that customers often equate lower prices with lower quality. Price your products too low and you won’t sell. Wonder why your competitors charge 20% more for the same product and have more sales? Because the customers expect (and will likely receive) quality work. Even if they would receive the same product from you, your prices do not reflect that. In fact, if your sales are slow, try raising your prices and see what happens. You might be surprised!
5) You’re hurting other shops, and Etsy as an entire marketplace.
This one hits a nerve for me. At what point does the price-lowering race end? When I first started creating custom tutu dresses back in 2006, they were priced anywhere from $75-100+ (sometimes much higher) a piece. The amount of time that goes into designing, tying, sewing, and accenting a quality custom tutu dress is insane. The amount of fabric that goes into a nice, fluffy tutu dress is an abundant amount, which costs money. By the time I closed my shop, the average tutu dress was $45. That’s about $20 in profit (if I was really lucky), for hours and hours of work. Now, you can find them for $29.99 or lower. Not only are these sellers not making any money, but they’ve cheapened the market for tutu sellers as a whole. Sellers who are pricing correctly aren’t getting sales and sellers who under-price aren’t making any profit, which deems tutu-making as a non-profitable market. Tutu sellers have jumped ship left and right – Etsy lost a lot of wonderful people because we were over-saturated and under-priced. It’s happening to sellers in every category.
6) How much work do you really want to do?
This is really just common business smarts, but a lot of people don’t seem to put two and two together. Lets say your goal is to make $1000. Would you rather make 50 items at $20 a piece, or 40 items at $25 a piece? Or even 33(ish) items at $30 a piece. Imagine how much extra work goes into making those twenty items to make the same amount of money. You could be spending that time creating new products, launching a new line, marketing your store, or spending time with your family.
Yes, you dropped your prices to undercut your competitor and maybe you even make more sales from doing so. But now the competitor makes more money per item than you, and has to do less work to reach the same amount of weekly/monthly profit. Rethink this.
7) You are worth it.
Simple as that. I know really all of the above reasons combined into one, but you are worth what your competitors are charging – maybe even more. Not less! Find ways to make your products and business stand out without cutting your prices: focus on product photography, create awesome product packaging, revamp your listings, etc. But do not take the hard work you put into your business and undermine it by underselling yourself.
Bonus Tip: My products are priced based upon the totals I came up with using this awesome Etsy calculator.