There are some things on Etsy that both novel and long-time Sellers struggle with and it doesn’t always get easier. One of those issues is product pricing on Etsy. It can be hard for a lot of shop owners to properly price their items as there are a number of conflicting considerations like profit margins, time spent creating or procuring items, and the risk of pushing buyers away with potentially high or even low prices. Here’s a quick guide on:
How to Price Your Product on Etsy. In general, you can use a simple formula to calculate product prices that looks at your break-even price times 2, to get your wholesale price which is multiplied by 2 again to get your retail price; however, this method does not account for every store, level of competition, or industry on Etsy.
There is a great deal more that goes into how products should be priced on Etsy. Your price point can make or break your business, so you need to get it right. Oftentimes Sellers go with lower prices which can squeeze margins and even drive away potential buyers looking for high-quality goods. Read below to find out how successful Etsy Sellers determine their prices.
Money, in general, is one of those taboo topics and it’s something that Etsy Sellers struggle with a lot when determining price. Funny thing is, business people never seem to worry about pricing and hiking up store prices because they know at the end of the day it’s just business.
That’s really the driving factor behind much of the worry around price. Sellers on Etsy are usually passionate hand-makers looking to turn their hobbies into a living.
That’s rule number one: If you aren’t making a handsome profit then all you are really doing is wasting time on a very expensive hobby.
There are a lot of costs associated with running an Etsy shop including Etsy fees, shipping costs, and labor costs so it doesn’t make sense to invest so much time and money when the upside is just not there.
Generally speaking, most e-commerce Sellers like to use a very simple formula to calculate the price of their items but stick around to find out why this formula is not exactly full-proof and why it may not fit your Etsy shop needs.
The formula is as follows:
While this formula is fairly straightforward. It’s not perfect because it doesn’t take into account your niche and while it does optimize for labor costs, it’s not that simple especially when you’re calculating your own hours and not an employee’s.
If you go get items from auctions or yard sales for cheap and use the formula above, you may make a profit but you could be missing out on a huge potential upside.
Yard sales often sell super-cheap items that can easily be marked up 10x making you a handsome profit.
Think also in terms of long-term sustainable and manageable growth. If you are barely paying your business expenses month after month, then you aren’t leaving much room for scaling and cost reduction especially in a business that works with lots of volume.
Way too many Sellers on Etsy forget to count their labor hours and include it in their individual item price points.
Again, this isn’t a hobby, it’s a business so you have to know your numbers inside and out.
Calculate your research, design, and development time. Every second you spend even thinking about your business you need to take into consideration.
If you are just starting out, try factoring in your time with a minimum wage hourly rate but increase gradually as you become more of an expert and sales start to pick up. Most hand-makers on Etsy calculate their hourly wages at around $20 per hour but again it’s up to you!
This is just good business advice to always follow. Before you even start an Etsy shop or a new listing you need to research your competition to understand what they are doing well and where you can improve.
Picasso said that good artists take, and great artists steal and it’s the same in business!
Check out what price-points your competition is selling at and price your items accordingly. There are various strategies to explore with competitive pricing.
In general, you can look at the range at which a product is selling and go for something in the middle. You can also choose to undercut your entire competition and rely on volume to make up for smaller margins.
Or go the opposite direction and position your brand as luxury and high quality with high price points. You may sell fewer units, but your margins will likely make up for that, leaving you with more cash!
This brings us to the:
A tried and true method, is pricing individual products and listings based on their quality and demand.
Say you’re a vintage goods seller on Etsy and happen to come across a limited edition comic book from the 1950s worth thousands of dollars. If the product is worth $10,000 and you list it for $2,000; one of two things will happen:
So, in general; you can price your items based on what they are worth to the market which is determined by their quality, craft, uniqueness, and demand.
Experimenting with pricing can take a while, but once you get it down you will notice a spike in profits quarter after quarter. Take your time and get it right to ensure the best results! If you want to find out how you can exponentially grow and scale your business with Etsy optimization contact us today.