Pricing Your Product: Part 2

Competition, Shipping, Venue Fees and “Our Pricing Formula”

Mar 04, 2024

Thank you for rejoining me for Part 2 of my pricing strategy.

Part 1, was published last Monday and discussed; Material Costs, Tool Maintenance and Overhead.

Pricing can be a dry subject and not very exciting, but ultimately important to all of our successes. Have your coffee ready…

Assessing Your Competition

Doing your research on what products similar to yours are selling for is an easy starting point for getting an idea of what you are up against.

Firstly, you should believe that yours are superior in craftsmanship and quality. Otherwise, why bother.

The markets are saturated with some categories with Jewelry and Clothing being the two largest. To be successful in a saturated niche you must be unique and be ready to do a bunch of promotional work, both paid and free, separate from what your venue provides.

Do some searches on Etsy, eBay and Google, etc. for items that might be like yours. Narrow your search filters to vendors shipping from whichever country you are in. You will begin to understand what your target selling price should be.

See how they write their descriptions, but NEVER copy. Your own descriptions should be as unique as your product while remembering SEO basics (using your keywords).
Be sure to note their shipping charges or if they offer free shipping.
Try to find 4 or 5 vendors to make a fair estimate.

Compare your potential competitor’s prices to what you think yours are worth. If they seem quite a bit cheaper but of similar quality, you might reconsider your attempt to make a go of them. If they are higher than what you expected, you may have more latitude to work with, remembering you are shooting for a profit margin of 65%.

Remember that there are a multitude of shady companies and individuals selling on reputable sites, as well as outright scammers. Make sure you are comparing your work with legitimate sellers. I have found quite a few that have stolen pictures and descriptions from valid artists and craftspeople (myself included) that they claim as their own work. Since they are thieves, they will offer ridiculously low prices and anyone buying from them will be disappointed in the results and open themselves to having their personal and financial hacked. So determine their legitimacy, to the best of your ability.

Shipping Costs

“Free Shipping” is by no means free, to either the buyer or seller. It should rather be called “Included Shipping”. I tend to shop this way online and believe that most people would rather see the total, delivered price over taking the extra steps to determine shipping by weight and location.

For my products, the cost of shipping is my greatest expense and runs 18-25% of a single product’s cost, but decreases dramatically when 2 or more items are ordered together. Doing this will improve your bottom line.

When I consider offering a product, I think first on how it will ship. We include “standard” U.S. shipping in the price of our items. The post office used to call this First Class. Now it is called Ground Advantage. I offer Priority Mail as an option, at an additional charge to the customer if they need it quicker, but I do not figure Priority costs into my product, just Ground Advantage.

International Shipping - If you decide to sell worldwide, International Flat Rates are always add-on costs to the buyer. Do your research on the USPS website for the countries you wish to ship to, and set the shipping cost based on weight and size to each country. I add the following to every listing to help the international buyer understand what to expect.

“INTERNATIONAL BUYERS: I am in Florida, U.S.A. Please be aware of your country’s customs/VAT/import rules and possible additional fees. I am not responsible for these fees or shipping delays due to your country's postal service. Depending on your country, international shipping can take from 14 to 30 (or more) days. Contact me for an average shipping time for your country. International tracking will be supplied but please know that they are only accurate about 50% of the time.”

Packaging: We use only 5 package sizes. At the onset of our online selling, we determined to keep our sights on small woodstuffs that are easily mailed. The largest being a large Priority Mail box. This makes it easy to predetermine our shipping costs before the products are even made.

Uniformity in package size also allows you to save on supplies by buying bulk bubble mailers, mailing tubes and boxes. Priority boxes (for U.S. addresses only) are free at the post office and include whatever weight you can fit in them, tracking and some insurance. Research with the Post Office your actual costs. If your items are of similar size and weight you may be able to price them with some or all of the shipping included.

I have found the Etsy shipping platform the easiest for me to purchase discounted USPS labels to quickly get my product to its new home. While my packaging materials are neat, clean and protect my customer’s order, they are not “frilly”. I don’t believe that my product warrants it. Everything you add to a package costs money, in both supplies and time.

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Sales and Listing Fees:

Having done them for about eight years back in the 80s, I know live craft shows in shopping malls, fairs or theme parks can be great fun. We are so glad we did them and are still friends with many that we met along the way. They allow you to network with other artists and patrons of arts, get new ideas and see the country, but they are not cheap.

If you already have the required licensing, liability insurance and tax certificates, the up-front setup charge for a single live show can be $300 to $500 (or more). Then you have the expenses of meeting the display requirements set by the promoter, traveling to and from the event, motel rates if not within a reasonable commute from home, and (if you eat) the increase of costs of restaurant food over home cooking.

Before even counting the cost of making your product, your outlay of capital for doing a three day show can easily be $1400 to $1600. That is a tough nut to crack and by my calculations would demand three daily sales of at least $1600 to make the show worthwhile. If you already have the stock built up to support these sales and believe the show will provide the foot traffic that could possibly generate those kinds of sales, you should definitely go for it. But be prepared for 12 to 14 hour days and a lot of physical work setting up and breaking down your booth. A bad show can quickly put you in a hole that may take months to recuperate from.

Now, with the advent of the internet and online sales venues galore, we can now do it all from home. Even the personal touch that we cherished in face-to-face interactions can be achieved through attentive messaging and photo/video sharing. My customers are not faceless, non-entities that buy my stuff and go away. After selling online for the last 15+ years, we now have hundreds of people (worldwide) that contact us on a regular basis and even call friends.

I now do sales exclusively on Etsy. Etsy’s fees for listing and selling a custom, personalized item for $25.00 currently run about $3.00 to $5.00, depending on whether they found me organically or via Etsy’s marketing. Even at the high end, I figure my Etsy fees are 15%. Compare gambling the cost of doing even a successful live show is a no-brainer. Etsy wins.

Setting Your Net Worth

In the beginning of our quest for self employment while working conventional jobs, we determined the gross income that we needed to earn was $60.00 per day. This was the absolute minimum needed to pay all of our bills and buy groceries. We set that as THE target goal, to consistently average over a six month (non-holiday) period, before quitting our “day jobs”.

I know that sounds low, but we are fortunate in our circumstances and location. Your unique circumstances will undoubtedly require you to determine what your minimum requirements will be to calculate your own hourly worth. Your materials and overhead, debt load, having children, mortgages, insurances, car payments, health costs, etc. must be taken into account.

Our Pricing Formula

After 40+ years of doing keychains and chopsticks, we have concluded that basing our pricing on a flat hourly rate, with all standard materials and costs included is the easiest and most effective method for us.

$60.00 became our hourly shop labor rate in 2017. This is likely to go up soon as inflation has taken its toll over the last 6 years. Our pricing is based on how many of the items we can complete in an hour. As an example, I can carve and finish five name keychains or two pairs of chopsticks in one hour. Therefore, my online price for one keychain is $12.00 and a pair of chopsticks with table rest is $30.00. Easy-Peasy!

*Sipo Mahogany Chopsticks (Right- and Left-Handed)*

As well as workshop time, you must also consider your office time. Real minutes are added to orders in messaging back and forth with clients, writing copy for listings, packing & shipping and posting aftersale pictures (Sneak Peeks) on social media.

One third of this hourly figure ($20.00) are my actual costs and includes:

Materials
Tool depreciation
Consumable supplies
Shop and Office overhead
Online/Internet fees
Advertising
Shipping

Two thirds of this hourly figure ($40.00) pays us for our time and allows us to keep the bill collectors at bay.

Special requests for non-standard, non-stocked materials or custom design requirements are added to this hourly rate as the work will be unique to the job.

Coincidentally, this is the same percentage we used when we dealt in antiques and collectibles.

This hourly “worth” is also considered when I look at other projects, whether they are a special woodworking request, a home maintenance task or improvement or a job away from home. It is a simple, easily figured formula.

I hope I have shed some light on product pricing for you. It can be a confusing topic, but ultimately important to your success. If you have any questions, feel free to contact me or leave a comment question (below) and I will do my best to help you out.

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