Chronicling the steps to creating a SUCCESSFUL life.

Saturday, June 15, 2013

The Price is Right

Today, I started listing items for sale at my Etsy Store. During the process of of investigating the postage I should charge for my items, I discovered that people do strange things to pricing in their online stores.  

To determine how much something will cost to ship, I looked on the USPS (US Postal Service) website to find out what a reasonable amount to charge for shipping and handling.  I took into consideration the materials for packaging the items, plus the actual postage.  This is not rocket-science.  To see if my calculations were close, I searched other stores on Etsy.  The postage was all over the place as was the
price for items similar to mine.

Listings seemed to fall into one of two categories.  The people who way under-priced their items--presumably just so they would sell quickly--and people who way over-priced items.  I did see a few that were right on target.

Probably no one ever stopped to explain HOW to price items to some people. I have included a good method, although, not the only method for pricing craft items. 

A good way to price crafts is simple:  Calculate the cost of the items and multiply by 3.  It you used a single ball of crochet thread and it cost you $1.69 for the ball, then the items should be priced at approximately $5.00.  If there was shipping involved when you purchased the ball of crochet thread, add the shipping and any applicable sales tax.  If you purchased more than one item in the same shipment with your ball of crochet thread, be certain to use only a percentage of the shipping and/or tax cost when you calculate how much to charge per item.

Example:  If you bought 10 balls of crochet cotton and the shipping totaled $6.58, then divide $6.58 by 10.  Your answer will be .658, so I normally round it up a penny to .66 for each ball of crochet cotton.  In Virginia, sales tax is .05%, so add $.08 cents to your cost.

Cost of thread:      $1.69
Shipping               $0.66
Sales tax               $0.08

Actual Cost          $2.43

Multiply $2.43 by 3. A reasonable charge for the item would them be:  $7.29.  Rounding up or down a few pennies is all right, depending on the complexity of the item.

$$$ Tip:  You will NEVER get paid a per-hour charge for the item you are working on.  If your crochet cotton item took you 7 hours to make, you cannot reasonably add even a minimum wage charge to the item and expect someone will buy it.  Seven hours of work at $7.15 an hour will make your piece cost $50.00 before you ever add on the cost of the item.  

Pricing too low is detrimental to the entire industry. How can a person make any money if they sell their items for LESS THAN COST?  Yes, they may sell something quickly, but they are not making any profit.  In fact, they are losing money on every transaction and worse, they are diluting the industry.  I saw some items listed on Etsy that were being sold for less than the actual cost of shipping, alone.

This tells me people are not calculating their costs and have NO IDEA what they have invested in their items.

The name of the game is not SELL, SELL, SELL, but rather MAKE A PROFIT.

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