Friday, May 2, 2008

You Want How Much For That?

The Art of Pricing: It's Capitalism Baby!

One of the biggest controversies in the handmade community is, Pricing. There are many reasons this issue is a sticking point for people. We want to make sales, so we want the price to be affordable to our target audience, but we also don't want to under price ourselves for fear of looking cheap. Then there's the most annoying factor, other sellers opinions!

Look, you have every right to price your goods any way you want. This is capitalism, supply and demand, a free market system that allows the consumer to regulate the pricing of goods. I know that as handmade artisans, we feel a sense of community, but that does not mean we need to resort to price fixing just to suit other sellers pricing needs. I know that this is contrary to many other peoples opinions on the subject so feel free to ignore my opinion if you so choose.

When I first started selling tatted jewelry it was woefully under priced. I had no base for comparison as I was the only tatter on Etsy at the time. Eventually I came up with price points that I could live with. I certainly can't wholesale at my prices, but I don't intend to wholesale, so that's a moot point. I used to worry about new folks selling tatted pieces at really low prices, but I realize that the average consumer is not a idiot. They can see the difference in quality, even online and the cheap goods are not really competition for me. The consumer who prefers a $3 tatted doily is never going to buy a $75 tatted scarf and the person who buys my scarf probably thinks that the $3 doily is poor of quality not a great deal.

Here's an example. Widget makers, company A and company B make a comparable product in both function and quality. If A lower their price, B must either lower their price or increase the quality of their product to compete. However, company Z who makes a similar product much cheaper in quality and price is not competition to A or B, because they do not actually share a consumer base. Company Z's customer will never spend the extra money to get a better product, only price determines their purchases. A and B don't pay attention to what Z does because they can't compete with that and continue to make a high quality product, nor should they. They must market themselves to a different demographic and continue making a product high enough in quality to warrant the price they charge.

So if you make high quality baby bibs for $16 a pop, you are not going to get a Dollar store customer to buy them. You do not share a customer base with the Dollar store, so don't complain about their product pricing. Perhaps you should worry more about marketing to your consumer base and less time trying to undermine other peoples business strategies or lack thereof. Etsy is not a co op and although we love to help each other out, we are individuals in a free market system. Not too long ago, I read someones post suggesting that we put a basement price on goods. I was actually shocked, I mean how would we feel if all industries adopted these kinds of strategies. Milk can't cost less than $3, a car can't cost less that $10,000, a pair of earrings can't cost less than $7. Ridiculous. If you can't sell your bibs at $16, the problem does not lie with the Dollar store, it lies with you. Either the price is higher than the market can support or you are simply not advertising to right demographic.

Here's a pricing strategy for you, take your costs, fees, materials, etc., add to that minimum hourly wage or give yourself a bit of a raise, then add $1 and that's your price. If you never plan to wholesale that's all you need to charge. Everything else is optional. My material costs are extremely minimal so my costs are basically labor, so it comes does to how much I feel my time is worth. I would never charge less than it cost to make something and neither should anyone else, but if you make just $1 on your item, you don't have to answer to anyone else. You are not hurting everyone else with your prices. Conversely if you want to make $20 on that same item, you can't complain about the $1 person, you need to make your product worth the extra $20 and market to the audience that pays for quality.

I know that this issue is not going away any time soon, but I think that people need to get some perspective. This is capitalism whether you like it or not!

17 comments:

Julie said...

AMEN!

Anitra Cameron said...

I agree 100%, but I couldn't have said it nearly so well!

Angelika@ Purple Sage Designz said...

Awesome post, exactly my thoughts. This issue on Etsy forums has bugged me for quite a while because it's nobody's business, I deal with my buyers, not other seller's expectations.

bombalurina said...

I also do a pricing formula for certain items which is "what is the most I personally would pay for this in a high end store" pricing - for items which did not take me forever, but the result is desireable. When you know you have a fashion-forward, "hot" item - why price it like Target?

bombalurina said...

I do agree that other people's pricing is not my problem. I wholesale and I price so I can wholesale, and people who do not haven't really cut into anything. The tent is VERY big, and I've never understood why people fail to see that.

People need something to blame when they're not selling - why not blame competition when it could just be a lull?

Cozy said...

I love the way you presented this topic and agree with you completely!

redring said...

HOORAH! I cant agree more! I cant tell you how many times I have been told in the past week inderectly that because my soaps are low price They are bad product. I have only started setting up my store!!! But this is comming from other soapers. I want to tell them just because they seem to feel buying the most expensive suplies on the market makes there soap better that dosent make it true. Ill tell you a secret most soaps cost less than $10 for 12 bars and less than two hrs to make add all the extras and I dont see some of whear the priceing is comming from. I believe all the people complaining just need to suck it up and learn to sell in a range of priceing to catch more buyers. I will be! Ok that was a rant but its been irratating me.

The Nature Nut said...

Excellent points - thanks for sharing your thoughts on this subject. Your work is wonderful by the way :o)

BabyLyons said...

Very well said! I completely agree!

Jane Eborall said...

Very interesting like all your posts about Etsy. I'm just 'brewing up' to open my shop again and it has been solely the pricing which has held me back!!! Having read the way you work yours out I now know that I'm on the right track. Thanks SO much for your blog thoughts.
JaneEb - (shuttle tatter!!!)

Elena said...

These sentiments echo world wide. Great post.
Ciao, Elena :)

Astrida Naturals said...

Another good post. Pricing strategy can be very complicated. I'm just starting out, but when I set my initial prices I based it on my costs and what I felt was reasonable to position my product in the industry. By no means do I feel they are final. I may adjust my prices in the future, especially if I wholesale.

Waterrose said...

Thank you for voicing this opinion. There are many people out there that as long as the quality is there...they don't have any sticker shock. I think even people who have to pay attention to their budget, if they see something that they love they will save in order to afford it.

Kelly said...

This is why you must stay put on Etsy. Your commentary is fabulous and inspiring for those of us who make our own creations. I need your sage advice when i begin to question my own! :)

Miss*Laurence said...

Gosh thanks for that, somehow it takes someone else to say it to know you're right!

Glitzy Gallery Gal said...

Thank you thank you thank you for speaking up on a subject that many of us deal with.

Coretta of corettadeesign said...

I so admire your work... and actually bought some needles to try needle tatting. So far I just shuttle. I just stumbled on your blog via inTatters. This is a fabulous post. When I started on Etsy I saw other little pieces and thought for sure I was charging too much... but I knew I was doing a quality piece made for what it was intended. Your pricing actually gave me confidence to charge what I thought it was worth (my time).