Tuesday, November 6, 2012

Pricing Handmade: An Inside Look

I have been asked over the years where on earth I came up with my prices.  Some questions come from other crafters and sellers, but mainly it is customers and potential customers that ask this question.  Some ask from the point of view that my prices are too low; others think they are too high.  This is my attempt to present my answer to these questions in a way that is easily understood by all.

First off there is this ‘formula’ that hand crafters are supposed to use that goes something like this:

Materials + Labor + Expenses + Profit = Wholesale Price

Wholesale Price x 2 = Retail Price

There are a slew of things that can be factored into labor, materials and expenses and I am not here to break that down for anyone, as that would be a whole different post in and of itself.  For seller’s this is the short answer and there are many other articles out there that can help you figure out what you should be paying yourself, what expenses to include and exactly which materials to count and maybe in some cases not count.

For my example I will use two sets of dishcloths that I currently have listed in my Etsy shop.  A set of two green dishcloths and a set of two white dishcloths.

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For all intents and purposes both of these sets have TWO solid color dishcloths, but the price is different.  The green set is $7.00 and the white set is $7.50.  WHY?  They are both made of cotton yarn, and the yarn cost is the same per skein (ball).  So the answer to why the price difference is:  The stitch pattern I used for the green set takes less yarn and less time to make. 

So why do I make dishcloths using two different stitch patterns and offer both??  People like both, it’s that simple.  Some prefer the thinner smoother texture of the green ones, while others prefer the nubby thicker texture of the white ones.  Is one better than the other?  The answer to that is:  it depends on the person using them. 

Now let’s move on to the other questions I’ve been asked about pricing, still using these dishcloths as the example.

Why do you charge that much for just two of them, I can buy 12 washcloths at Walmart for less than $5.00?  My response to that question is:  The ones I make are thicker and last longer.  They are a better quality and in the long run you will have saved money.  The thing I usually do not say unless really pressed is that it takes me about 45 minutes to an hour to make two washcloths, I am not a factory nor am I a machine.  I prefer to provide a quality product and can not, more importantly will not, compete with large chain-store pricing.

Some of those people that have pushed me, and that have gotten that response feel that I am being rude and have said so.  I don’t feel that it is rude for me to answer the question as honestly as I can.  I would never ask my hair stylist to dye my hair for $8.00 because I can go to the store and get hair dye for that price.

And finally, for those that think my prices are too low.  Yes, yes I have been told several times (more than they are too high) that my prices are too low; by other crocheters and potential customers alike.  I have been asked if it is because I either

  • buy my yarn wholesale,
  • buy materials that are cheap or substandard or
  • crochet lightening fast. 

I do not buy my yarn wholesale, nor do I buy cheap quality yarns; but I do crochet faster than most.  But, the main reason I set my prices where I do is because I do not pay myself the $20 an hour that someone of my skill level would earn in the job force, and I will get to that in a moment.

The main reason I do not buy my yarns wholesale is that I like to look at and feel every single skein (ball) of yarn before I buy.  I will not buy yarn that is not dyed evenly, or that is not evenly textured; I consider these deficiencies in a skein of yarn to be substandard and the yarn unusable.  I will also not buy any yarn that I find to be scratchy or rough.  The quality of the yarns I use does affect the overall price of the items I make.

Now, let’s talk about how much I pay myself.  This is a sticky subject for many.  I personally do not have a set hourly rate that I pay myself, but I can assure you it is no where near the industry standard of $20 an hour or more that hand crafters are supposed to be paid.  Why?

It is not because I do not value my work, nor is it because I do not produce quality items made with quality materials.  It mainly has to do with the fact that I want to make products that most people can easily afford to buy.  Some stitch patterns are more difficult, require more time and concentration than others.  That being the case is why I pay myself at different hourly rates for different projects and project types. 

Using the formula above and the green dishcloths above, if I paid myself $20/hour to make those the price would start at $15 and go up from there to include the materials, expenses and a profit; then multiply that by two to get the retail price.  That would mean that I’d be asking more than $35 for a set of two dishcloths and there is just no way in this world that I can wrap my mind around asking for that much for two dishcloths unless they wash the dishes by themselves!

With all that I’ve said already I will wrap this post up with this…

I set my prices in such a way that most people should be able to afford my items without going broke to do so.  If I use the formula above and end up with a price that is ridiculously high, I lower it.  If I use the formula above and come up with a price that is ridiculously low (which almost never happens lol) then I re-do my math.

Handmade items take a lot of time to design and make, and the experience to make a product that does what it is intended to do, but this is not my get rich quick scheme.  My prices are higher than some and lower than some, but I feel they are fair for most.

When buying handmade there are a few things to look for in pricing to help you make a good choice as to who’s items to buy.  I hope that my explanations here will help you make your choices in the future!

I’d love to hear your thoughts, comments and questions on this subject!

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