Get your calculator out because we are doing math today. If this sends shivers down your spine, then you’re not alone. This is the trickiest part of your business since pricing will make or break you. It’s not rocket science to know that if you don’t make any profits, then bye-bye business.
Luckily calculating your Etsy pricing strategy is easier than you’d expect. During this process also keep in mind that it doesn’t hurt to calculate your wholesale costs too. Being prepared with this information not only leaves your customers feeling confident but it’s also more money in your pocket.
Before Pricing Your Handmade Items
Research your category
It makes the most sense to start here. This is the heart of the question you will ask, “what are people willing to pay for my product”. This has a fancy-schmancy word called market research. You can pay someone to do this research for you, otherwise, you can do it yourself on a smaller scale.
This would look like researching competitors in your category and putting out a Facebook poll about what people would realistically pay. The problem with a poll is that it’s one thing to hypothetically buy something for a specific price and it’s another to actually make the purchase. So it’s best to take this information and use it as a ballpark estimate for what your dollar amount will be.
Decide on a marketing scheme
Are you selling a luxury product that is more expensive than the competition or are you cornering the market at a cheaper price? You could even be mid-range. If your company’s value is to offer the cheapest prices or the highest quality goods, your strategy has to match.
The great thing about pricing is that early on in your business, you can tweak things without much backlash. When the original plan just isn’t quite working for you, try another approach like lowering or raising your prices.
Components of Your Item’s Price
1. Marketing, branding, operating costs
A lot of times you are paying either yourself or someone to do your marketing, branding, copywriting, and other needs. If you have to pay someone for the SEO in your titles, the descriptions, email newsletters, etc, be sure to factor this into your pricing.
2. Ad Spend
You already know that ads cost money. From Facebook and Instagram to Website and Google ads, set your budget and then incorporate this magic number into your cost.
3. Sales Promotions
Everyone LOVES a good deal. When you find a great sale, it feels like you beat the competition and won something. I suggest running at least a constant 10% off sale within your store. When you run sales, you not only boost your regular listings but also create value for your customer.
You’ll want to leave room in your price for these promotional discounts.
Etsy also loves a good holiday sale. If you include your shop in the seasonal promotions that they run, then you will especially boost yourself during the busy seasons.
This includes not only the supplies it takes to create your product line but all other packaging, shipping envelopes, and any extra freebies you include. Don’t forget your business cards, glue, fliers, thank you cards, etc.
Pay yourself what you’re worth. The time it takes to create your item from start to finish and however long you need to list the item in your Etsy shop. (Product photography, SEO, and descriptions).
Set a timer and figure out what you want to pay yourself per hour and then factor that into your pricing.
For me personally, this takes up a lot of my costs. If you want to rank higher on the site then free shipping is a must. (Also people are always more likely to buy with free shipping).
Calculating your “free” shipping is pretty simple when you use Etsy to buy your labels since it’s a little calculator within the listing that tells you exactly what your shipping costs. You can also calculate your Etsy shipping costs here.
I do not offer international free shipping but some shops do. My product works competitively at a low price point so I would have to do raise my prices by $15 on a product that is already less than $10. Try your hardest to at least offer free shipping within your country.
7. Etsy Fees
Once you’ve been on the site for a while you will be no stranger to the $0.20 listing fee. This can automatically renew after the purchase of your listing or could renew after a few months without sales. Anytime you add something new, it’s a $0.20 listing fee.
The transaction fee is a percentage of your sale. The current percentage is 5% of everything. (Listing Price, Shipping, Giftwrap, Etc)
Lastly, there are other possible subscription fees if you pay for any of Etsy’s add-ons. Etsy Plus is a premium program that offers a few special features within the site. I do not subscribe to Etsy Plus because I don’t see the value within it yet.
Another subscription fee you might experience is if you use Etsy to run your website. Pattern seamlessly integrates your inventory within your website but costs a fee every month to host your website. (Don’t forget to add your website fees into your pricing.)
We have an entire article devoted to how much it costs to sell on Etsy.
If you have “free” returns, that means you are paying for the shipping label from the customer’s house to your studio. Sometimes it’s better to just let them keep the product and refund them for the cost.
If you offer free shipping on your products, you do not get that price of the label back if a customer returns their item. I cushion my prices to accommodate any returns. I raise my prices by almost a penny since I rarely get any returns.
If you’re like me, you could be paying taxes multiple times a year. This doesn’t necessarily mean you need to calculate it into your cost, but to make sure you are charging the correct taxes for your product. My accountant does this brainwork for me.
Still having trouble?
If you’re still having trouble figuring it all out it might be time to hire someone. You can find a personal assistant or a marketing specialist to help you. Your prices aren’t a set it and forget it type of deal. It’s important to stay updated with pricing trends, higher fees, and other fun things you encounter on your day-to-day basis.