Pricing on Etsy can be a be bit tricky. Whether you are trying to make it full time or just sell in your spare time you still want to cover all your costs and stay competitive without radically undercutting other sellers. Its a fine line and determining the right price and can take some trial and error. I’ve tried a number of small business marketing strategies to help boost sales through pricing and have a few thoughts on these to share with you today.
There are a lot of strategies people may suggest to you and some may work depending on your product and market but its a good idea to think through all the pros and cons of particular marketing-style pricing strategies before you set one into motion.Whatever you do to price your items, give it some serious thought.
Pros and Cons to Pricing Strategies
Undercut & Inch Up
This strategy is to undercut all your competition even at a loss and then plan to inch your price up later to cover costs and eventually make a profit. This is a double edged strategy and NOT RECOMMENDED as it is can make your product look cheap (actually deterring customers) and build ill-will in the community resulting in a net loss or worse: no sales at all.
If you are able to make sales and build a client base you will eventually have to raise prices to make your operation sustainable and risk upsetting what would have been a loyal following by increasing prices for the same value product. If you’re not selling right away this might seem like a savvy move but think about the cons before you rush to undercut competition.
Overvalue and Run Consistent Sales
Another strategy for pricing is to overvalue your products then run regular sales or offer coupon codes to displace the excessive cost of your product for consumers. This type of pricing strategy is used by a lot of successful retail outlets where consumers rarely pay the marked price for anything with constant sales, coupons and membership program discounts available.
Coupons are integrated into Etsy and are very easy to implement. Simply add a code with an expiry date and set an option for % OFF, % OFF orders over certain total or Free Shipping. One draw back to coupon codes is making them widely available and making sure your potential customer base is aware of them. If the majority of your traffic comes from an outside site like facebook or a blog this could be a great place to put the code. You can include them in your shop banner but if someone is looking in an individual listing they might not make it to your shop home page to see it.This can also be a problem with the ‘Sort Results By’ function which gives potential customers the option to sort their search results price low to high.
You can also add a SALE section to your shop and price down items individually but this takes a lot more effort than a coupon code. This could be a viable strategy depending on the number of customers who make it to your shop page from individual listings or the type of products/price range you deal in but in general Etsy shoppers are not bargain hunters, they are in the market for a unique handmade or vintage item at a fair price.
Think through this strategy and think about your potential customer. Etsy provides you with all the stats from your shop, use them! Check to see how many item views you have versus how many shop views, how people arrive at your site etc before you decide if this is the right strategy for you.
Cost plus Percentage
This is the clearest cut way to price items and the one I’d most recommend. It is a little tricky because there is a lot of figure-figuring up front but once you have all your base numbers you’ll quickly get the hang of it an feel organized and empowered as your own employee and as a small business owner.
First you do a full cost sheet on the item. I include a time and preferred hourly rate section, I set mine at $14 flat rate right now but anything above minimum wage is good (be sure to include the time it takes to photograph, list, pack and ship too that’s all part of the business! You can set the hourly rates differently for different skill-level tasks but dont take anything for granted) as well as an hourly operations cost (which includes a small percentage of my tools -including camera, computer-, the operating costs of my home office and even mileage on my car -I add this all up for the month and divide by the number of total hours I work in a month to get a rough figure-) and of course the total cost of all the supplies involved in the product (including and shipping, membership fees or taxes you’ve paid when buying these supplies). Once I have a clear idea the full cost of the item I know my absolute lowest price point for that item.
Since I include an hourly fee for my work involved and cover all my costs its possible I can list the item at this point if I need to given the competition however I’m trying to make money in this process not just fund a hobby. The percentage you add over and above this cost is up to you and you should take into consideration your current scale of operation, your scalability -how quickly and easily you could scale up your operation if you were to receive a high number of orders-, your competitors prices points etc. I think of this as my ‘business owner’ salary and the hourly rate in my cost sheet as my ‘self-employed wage.’ Here’s the way I think about pricing using the cost plus percentage strategy:
I’m successfully self-employed when I break even on my cost sheet, I’m a successful small business owner when I start seeing a good percentage off the top.