Selling handmade goods can be an incredibly rewarding and lucrative career with the rise in online shopping. But determining how to price your products appropriately can be a challenge, especially if you’re just starting out. Here are a few tips that may help when it comes to pricing your handmade goods.
The handmade goods industry has evolved from what began as a relatively niche market to one of the most plentiful in ecommerce. The handmade or handcrafted industry consists of products made without using the typical machinery utilized by most mass-market production companies.
Handmade items have quickly become popular throughout the ecommerce world, combining a personal touch with the ability to quickly and efficiently get products to customers all over the world.
Why Go Handmade?
Handcrafted items tend to hold value for customers for a multitude of reasons. First, the creativity of many handcrafted products is simply unmatched by items that are mass-produced. Handmade goods also represent more than a finished product; they illustrate what is often hours of hard work and dedication from the person producing the item. Homemade products are incredibly unique, with no two items looking exactly alike. When buying handmade products, you’re obtaining a one-of-a-kind item, which makes the purchase even more special.
Handmade items are sold on many different online marketplaces, with some being more popular than others. Here are a few of the most common marketplaces where handmade goods are sold:
- Absolute Arts
- Handmade at Amazon
- Indie Cart
How To Price Handmade Goods
Opening a handmade store can be lucrative when done correctly, but determining the value of something made by hand is sometimes easier said than done. Here are a few things to consider when pricing your handmade goods.
The first thing you’ll want to do when deciding on a price point is to take a look at the current market for similar items. Because you’re working with handmade goods, you’ll likely be unable to find an exact match for your products, but try to find items that are as close as possible. Once you find a seller with similar products, take a look at the prices their items are listed for.
Of course, simply listing a product at a certain price doesn’t mean the product will necessarily sell for that amount, so make sure you take your research one step further and look at their ‘sold’ listings and customer reviews. This will give you a better idea as to whether your competitors are actually making sales at that price point, or if their customers believe the products are actually worth that amount.
The more sellers you look into, the better range of potential prices you’ll have. Ideally, your price should land somewhere in the middle of that range to encourage sales while still turning a profit. However, if you use higher-end materials or a more complex process to make your products, you may find that your items fit best at the higher end of that price range.
Cost of Materials
The cost of the materials you use to make your goods should be factored into the price, which makes it important to avoid paying the full retail price for your supplies. You’ll want to look for wholesale options. Limiting the amount you have to spend on materials directly translates to making more profit from the items you sell.
Cost of Marketing
You must also factor in your marketing budget since your product isn’t going to sell itself. Consider what types of marketing will be most efficient for your business and which methods will get your products seen by the most shoppers. Marketing costs vary, so reworking the numbers on your marketing costs and translating that into your product prices should be done periodically.
Your Hourly Rate
One of the hardest aspects of pricing to calculate is your hourly rate. While many homemade manufacturers charge around $10 per hour of work put into an item, it is important to define what is considered an “hour of work”. Working on a project while watching television or spending time with family is not the same as an hour being completely focused on the work in front of you. Working while completely focused often results in the task taking less time, so charging the same amount per hour for work that takes longer due to distractions can significantly impact the ending price of the product. This is another reason that market research is so important; by looking at competitors, you can determine if your price is realistic or not.
Other Fixed Costs
There are a number of additional fixed costs you’ll deal with as a business, which must also be taken into account when pricing your items. You’ll need to consider things like rent for any studio or other space used, as well as the salaries of any employees you hire. Website hosting fees will also factor into your fixed expenses, as well as any taxes or other fees your business will have to pay.
There are a number of pricing tips that may come in handy when selecting the right cost for your products. Understanding the psychology behind pricing is important when it comes to increasing sales and ensuring your customer feels they’re getting a good deal. Tools like price anchoring and simplified pricing can be incredibly helpful when it comes to naming the right price for your handmade products.
Final Thoughts on Pricing Handmade Goods
Finding the right price for your items is ultimately a game of trial and error. While you may not get it exactly right the first time, making informed decisions about the prices of your handmade products can help simplify the process. Taking into account these three elements: the costs of your materials and marketing, any fixed costs to your business, and the value of your time will give you a better idea of the price you want to charge. Comparing that price to your competitors’ lets you know whether or not you’re on the right track.
Remember, determining the best prices for your handmade products will keep your customers happy and your bottom line increasing. To learn more about selling handmade items, check out our recent blog post about the common mistakes new handmade sellers make.