Be An Expert - Pricing - Diverse Products = A Varied Price Range

It's our last week looking at pricing your products. This one is a quicker tip - to make sure you diversify products in your shop - but to include a range of prices as well as a range of products!

If you make sure you have a range of prices in your shop then this will appeal to customers with different budgets, or encourage them to add cheaper items to their purchase. But don't cheapen the items you have by selling similar items much cheaper. For example, if you currently sell necklaces costing £20 - £30 each, don't start selling other necklaces for £5 each too, or it will make customers think the more expensive ones are over-priced. Instead think of things that could compliment your stock rather than competing with it. Could you sell stud earrings which would go with your necklaces and sell for £15 ish? Perhaps you could design a few greetings cards that suit your style which could sell for £3 - £5? 

Varying your items and prices will encourage add-on sales, where a customer comes to your shop for one item but ends up purchasing more. Also if someone loves that £30 necklace, but can't afford it right now, they might buy the £15 earrings right now, rather than just bookmarking your necklace and possibly never coming back to it again.

Diversifying stock will also mean you get found in more Etsy searches (now you'll appear in earrings as well as necklaces!). Just make sure you keep your shop looking cohesive, for tips on that see here: https://www.etsy.com/uk/seller-handbook/article/how-to-create-a-cohesive-shop/22797014088 Have fun thinking of new things to sell!

Be An Expert - Pricing - Wholesale

Last week we looked at why you need to add labour AND profit into your pricing formula. This week we're going to look at why wholesale needs to approx 50% off the retail price. (Here's a link to the pricing formula if you missed it before: https://www.etsy.com/uk/seller-handbook/article/a-simple-formula-for-pricing-your-work/26192517008)

Even if you don't want to sell wholesale at the moment - maybe you are just setting up an Etsy shop as a hobby - you should still use it in your formula, and double it for the retail price. You might think of your shop as a hobby now, but what if it really takes off and someone wants to stock it in their shop? What if you realise you could quit the day-job and run your shop as a business full time? If you haven't worked out the pricing right then you'll be stuck if a shop wants to buy your items for 50% off, but you will lose money selling them that cheaply because you didn't price it right. So start as you mean to go on and think about this pricing from the start.

Why do shops want approx 50% off the retail price? They have costs to pay too! One big one is tax. Shops are likely to be registered for VAT and they will have to pay the government 20% of your item which they've sold. To work out what a shop will receive after they've paid the tax, divide your retail price by 1.2. For example a necklace with a retail price of £12 divided by 1.2 = £10. If the shop has paid you a wholesale price of £6 for that necklace, they now have £4 left to help pay the rent for the premises, the bills for the shop like electricity and gas, the wages for their staff, shop fittings, advertising costs for their shop (which help bring customers in to buy your items), and of course make some profit to help their business grow too. It doesn't sound like much now does it?!

Of course you could try offering a sliding scale of wholesale prices depending on how much is ordered. You could offer less discount to an online shop which may have less premises costs (but remember they may have storage costs still), and you should certainly offer less discount if it's a bulk-buy customer rather than a retail customer (someone who is buying in bulk eg. 100 items, but to use themselves rather than sell on to someone else) - here you could offer 20% - 30% off the retail price.

If your retail prices don't currently reflect this formula, then don't panic. Creep your prices up bit-by-bit and accept you will earn less labour & profit for yourself if you suddenly get a wholesale order. Or close your shop for a while and re-launch with new prices, but also think about a social media campaign and maybe a discount code for the first month after you've re-opened, so past customers don't get scared away!

Be An Expert - Pricing - How To Price & Why

How to price your products is something we've covered before, and for those who missed it last time here's a link to a pricing formula that you can use to help you work it out: https://www.etsy.com/uk/seller-handbook/article/a-simple-formula-for-pricing-your-work/26192517008 

Today let's think about WHY we need to include labour AND profit in our pricing formula. As a self-employed sole trader all your profits count as your personal earnings, so you will be taxed on both your 'labour' and your 'profit' which you've added into your pricing formula. So why should you separate them into 2 categories when working out the formula and looking at how your business is doing? Here's why:

Labour should be your wages. This is what you actually need to pay yourself each month so you can afford to eat and pay for stuff for yourself (not stuff for the business). 

Profit is what you can use to help your business grow. Need to buy a new camera to photograph your items? A new printer for invoices or to start selling greetings cards? Want to buy your materials in bulk to bring the costs down? This is where you can re-invest your profits into the business, rather than spending your wages on them (and making yourself live on baked beans for the next month).

Make sure you don't spend ALL your profit on new toys though. Leave yourself enough for business expenses e.g. if you regularly spend £100 a month on jewellery findings, don't spend all your money on a new camera and then realise you can't buy jewellery findings for a few months. Leave yourself enough to pay your tax (even if you don't pay tax yet you might grow big enough to, so it's good to start setting some aside). Leave yourself a buffer for unexpected costs e.g. needing to refund a customer who spent a lot in your shop.

If you feel you can't put profit into your formula at the moment because it will push your product's retail price too high, then at least just include a small amount of profit. Once you've saved enough to buy materials in bulk this will bring your costs down and make your profit margin bigger, so you can grow it that way, rather than adding it to the retail price.

Just make sure you are earning enough to pay yourself and help your business grow!

Next week we're going to look at why your wholesale price should be approx 50% off your retail price.

Be an Expert - Pricing your products

Photo Credit: Sojung Kim from Do A Little Dance who is part of the #DorsetTeam
Please find this beautiful purses here: https://www.etsy.com/uk/shop/doalittledance

Today as part of our 'Be an Expert' series we are talking pricing. 

As a small shop owner,  pricing your products can be one of the most difficult things we do....over-price and run the risk of not selling anything, under-price and run the risk of cheapening your brand.

The Etsy Seller Handbook contains this useful article to help you to think about how you price your products to sell on Etsy and taking into account the skill and time that went into each product.

https://www.etsy.com/uk/seller-handbook/article/are-you-paying-yourself-enough/27950120177

Do you have a resource that you could share with the team on pricing?

Please let us know in the comments section below or share using the hashtag #DorsetTeam on social media.