Saturday, July 26, 2008

The business of selling

I've never been a financial whiz-kid. I'm hopeless with bills and finances and taxes. Even my last job, where I had to control the project finances, ended in tears. I am financially stupid..

So when I started my second Etsy shop, I was in a quandary as to what to do about prices. So I guessed (!) the cost-per-item of the materials I was using, and then slapped a profit figure together. I figured it would all come out OK in the end. Besides, I was living my dream of making beautiful things that other people appreciated, and that should be worth enough, right?

Well, no. I've already had to adjust my postage costs, mainly due to this post which was eye-opening to say the least. Effectively I was charging buyers for the envelope and the postage, but then giving away the time I spent filling in addresses, verifying Paypal and Etsy addresses, and then standing in line at the post office three times a week. For overseas buyers I was even taking a $1 hit, as I felt $5 was way too much for overseas postage. Nuts.

So this morning I actually sat down and worked out the cost of materials per item and I suddenly could barely breath. When I joke to my friends about me now earning 50 cents per hour, it seems that is in fact what I earn. Let me explain. To make a $15 USD sunnyboy bag, I am actually putting at least $8.20 of materials in each bag, but mostly it comes to about $10. The outer fabric I use is not cheap - it varies between $36 and $44 per metre, but I buy it because it's excellent fabric, unique, screen printed and Australian. So it costs me between $6.70 and $8 for the outer fabric for each bag. The pellon works out at 87 cents a piece. And the zipper ranges in price from $1 to $1.34, depending on where I buy it.

What I haven't included in the price is the cost of thread, the postage charges for the fabric I buy, the exorbitant paypal charges, the Etsy fees, the petrol money in getting to Belconnen for the cheapest zippers, the electricity to run my sewing machine, overlocker and iron, the time it takes to measure and list an item on Etsy, and numerous other things. And obviously, I haven't included the true value of my time. From beginning to end, from ironing the fabric to actually turning it inside-out and zipping it up, each bag takes me a little over an hour.

So here's the problem. I obviously have to put my prices up. But if I do that I risk alienating potential buyers, and then the stuff doesn't well at all. I'm competing with US sellers who can get really cool fabric at dirt cheap prices (for instance, patchwork fabric in the US is about a quarter of the price it costs me in Australia). And a lot of Etsy sellers also under price their own product - for what reason, I don't know - so that it appears they are actually making a loss. That's hard to compete against!

I'm in a quandary and it's way to much to think about on a weekend that I was going to stay away from the sewing machine.

Please don't think this is a big whine. I am just getting my thoughts down in writing, and to also explain to you all that if my prices do go up, you can understand that loving the job you do is not an excuse to pay yourself 50 cents an hour.

Because I've been loving doing this. It's been the perfect antidote for what was ailing me, for addressing my frustration at not being creative enough. I couldn't think of a more perfect job.


  1. I for one was surprised at the low cost of your gorgeous bags. OK. I didn't include a tip in my order to reflect that, and I guess I should have. Except adding a tip wasn't on the Etsy option list!
    You could think of your first round prices as "opening specials", to get people interested. And you know they are.
    It is always difficult to know how to price hand-made specialty items. I try to add $3 an hour for mine, but don't include anything for extra time, like design, petrol etc etc etc. But it isn't my income. I'm lucky to be married to someone who earns enough to support an unemployed used-to-be!

  2. Michelle, this is such a great post and such a brain teaser. I just make prices up, because I know, especially for dolls that I am usually working for about 20c and hour. I am hopeless with postage, especially international. Its all such a headache that I just ignore it -but then again I am only trying to keep my craft addiction afloat. I find it so hard to put a moentary value on things - especially little things that are fiddly and take ages, not to mention the five or six drafts before something is right. Iam not beling helpful here at all - you have given me more to think about !

  3. How annoying for you! I've nothing helpful to say, except of course you should be getting more than 50c an hour.

  4. This is a very interesting post to me. I'm playing with the idea of an Etsy shop but figured I'd end up losing money as I imagine I'd do the same as you. Having read your post, I'm going to look at it again and figure out just what would be a fair price for the things I might sell and then look at whether the price is even in the ballpark.
    I'm in somewhat the same boat -- in Canada, fabric prices are about twice or a bit more than those in the U.S. so there is no way I can compete with U.S. vendors.
    Thank you for writing a really well thought-out post. Definite food for thought!

  5. Yeah, I've done these sums before and it is a bit depressing. For what it's worth I think you're doing right to stick with quality fabric though. I think you could get away with charging a bit more for the bags. Maybe you can have specials now and then to get customers hooked. Then when they realise what good quality the stuff is they'll come back - that's what you need - good returning customers. Chin up! We're all rooting for you as they say in the US.

  6. It's such a tough call. The other commentors have made some great suggestions. I guess the good thing is that Etsy is exactly the place where people who appreciate quality handmade craft items, and who are prepared to pay for that artisanship, will go. If you want Made in [insert third world country of choice] crap with the price tag to reflect that, then go to a $2 shop or ebay.

    I too think your stuff is very reasonably priced and you could certainly charge a little more.

  7. I was actually thinking about your prices as I paid for my sunnyboy thismorning and I was thinking that they were very cheap.....I would have paid at least $20 for one.
    Don't even get me started on about the lines at the post office....I go to the post office to post mail (because that's what it's for). Everyone else goes there for the most bizzare time consuming things...why can't people just use phone and internet banking to pay their bills! There should be a separate line for time consuming things like passports etc....ok rant over.
    I've also been thinking about selling but I'm not very quick on the sewing machine and I'd end up working for still just thinking and dreaming.

  8. I see nothing wrong with putting your prices up - $20 for a quilted sunny boy is still pretty damn cheap when you consider the quality and craftsmanship.

    Do what you need to - your work speaks for itself - use this first wave to get your product out there and establish your name, and then establish the prices. You've done brilliantly with the first part - now, do something so that your prices give you more than 50c/item. :)

  9. These issues are partly what holds me back from selling handmade things - I don't think you ever are appropriately rewarded for your time and effort (which is a shame). Having said that, I agree that you could put your prices up!! And maybe concentrate on the local market, as we know how expensive good stuff is here.


    your work is great & you should be paid more than 50 cents per hour!

    I think a big part of the problem is that most etsy sellers undervalue their work & then it puts the pressure on everyone else to do so. You should sell for what YOU think is fair.


  11. As I am about to open my own online shop to sell my handknits, I have been wrestling with the pricing issue also. It takes a good ten hours to knit, sew and add buttons to even baby size clothes. Add to that the price of the yarns and then postage and it all adds up. I have decided to "pay" myself about $2 an hour, which is still really low, but I love the work so cardy's will be going for about $20 plus materials which depending on the yarn used means my items would be between $30 and $70. I am hoping that there will be the people out there who will be willing to pay for the quality.
    Having looked at your beautiful items I was surprised at how low the prices were, and am more than willing to pay more than your current price for them, so GO FOR IT! Raise those prices and reap the reward of knowing people don't just appreciate your product but your effort as well. :-)

  12. I have also been thinking about this issue. What is a fair price to me - what is a price that people will be prepared to buy at. It is extremely easy to gloss over all the little expenses. I am going to have to think hard about this now... Thanks for your post.

  13. I here you Michelle. I am a bit of a finance person. I've got a Commerce degree with a major in Finance and a Grad Dip in Finance & Investment.

    I'd love to sell my things but it just wouldn't be a viable option.

    Let's just hope that everyone moves away from mass produced rubbish and starts buying (and paying decent prices for) beautiful hand crafted stuff.

  14. Your stuff is lovely - if you put your prices up, it won't stop me being a repeat customer. It will mean I have a clearer conscience!

    These two good pricing articles were recommended by Sew Bettie on Craft Yourself Rich. Worth a looksee:

  15. I read a news article in the last two weeks in an Aust mainstream paper about a woman who made candles at home and sold them at markets.

    she got business advice and put her prices up substantially (like double). She made less sales, but with the higher prices she still came out with greater profits.

    I've tried to find the article again but can't -maybe i READ IT IN A real paper and not online...

    Anyway - the message was clear - don't wear yourself out making hundreds of things to sell cheaply, if you could make less, they may take longer to sell, but you won't'have an empty shop, and when they do sell it is more worthwhile.

    good luck!

  16. I have had the exact same thoughts. the true value of handmade goodies is fair less than what it is worth but lucky we do it for the love and not the pocket. speaking of love, Blythe owl beanie, love!

  17. The pricing thing is so hard isn't it! But I think you should definately be putting yours up, you're not a sweat shop!

  18. I, too, was wondering how you managed to keep your prices so low with the materials you were using...

  19. what a dilemma! sounds like you should put your prices up. Can you use the 'quality Australian fabric'angle to try to compete with the cheapness of the US sellers? (I gotta visit your shop soon, I've been delaying, but a friend's birthday is coming up..)

  20. This is really interesting - and a huge dilemma for most crafters.
    I think you should put up your prices, without a doubt but the question of the hidden costs like waiting in Post Office queues and all the correspondence, too!

    It isn't really an issue for me. I work full time, knit on the train to work, in the evening when I'm watching TV and try to sneak out during work time to go to the Post Office while it's quite mid afternoon and have a short lunch break at my desk. It works pretty well. Really all I want to be able to do if afford a new dolly every few months and buy other lovely handmade goodies at Etsy.
    For you, now this your fabulous new life. I envy you and would love to see you happy doing it and making a profit. I guess out up the prices and see. Selling fewer things for more could well work out for you. I hope so!!

  21. What a dilemma. Judging from the comments though, you've hit a chord, so surely most people would be understanding of slightly higher prices? It seems to be one of those challenges doesn't it, of trying to make a living out of what you love! (a worthy pursuit I think!)


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