Product Pricing 101 - Pricing Basics for Your Etsy Shop (Retail + Wholesale)

Pricing your products in your Etsy shop can be intimidating-- to say the least. Etsy shop owners tend to under price their products all the time--so let's put a stop to that once and for all! Your items are amazing, and your price should reflect that! Click through to read my fool-proof formula for pricing your products in both retail and wholesale >>

If you opened your Etsy shop to crickets, chances are you’ve probably adjusted your prices. A few times. At least.

Hey, we’ve all done it, so you’re in good company, my friend!

If pricing your products has you completely overwhelmed ("I'd never pay that much for _____!"), then stop whatever you were doing and let's get one thing straight: Your mindset is wrong.

We're not pricing based on what you would pay for your items (you can make them yourself, so why would you ever buy them anyways?!)-- we're pricing our products based on a simple math formula that produces consistent, achievable numbers every. single. time.

A walk down memory lane (+ my love affair with the band-aid company)

This is a story that I’ve told before, but it’s worth telling again because it’s true, embarrassing (the best stories are!), and serves as a warning for those who price their products willy-nilly.

I started out my Etsy journey back in 2011 selling customized stationary—the gist of which was that I had some standard designs in my shop, and people would purchase these listings and I would personalize it for them—I would add their name, adjust colors, adjust fonts, you name it, I adjusted it.

All for the grand cost of $8/set. $8 for a set of 12 personalized, handmade stationary cards + envelopes.

My pricing formula?

Find the cheapest priced stationary on Etsy and be even cheaper.

My reasoning was sound—the cheaper I sold my stationary for, the more I would sell (ideally!) and the more profit I would make. I had a lot of extra time to work on the business, so time wasn’t an issue, and it genuinely seemed like a win-win—cheap prices = sales, right?

I estimated my cost for making the stationary at around $3/set, so I banked on a $5 profit.

Well guess what? I sold a bunch of stationary (yay!)

And guess what else? I think I profited a total of $33 by selling 40 sets of stationary (boo!). Oh, and it actually turned out to be only $30 in profit, since I had to spend $3 in band aids to cover all the paper cuts on my fingers. #truestory

When I sat down to do the math and figured out my $33 profit, I was befuddled. I should have had at least $200 to my name, based on my initial guess, and instead I had less than $20.

And then I sat down and accounted—really accounted—the cost of making the stationary, instead of just winging it by counting the cost of printing the note cards.

Suddenly I had a length supply list-- I added in the cost of cello bags, envelopes, blades for the paper-cutter, scissors, and the monthly subscription fee for Adobe Illustrator (just to name a few).  And when all was said and done, I was shocked to find out that the cost for making a single order of stationary was closer to $7.25/set, leaving me with a profit of less than $1/set for each sale I made.

And yes, a profit is still a profit, but I was seriously spending hours on the computer customizing these note cards to customer specifications.

And hand-cutting them. And hand scoring them. And packaging them up.

I was literally paying myself around $.50/hour for my time (again, we’re not factoring the band-aids into the cost at this point, ha ha!).

You may be thinking: Well, no duh! Why on earth did you price your product so low + why didn’t you actually realize the cost of making them?

The answer? Because I was scared.

Because I was afraid that if I charged anymore, no one would buy them.

Can we all take a minute and learn from my mistakes? THAT IS A HORRIBLE BASIS TO PRICE YOUR ITEMS OFF OF.

 

My simple pricing formula

You’ve probably seen pricing formulas floating around the internet. And most of these are pretty standard, but they don’t take into account the fact that you are hand-making the item (at least, to start out you are), which takes a great deal of time.

So here’s the pricing formula I use (from Megan Aumun, a renowned biz woman + jewelry artist):

Materials + Labor + Expenses + Profit = Wholesale x 2 = Retail

And yes, we’re throwing that scary “wholesale” word in there because guess what? Even if you think wholesale is not for you, you absolutely need to be factoring it in. Once you start getting sales on Etsy, you better believe that people are going to start messaging you (that’s right—people find you!) about selling your products wholesale.

...and it’s a sad, sad day when you realize that you’re charging too little to be able to sell wholesale.

So let’s break the formula down and calculate it for YOUR shop:

1 | Materials

Basically, everything that you absolutely need to make your product from start to finish. As an example, for a seamstress, this includes things like thread, rotary blades, fabric, trim, notions, etc. Basically, you're listing everything that has a per item cost associated with it.

For LittleHighbury, the expenses for a set of headbands looks something like this:

  • Fabric
  • Thread
  • Rotary Blades
  • Fray Check
  • Kraft Paper Boxes
  • Ribbon
  • Business Card

To figure this out for yourself, do a mental run-through of your product creation from start to finish, and write down EVERYTHING that you use. And I mean everything. Scissors, pens, sewing machines, everything.

Then, figure out what is specific to that item and has a per item cost associated with it. For example, your sewing machine cost won’t be figured into materials (it’ll be under “expenses” below) because it’s a one-time expense (depending on how rough you are on it! I’m seriously on serger #5 for LittleHighbury!). But fabric? I use up fabric every single time I make a headband, so that would be listed under “materials.”
 

2 | Labor

This—THIS is where I see people undercharging themselves. DON’T GIVE IN! If you were paying someone contractually to work for you, would you pay them just $2/hour? No? Then don’t pay yourself like that either!

If your ultimate goal is to quit your day job, then figure out what you’re making at your corporate gig, and pay yourself similarly (if at all possible). Starting out, it doesn’t need to be an exact match, but you’ll have a lot easier time convincing yourself (and your family) that you can quit your day job if you’re making close to what you were bringing home before.

If you’ve been out of the corporate world for a spell and are not even sure what to charge yourself, do some research! Google up what people with your skills are making and then pay yourself fairly (and remember-- you're not just a seamstress. You're also a marketer, advertiser, copywriter, accountant, and so on). Your time is worth something—so treat it like it is!

3 | Expenses

Bleh. These are the worst, but something you have to consider when running a business. Expenses are basically all those little things that you don’t want to think about and try to ignore for as long as possible, but are still things you absolutely need to have in order to sell product.

Your expenses will generally consist of those monthly fees you have, as well as one-time fees like equipment purchases or subscriptions.

Here’s a look at some (abbreviated!) expenses for LittleHighbury:

  • Gas for car (runs to post office)
  • Monthly Internet
  • Shipping supplies
  • Etsy + PayPal fees (don’t forget to include these!)
  • Accountant fees

Basically, anything that is un-glamorous and annoying about running a business will fall under this category :)

4 | Profit

This is usually the hardest part of the pricing formula because we tend to think that we are taking advantage of our customers if we factor profit (in additional to "labor") into the cost of our items. 

Trust me: you're not.

You are running a business, and profit is a KEY part of that business, no matter what you're Etsy shop goals are. If you don't make a profit, you aren't running a business.

There are a million reasons out there why someone would want to quit her day job, but one of the main reasons for me (besides, you know, the fact that I was giving birth to my first child) was that I KNEW that I could have much greater financial freedom as an entrepreneur than I ever could working my way up the corporate ladder.

(and if money is your motivating factor, too, that’s okay! Money is a very real, very necessary thing. It shouldn’t be the sole reason you’re running an Etsy biz (or you’re going to hit burnout really, really fast), but it definitely can be one of the main reasons!)

Where do you want your business to be one year from now? Five years from now?

How are you going to get there?

Profit is going to be one of the main factors in getting you to reach your financial dreams. If you forget to factor it into your costs, you’ll never reach the level of success you want to with your business. #truestory

So think about your financial goals (no matter how underwhelming or ambitious they are!): are you trying to pay off a home mortgage? Maybe you’re trying to get that credit card balance down to zero. Or maybe you just want to enroll your children in a private school.

Whatever they are, it doesn’t matter! It just matters that you make a plan on how you're going to get there. So be sure to figure profit into your pricing formula!

One of the easiest ways to do this is to come up with a # of items you plan to sell each month (say, 100) and then figure out how much money you’d like to make that month, and divide that number by the number of items you plan on selling.

So, say I plan on selling 200 separate orders of headbands this month, and I want to bring in an extra $1,500 of profit each month. That basically means that I need to make sure that I make a profit of $7.50/set for each set of headbands that I sell to reach my goals (assuming I sell 200 sets).

As much as entrepreneurship is up and down and all over the place, there are mathematical formulas to help you reach your business goals much, much quicker :)

Pricing for wholesale

Okay, so we've gone over four pricing factors and have now come up with our base price:

Materials + Labor + Supplies + Profit = Wholesale

Now, many Etsy sellers stop here and list the wholesale price as their product pricing in their shop.

DON’T BE THAT SELLERS!

Your wholesale price should be just that—the price you sell your product wholesale (which simply means the price you charge when you sell your product to other retailers for resell). This is not your retail cost (aka the price you list in your Etsy shop.). We’ll get to that in a minute, promise :)

Why shouldn’t I just charge wholesale price in my Etsy shop? Won’t that bring me more sales?

It might. But you're also But it’s not worth it. Charging wholesale price in your Etsy shop presents a myriad of problems:

  1. You are undercutting other sellers in the market. Well this might seem like a great short-term strategy, it is never a good one for the long term (and you’re in this for the long term, yes?!). 
     
  2. Your customers will never be loyal. The minute someone else produces a similar product to yours and undercuts you, your customers will go flocking to that new person. Why? Because you haven’t won their loyalty—you’ve just won the spot of “lowest price,” and the minute they see a lower one? You better bet they’ll shift their loyalty
     
  3. You raise the question of “why?” Why are your prices so much cheaper than your competitors? Are you using cheaper supplies? Is your quality poor?  These are all questions that you can avoid by charging retail price :)
     
  4. You're doing a lot more work than you need to be. You can either make 10 orders at $5 each, or 5 orders at $10 each. Either way, you're making the same amount of money, but with the latter option, you're only doing half the work.

 

"Why would I want to sell wholesale?"

It seems ridiculous, almost, when you think about it: Selling your products for half the price you normally charge. Ouch! (I see you nodding your head in agreement—and that’s okay—I totally felt that way too with my first wholesale order!)

But here’s the deal: With wholesale, you are guaranteeing yourself a consistent income. You are fulfilling larger order batches on a consistent basis (especially if you work with some fabulous wholesale clients who can push your product), and it becomes income you can depend on (income you can depend on as an entrepreneur? Heck yes!)

We’re not going to get into the ins and outs of wholesale right now (that’s a longer blog post for another day!), but basically? I’m asking you to consider it if you haven’t already. It’s a great way to make consistent income that you can rely on—and it’s also a great way to spread the word about your brand.

 

Pricing for Retail

At last, we’ve arrived home :) And this formula is an easy one:

Retail = Wholesale x 2

(seriously-- that's it)

Your retail cost is what you are going to charge per product in your Etsy shop. It takes into account allllllllll of the factors we listed above, so you know you will be profitable from the get-go.

The best part is that this number is not set in stone. If it's a bit higher or lower than you are comfortable with, feel free to adjust as necessary. There’s no right or wrong answer to pricing your products—it ultimately comes down to what works for your business.

You may have to play around with pricing for a while (true story—my headbands started out at $12, then down to $8, then $10/each) before you find your “sweet spot,” but you’ll get there! I swear, half of entrepreneurship is testing and tweaking over and over and over again until you figure out what works.  

 

Keeping up with the Jones'

And if I can offer you one piece of advice that I encourage you to listen to above everything else?

Don’t ever compare the price of your products to someone else's.

Yes, do some market research and get a ballpark figure of what similar items are going for in your market, but don’t base you price solely on that. Do the math above and see what you come up with—your number will be a lot better suited for your shop than any prices you stumble upon in your research.

And don't stress--price doesn’t matter nearly as much as you think it does, I promise ;). If your items are high quality, your photos are beautiful, and your copy is spot-on, customers will come and buy from you—even if you are a few dollars higher than the next shop.


Your stuff is amazing. It’s fantastic. And chances are it’s worth a heckuva lot more than you’re currently charging for it.

So stop trying to undercut the market to make those sales. Stop devaluing your work. Stop undercharging and overworking yourself.

Charge what you're worth and then watch the sales come pouring in.

xoxo, Morgan