Artisans confused about pricing their products on Etsy must factor in the cost of buying tools and supplies and the time spent making and packaging their items. They must also factor in how well they've mastered their craft compared with similar artisans, their desired earnings per month or year, and their customer profiles.
Calculate the cost of materials. If you purchase a ball of crochet thread for $5 and create 30 placemats from it, the cost of thread for each placemat is $0.17 per ball ($5 / 30). Factor in the cost of all materials -- except tools -- used to make an item.
Add up your labor costs. This determines in dollars what your work is worth. Decide what to pay yourself an hour. Multiply your hourly wage by the length of time it took you to make a single product. If your placemat took 1.5 hours to create and your hourly wage is $10, the cost of labor is $15.00 ($10 X 1.5).
Figure your "actual cost." This is the total cost of materials, labor and fees, or the actual cost per product.
Calculate the retail price. Multiply your actual cost times two.
Total your fees. Since Etsy and PayPal fees vary monthly, calculate an average monthly rate for these fees and total them. Don't include shipping and handling costs unless you're offering free shipping.
Add up the Etsy price. This is the retail price of your item plus your fees. The total, which is called the "fair" Etsy price because it offsets the costs of your fees, is the online sales price.
The fair price should generate enough revenue to allow you to reinvest in and grow your business.
If you're having trouble keeping up with the demand for your products, you may be underpricing them. Consider making fewer but more valuable items at a higher price point. The goal is to maximize your profit and minimize production time.
Don't overlook costly, time-consuming tasks like marketing, promoting and packaging your items or taking them to the post office to ship. Designer Megan Aumen says on her website, Crafting an MBA, that Etsy sellers "don’t consider labor, profit, or many of the other costs of running a business when setting their prices" because they treat their craft like a hobby. Don't discount these tasks or your point-of view of your product in setting its price: no one knows better than you the skill, tasks, time and quality of the materials involved.
Set your prices by identifying and knowing your customers. People who like and appreciate handmade items place a higher value on such items and may be willing to pay more for them than other customers.
Determine your price point from your desired gross sales. If you want at least $12,000 in gross annual sales and you make 260 items a year, divide the gross annual sales figure by the number of pieces to get the price of each item, $50 ($12,000 / 260).
If you're a wholesaler, you may need to discount your prices because you sell a lot more items at one time than retailers. Customers who buy in bulk want and expect discounts from wholesalers.