Etsy How-to

How to Price Your Handmade Products for Profit

Not sure how to price your handmade products in your Etsy shop? It’s easy to come up with a number you think you’re worth. But how does your pricing stack up against the competition? Better yet, are you even making enough money to cover your costs?

Etsy sellers fit into two camps: Either you’re in this just for fun. Or you’re in this to make money.

But ideally, you’ll do both.

You probably started your business because you love making things. To get more specific, you love making the things you sell in your shop. And at the end of the day, you’re selling what you make because you want to make money (or at least break even).

You probably didn’t set out to make huge profits; you just want to share your handmade products with the world. But the more money you can make, the happier you’ll be selling on Etsy.

Well, trying to calculate how much money you’ll make is a difficult process. Many of us feel greedy (or timid) when trying to justify how much our time and effort is worth.

With some simple math and basic formulas, you can create a competitive, profitable pricing plan for your handmade products that considers everything that makes you and your business unique. 

Competitive pricing for your handmade products.

Determining your cost price

The first and arguably most important step in determining how to price your handmade products is establishing your cost price. 

Your cost price is the value of your product. 

In other words, what did it cost you to make your product?

This price is the sum of conceptualization, design, sourcing raw materials, manufacturing, finishing, packaging, etc. 

Related: How to price on Etsy for those with no idea where to start

This price doesn’t include any form of profit or shipping costs. It may seem rudimentary, but it’s also important to note that:

  • Cost is the expense a company incurs for selling a product.
  • Price is the amount a customer is willing to pay for that product. 

And once you’ve established your cost price, it’s time to examine market pricing. 

Calculating your market pricing

How to price handmade products: Handmade soap measured on a scale.

If you set the price of your handmade product slightly above your cost price, you’ll probably sell them pretty easily. But you’ll hardly make any money. As we mentioned earlier, if you can make a decent profit, you’ll have a better time selling your products on Etsy.

Here’s how beginner Etsy sellers typically price their products: They figure out their cost, then tack on a few extra bucks to come up with their price. This isn’t a smart business move since you don’t know what the competition is selling a similar product for.

And even if your Etsy shop is a small side-project, you’ll want to make smart business moves if you want to continue doing it.

Looking at the market and using competitors to establish better pricing is the best way to price your products fairly. 

What is market pricing?

Market pricing is when you price your handmade product in a range comparable to other similar products. 

It’s a pricing model that helps you stay competitive (and profitable) in a flooded marketplace. 

It requires you to look at the cost of competing products regularly (but not constantly). It also means you’ll never be an outlier in your pricing structure, pricing your products too high or too low.

Related: The truth about market-based pricing on Etsy

When your products are priced similarly to your competitors, your brand value and product quality wins over your customers, not the difference in price. 

Bringing it all together

How to price handmade products: Two people weaving handmade products.

With your cost and market prices calculated, it’s simply a matter of bringing them all together. 

If your cost price is already higher than that of the market price, then you might need to find some ways to lower that cost price. 

There’s every chance your competitors are manufacturing at a more significant number and using economies of scale to keep prices down. If this is true, those businesses are not your competitors — because handmade products, naturally, cost more. 

How to price your handmade products? Know that handmade cost more.

Handmade products cost more because your production is on a significantly smaller scale. This means you have the ability to pay attention to the finer details, unlike large-scale production lines.

That’s why a kid’s watch that comes in a party bag costs $2 and is included for free, but a Rolex Submariner can cost upwards of $20,000. Every detail on the Rolex is painstakingly engineered to meet the highest quality. While the toy watch is made with cheap materials by low-wage laborers.

Generally, handmade products take more time, are better quality, and come with better customer service. In addition, they’re more attractive, last longer, and mean more to the seller and the person buying the product. 

This is a pricing factor. And it’s one of the reasons consumers shop on Etsy in the first place.

There is an element of creativity and imagination in the design and creation of customized products. And while that’s true of all products, when done on a smaller, handmade scale, that incurs a cost. 

We, as consumers, are generally aware of this but seldom sit down and actually think about it. 

When establishing the pricing for your Etsy products, that’s the time to think about why handmade products often cost more!

Woodworker measuring plywood.

Remember your story when calculating your price

Etsy is an artisanal marketplace with products you can’t find in stores. The products are generally low volume and, as you just read, handmade. Therefore, they incur an extra premium because of that. 

The story of your business should also be taken into consideration. For example, your story might be nothing more than “a side hustle” or that you’ve turned a passion into a small empire. 

Either way, that story is worth something and should be considered. 

On average, profit margins are between 20-30%. Again, that’s not true of all industries, but rather an approximation and, therefore, a good rule of thumb. Consider rounding up rather than down when calculating your pricing, with that little extra profit margin being the price of your brand’s story. 

Calculating customization costs

Two Etsy sellers calculating the price of their handmade products.

Offering customization options for some of your Etsy products is a great way to stand out. Moreover, many people go to Etsy to find gifts for special occasions. These two factors make offering custom products on Etsy a no-brainer. 

But how do you calculate the costs of a custom product?

First, take the same approach as you did when calculating the initial price of your product. The price of customizing a product has to obviously cover the costs of doing so. 

Next is the time it takes to make that custom product or do the customization work. Again, this should be put into the equation as a general profit margin. For example, 30% is the available profit margin on most retail products. Use this as a ballpark to calculate the costs of your custom products and adjust accordingly. 

Remember to look at the competition to see how much they charge for custom products. 

Over to you

Pricing your handmade products is a challenge for some Etsy sellers. Making a profit on something you already love to do can easily make us feel greedy and dishonest. 

But the truth is that if your products are in demand, consumers will pay you to make them.

Calculate your pricing using what you’ve seen in this article, and you’ll make your product even more desirable!

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