Are you running a business or just an expensive hobby? Danielle from The Merriweather Council joins us for part 2 of our 2 part series where we talk all about how to price on Etsy. Make sure your listings and shop are set up for maximum sales and success. Danielle shares some great tips for overcoming the hobbyist mentality, finding the best price point, and what you should do about discounts in your shop.
How to price on Etsy
Today we’re specifically going to focus on pricing. This is something that needs to be discussed because a lot of people look at pricing in a negative light. It’s easy to fall into the trap of following a “formula” and price ALL your things by that formula, whatever it may be. There’s so much more to it than just following some formula. We want this post to be encouraging for you as an Etsy seller and small business creative so you can find even more Etsy shop success! How to price on Etsy is important and we want to shed some light on how to do this as we chat with Danielle.
Are you paying to stay in business?
Danielle is very passionate about how to price on Etsy and do it correctly. She wants sellers to see the value in their own work and charge appropriately for it. This is hard, however. It’s easy when you’re a new seller to not be aware of how much you should be pricing items. Sellers also love to look around and see what the competition is charging. Danielle says the most important thing to remember concerning pricing is this: if you’re not making a profit at whatever price it is you’ve chosen, then you basically have a very expensive hobby.
For the love
She says it’s often hard for sellers to think of this in the correct way, especially at first. Most handmade sellers did not get into running an Etsy shop because they wanted to be a business person. Often it came about by making things that were fun for friends or family. Then, those friends or family may have commented that you should sell whatever this awesome product was. You began to hear comments like, “Oh! I’d buy this if you were selling it,” or even worse, “I love this…do you think I could get one for free?” Danielle says it doesn’t help when those closest to us ask for our products for free!
So, you got into it because you loved what you were making and over time it evolved into this awesome Etsy shop you currently have. Sellers will often think or say things like, “Oh, it I LOVE doing this,” “It really only took me like ten minutes” or “I did this while I was watching my favorite show, it’s so easy,” and that’s all perfectly fine, BUT there comes a point where it is actually work, no matter how much you love it!
A mental shift
Eventually, if you’re selling products in your shop, that IS your work. It’s no longer something you simply love to make. So, making that mental shift from hobby to business is huge. Making this shift can also slow sellers down concerning pricing accurately. It’s important that you get this right as soon as you possibly can, not just for yourself but for everyone involved. There’s always going to be someone who can sell what you’re selling or something similar, for cheaper. No matter what. No matter how low you price your item, someone will always sell it for less.
Pricing first, volume second.
When you think of it this way, it doesn’t make sense to try to compete for the lowest price. Remember, a lot of buyers are not looking for the lowest priced item anyway. Bottom line: if you’re not profitable and you want to be, and you also want to be in business, you MUST price correctly. You do not have a choice. It first starts with pricing and then the number of sales is secondary to this. Danielle says she has had an influx of sales before at the wrong price. What happened was she became fatigued because she was not making enough to sustain the amount of time she was putting in to do all that work. You DO NOT want to get into a situation like this. Price right to begin with so that no matter what happens, you know you’ll be profitable.
Breaking the mindset
The first specific tip Danielle has for you as a seller concerning pricing is this: break yourself out of the “hobby” mindset. No more underpricing because it’s fun for you or you enjoy doing it. It’s awesome that you do! That’s definitely the dream. You still have to be paid enough to justify your time and effort. The reason people want to buy from you is that they love what you’re making. They don’t want to make it themselves. They probably don’t have time to make what you’re making.
So, this is an exchange of value. Time is money. You’re making this exchange with your customer. You must see your own value in order to be comfortable exchanging it for money. Just because it’s easy and fun for you doesn’t mean you shouldn’t charge an appropriate amount for it. Even if your customer could make what you do, that doesn’t mean they want to. Stop justifying a cheaper price because you think what you make is easy. Your quality and your time matter and are worth being valued appropriately.
Math isn’t scary…most of the time
Next, Danielle says to not be afraid of looking at the mathematical parts of the equation. Yeah, for those of us who are right-brained it’s never fun. She says it’s SO important to get past the initial hurdle of understanding your numbers in order to get to your ideal pricing. There are lots of different formulas to get to a price. However, before you can use a formula, you must know what goes into it. This will be so useful and lucrative for you to know your exact numbers.
Once you understand your numbers, it allows you to have flexibility for pricing and pricing with the possibility of doing a sale once in a while. Understanding your numbers also gives you power over them. Take an afternoon or evening every year or so, to sit down and really work your numbers out until you really understand them. No, this isn’t super fun, but in the long run, it is very important to running a successful business.
Increased prices and crickets
If you’re an established seller who is re-evaluating your prices but is worried that no one will want to pay increased prices in your shop, Danielle has some advice for you. First, she says raising prices is just part of life. Amazon prime recently raised their price and if they have to do it as a huge business, smaller businesses are definitely no different. A lot of times, raising prices is just part of being a realistic business owner. It doesn’t have to be a 40% increase. It could be a couple of dollars added on here and there. Danielle says a lot of sellers are afraid of isolating their existing customers, which is a fair concern.
She normally would suggest that as a seller, you give your customers a warning before increasing your prices. If you’re raising your prices substantially, let them know and give them a why if you feel it’s necessary. Usually, in the handmade community, there’s a reason beyond just wanting to make more money that causes a seller to raise their pricing. Your supply costs may have increased. Let your customers know.
If you have a loyal customer base that shops with you often, they are more than likely going to understand this from you. Maybe you don’t have a loyal customer base yet. If not, then it doesn’t matter about the why. You’ll find new customers that will come to you one and done. Danielle says to remember that there is a market for every product at every price point. It all comes down to communicating your value and price to your customers.
Fewer sales, more profit
This is where knowing your numbers inside and out really comes into play. If you’ve recently raised your prices and have seen a decrease in sales, this doesn’t have to mean you’re making less money. If you’re pricing correctly, you could be experiencing fewer sales but more profit. This means you’re doing less work for more money which is the sweet spot in selling!
The glorified “number of sales”
As an Etsy seller, this can be hard to wrap your brain around since Etsy somewhat glorifies the number of sales by putting it on the front of your shop. Danielle says that Etsy sellers often have an emotional attachment to the number of sales in their shop. But, the number of sales honestly isn’t what’s most important! How much money you make is what’s important!
As a seller, you should put more value on the number in your bank account and not the number of sales in your shop. Danielle says that basically, the only people who care about the number of sales in your shop are you and haters. No one else really cares. For customers, if you have great reviews that’s what matters most. The more you can disassociate from the number of sales in your shop and attach more value to the profit you’re making, the better.
Danielle says that the sales number that sellers often put so much value in, is a fictional representation of how profitable a shop is. She says if she goes to your shop and buys forty of the same listing, that equals one sale in the shop sales numbers because it’s technically one transaction. But, you sold forty items! In Danielle’s own shop she says she often sells five of the same listing because buyers are often giving multiple gifts. Yet, it still technically shows only one sale.
Also, the sales number doesn’t take into account if a seller took a vacation or time off from their shop. You have no idea what’s going on in the back-end of a shop by the sales number shown. She says people will get so attached to these numbers that really don’t mean anything as far as success goes and how healthy a shop is. Again, the meaningful number here is your profit.
Her feelings on discounts
Discounts are something that Danielle feels very strongly about. She thinks there is a lot of bad information available to sellers concerning this. Though she’s all about looking at big businesses and latching onto their coattails concerning some things, discounts are not one of them. A small business can’t offer the same amount of discounts as Walmart, Target or Amazon. However, sellers often look to big businesses concerning discounts and follow suit, thinking that because it’s working for them it will work in their Etsy shop as well.
Diminishing your value upfront
One of the biggest discounts that Danielle sees sellers doing is building their email list by giving a discount on a first order. Often this will be the first thing you’ll read on a sellers Instagram bio and is the first thing you read about a seller. If you’re doing this, you’re not even giving a buyer the chance to get to know you! How can they know if your products are worth the price you’re charging?! Now it doesn’t matter because you’ve told them up front that your products will already be discounted by 10-20% less than what it usually is.
This immediately diminishes the value of your product to your buyers. You may have gotten someone’s email address out of this, but they’ll probably unsubscribe once they’ve used your discount. There’s no incentive for them to follow along social media wise and wait for a promotion that you might run in the future. This doesn’t make any sense for small businesses to do.
Be in control
Danielle is totally on board with Banana Republic giving her 20% off her first order every time she orders. For Etsy sellers, many are underpricing to begin with and on top of this, they’re offering a discount. This takes power away from you as a seller. Whereas you could have had a customer come to your shop, love your work, love your story as a seller and purchase your products at full price, now that option is no longer there.
If you’re going to discount items, do it on a particular item for a limited time. Danielle has placed items on sale only when she wants to quickly get rid of products and make a lot of money. This is a more controlled environment for discounting as a seller. Have intentional promotions or discounts throughout the year instead of one standard discount across the board that can be used all the time.
Another promotion that many sellers use are automated coupons. This is where your customer has a coupon mailed to them from you, as soon as they purchase an item from your shop. They can then use this discount on their next purchase. The problem with this is that you’ve now taken a buyer who did pay full price and who may continue to pay full price in the future without question, but now won’t because you’ve basically told them they don’t have to! Stop it. Don’t do this!
The only reason this works in large businesses is that places like Old Navy or Banana Republic know you’re absolutely going to come back. They sell products that are purchased over and over again by their customers. If you’re a seller that sells products that tend to be a one time purchase, this is even MORE harmful to you. Value your own products and if you want to discount, do it in a way that’s more controlled than this.
If you want to check out Danielle’s shop, be sure and do that here along with her website, blog, and podcast, The Merriweather Podcast! She also recently collaborated and developed a pricing course with her good friend, Janet LeBlanc from PaperandSpark! This course is called The Pricing Workshop. Janet brings the math since she’s a CPA and Danielle brings the creative part in a unique way to help sellers figure out what their pricing should be. Definitely check this out on Danielle’s website as it might be exactly what you’ve been looking for if you’ve felt a little lost with pricing.
As always, be sure to check out this week’s Jam! There’s always SO much in the Jam that we don’t capture in the blog write up. Our Jams are definitely worth listening to in order to hear all those juicy details that aren’t included here. Also, this is the first Jam of June and our Jam and Eggs round has started fresh, so that’s another reason to be sure and listen:)
Happy selling, everyone!