Thursday, July 22, 2010

Rethinking Pricing

My annual attempt to straighten up my ETSY shop is here again.This seems to happen every summer. This year it involves double checking to make sure everything listed is available in the proper sizes and taking another look at the prices.
Pricing my work is (as is common to the artsy set) a fraught process full of insecurity and indecision.
In fact I have sort of sidestepped the entire thing by setting a blanket rule for dyed garments:

Retail Price = 3 x cost of white garment

I figured that roughly covers my time and the supplies needed without pricing me out of the reach of my customers.
A couple of recent wholesale inquiries have made me take another look at my pricing formulas.

I figure that my wholesale price needs to be 1/2 of my retail price.

I then decided to see if my current prices will give me any profit at wholesale, which in turn gave me a different perspective on the prices I set.

Here is a hypothetical example:
This cute little toddler tank, the cost of raw goods here is 5.50 per unit (including shipping).

Using my default price setting formula (3 x cost of goods, 5.50) my retail price for the tie dyed shirt would be 16.50... modified to 16.00 even (because I'm like that) and my wholesale price would be 8.00 per unit.

which sounds OK at first...

here is the test though...

16.00 ~ retail price
- 5.50 ~ raw goods
- 2.00 ~ dye and supplies (roughly)
= 9.00 ~ what I get for it at retail

now wait for it...
/ 2 (wholesale formula of choice)

you ready?

= 4.50

this is a full dollar less than the white goods cost me!
So I'm losing money at wholesale, and I gotta figure my retail price is skewed too.

I figure I'm gonna have to work it backward.
Start with the preferred amount I want to make at wholesale then add in the costs, as so
Lets say I want to make 2.00 per unit, beyond cost at wholesale.

2.00 ~ what I get (wholesale)
+ 2.00 ~ dye and supplies
+ 5.50 ~ raw goods
= 9.50 ~ final wholesale cost per unit
x 2 (wholesale to retail formula)
= 19.00 ~ final retail price

This seems like a good test for me to check my current prices.
I expect some revisions will be necessary...

As I have discussed I'm pretty ambivalent about the tie dyes already, operating at a loss isn't helping.
There is a confidence factor to it too. I am taking a hard look at declaring my work's worth. If the price seems beyond what the market will bear then I will have to rethink all sorts of things...


jan in nagasaki said...

there is a picture of my kid in one of your shirts.(over in my blog) he loves it so much and wears it all the time. i have two other shirts from you and i love them. i really love them. (go over to my blog and ch ch check it out!!!!..

Liz said...

Isn't the maths flawed. If the wholesale price is half the retail ie half of 16 is 8. 8 minus 5.50 is 2.50 . 2 dollars for dying one tiny vest seems a lot, particularly if you do a batch run. Anyway 8 minus 5.50 minus 2 is 50 cents for wholesale order.(small but not negative)

nandas said...

thank you for this thinking out loud! its so hard to figure out prices and then to balance what the market will bear and whether you feel like you are getting a fair price for your own time. no matter how you look at it pricing is hard work.

alsokaizen said...

Hi jan
I saw the picture and I got such a kick out of it he looks great!
Oops you are right Liz! Math was never my strong suit.I will edit the post :)
2.00 IS alot for one, I do batches though and I have to figure in overhead such as electric and water
yadda yadda... At least its not a full negative.
Hi Nandas
Its another way to look at the question for sure.

tiedyejudy said...

One thing I have tried to do is establish piece minimums on wholesale orders. That way I can get the raw goods for a better unit price than if I order in smaller quantities. The thing about wholesale orders is they do give my biz a cash infusion so I can order more supplies, so I can dye more... you know! Definitely can't feed myself this way, except creatively!

Julia Moore said...

Thank you so much for your honest thoughts on pricing your work. It is hard to find practical information on pricing from the artist's point of view.