How To Price Your Etsy Handmade Items (Formula, Strategies & Examples)

Many handmade sellers are afraid of the topic of pricing. They are always afraid of charging 'too much' for their craft.

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However, not charging enough can quickly lead to an unprofitable and unsustainable Etsy business.

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In this guide, let's look at the dangers of charging too little for your craft, the basics of costing and pricing, and strategies that you can use today.

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Don’t Price Your Handmade Items Too Low

Many handmade sellers are worried about pricing their crafts too high and would scare away potential customers. 

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However, in my experience, most handmade sellers price their craft too low, which leads to several problems:

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Low Margins And Profit

If your margin is too slim, your business will not be sustainable in the long-run.

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Inability To Run Sales

If your margin is too small, you wouldn’t be able to run sales in holiday seasons or in general. It can seriously hurt your shop’s growth and overall profitability.

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Comparison To Mass Produced Goods

Mass produced goods that are sold on Etsy usually charge a lower price compared to handmade products. If you charge a similarly low price, you would draw unwanted comparison to your handmade products.

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Low Prices Don’t Necessarily Mean More Sales

Customers perceive low price with low value. If your craft is priced lower than your competition, shoppers are likely to question: "there has to be a catch if the price is so low. Maybe the material is inferior or it simply won't last".

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We will look at how pricing is a perception of quality later in this guide.

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Different Types Of Handmade Business Costs

Before we start looking at any advanced pricing strategies, let’s have a look at the basics of the costs of running your handmade business, and how we can make sure your bases are covered.

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Variable costs

Variable costs are costs that increase with each product made/sold. This cost increases when you make new products.

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Some common variable costs include:

• Raw materials
• Packaging
• Order inserts
• Shipping
• Etsy fees

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Don’t forget to pay yourself in the process. Set yourself an hourly rate and see how much time is required to make an item. This method can help you come up with the labour cost of your products.

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Fixed costs

There are some costs that stay the same no matter how many products you make in a period of time. Some examples include:

• Rent/location
• Tools
• Equipments 
• Subscriptions like Marmalead, Canva, etc

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To include them in the product cost, try this method:

1. Add up all your fixed costs
2. Estimate the number of products that you will sell or have sold in one month
3. Divide the total fixed costs by the number of items from step 2

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This is a general method for dividing up the fixed costs. You can also put a bigger percentage of the fixed costs on higher priced items and smaller percentage on lower priced items.

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Is There A Pricing Formula For Etsy Sellers?

There are a lot of pricing formulas online. All of them have their merits, but it’s not the approach that I recommend. Just using pricing formula runs into the risk of pricing for yourself, and not considering the market. It’s likely that you would under- or over- charge your customers.

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Instead, pricing formula is a way to find the “baseline price” that you need to charge to breakeven, but not to find the final price that you’ll charge.

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All Variable Costs (Materials, Labour, etc) + All Fixed Costs (Tools, Rent, etc) = Baseline Price

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To do that, add up your variable costs and fixed costs for each product to get your baseline prices. This is the price you need to know going forward to not go below.

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Etsy Pricing Calculator

I've made a pricing calculator that gives you an estimate of how much you need to charge for different profit margins. It takes into account your different costs and Etsy fees, and shows you the selling price to make sure you are charging enough for your craft. Click here to use the free Etsy Pricing Calculator.

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Price Is Part Of Perception Of Quality

For shoppers, price can indicate the product quality.

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In any markets, including Etsy, the information is not perfect. There are uncertainty of what they will get from their purchase. For example, difference in material, colour, unknown actual shipping time, etc. Although reviews on Etsy can help, shoppers still don’t have perfect information.

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Because of that, shoppers use price as one of the indicators to determine quality.

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Generally speaking, in most situation, higher quality products are more expensive. If you pay more, you should get a product that lasts longer, uses premium materials, etc.

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So for you, if you can convince your target customers that your product is superior and can bring value/benefits to them, you will be able to charge a higher price.

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From my experience, it’s not a case of the prices being “too expensive” for handmade sellers, but a case of not communicating the value of their handmade products correctly.

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Let’s look at ways that you can increase the value of your product which allows you to charge a higher price while getting more sales.

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Showcase Your Technique & Skills

If there are certain techniques or skills required to make your craft, show it. Don’t be afraid that it’s not special. Even if you are using the same technique as your competitors, you can get ahead of them by just showing your work. Have your friend or family film you when you make your product, and edit a short clip with editing tools like Canva.

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Black Sea Resin Works showcases the skills needed to make their clocks.

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Culture & Your Personal History

When you travel, you will inevitably come across gift shops that sell crafts made by locals. Most people are willing to pay extra for authentic crafts. If your products can be tied in with your personal culture or heritage, be sure to showcase that. House Of Izzi is a great example of that.

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8 More Strategies To Increase The Value Of Your Products

In our pricing course, we will go through 8 more strategies that you can use to boost the value of your products. So that your craft can command a higher price and still get more sales.

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Should I Include Shipping Cost And Other Packaging In The Price

It depends. If the shipping cost is relatively low (less than $10), I would recommend including that in the product price and offer free shipping to take advantage of the search ranking boost. Offering free shipping can also increase conversion rate (unexpected costs like shipping is one of the major reasons for abandon cart).

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However, for higher shipping costs like over $10, then it’s understandable to include it as a separate cost, or put part of the shipping cost into the product price.

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Prices Ends With A “9”

I would recommend doing this. Multiple studies have found that prices that end with a “9” or other odd numbers increase sales.

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This book - Priceless - shows that there is a 24% increase in sales for prices ending in odd numbers compared to nearest rounded numbers

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An experiment done in an MIT paper shows that out of three prices for the same women’s clothing item - $34, $39 and $44. The item that’s priced $39 sold the most.

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What's Next

If you'd like to go more in-depth about pricing your handmade products, then the course The Complete Guide To Pricing Your Etsy Handmade Products is made for you. Inside you'll learn the 10 ways to charge more for your craft without scaring away customers, and how to avoid price competition and increase your profit margin. Join GYC Etsy Academy 2.0 to get instant access.