Let’s start with some fundamentals:
- Variable Costs: Costs that increase with each product sold (e.g. labour costs, materials, packaging, Etsy fees)
- Fixed Costs: Costs that remain constant regardless of sales volume (e.g. rent, tools, subscriptions)
Calculate your Baseline Price by adding up all variable and fixed costs. This is the minimum price needed to cover expenses and avoid losses.
Anything above that would be your profit.
Important: Just like any marketplaces, knowing what your competitors are doing is important. Analyse your main competitors to know what they are charging and their product features.
Don’t price your craft too low. Some drawbacks of underpricing your products:
- Low profit margins
- Inability to run sales or promotions
- Direct competition to mass-produced products
Remember, price is a key indicator of perceived quality. Here are some strategies for you to charge more for your craft:
- Offering unique designs or materials
- Showcasing the handmade process
- Highlighting product benefits and features
- Leveraging personal stories or cultural heritage
- Using better quality photos
- Creating a strong brand image
- Associating with a cause or charity
- Breaking down the price into smaller, more digestible units
It’s also beneficial to have products in a range of price points. Doing this can help you reach a wider group of customers.
For digital products, the market is often more competitive. But they also incur much lower variable costs, which means their margin percentage is often higher. To stand out and charge more, consider creating bundles or more innovative designs by incorporating interactivity or animated features (e.g. mobile animated e-invites).