Pricing... Again.

[ps_bond]

It's been a wee while since I last vented on this - it's cropped up again IRL

As some may recall, I use a formula that is pretty simple -
Wholesale price: (Materials costs + hourly rate * hours worked + other costs) * 1.2
The 1.2 is profit to allow development & growth. Fairly standard stuff.
Retail price (usually): 2 * wholesale

A jeweller I know is selling a bangle.
There's about £20 of material in it.
There's a box - call it £2. It's hallmarked, no idea how many items were in the packet but let's say it cost £3.50 (incl. post to & fro). That's a total of £25.50 so far.
Retail price is... £78.
So the wholesale price is £39

39/1.2 = £32.50

That leaves £7 for labour; it took "around" 2 hours (so probably more).

So an hourly rate of £3.50

By way of comparison McDonalds will pay £5.55/hr for over 22 year olds. And you don't need to spend loads on tools either.

BTW - as I've covered before: Retail price is there to cover cost of sales. Whether that is through a shop, a gallery, an online presence or even "just" on Facebook those costs exist. Curating an exhibition takes time - again, cost of sales.

There was quite a good article in Craft & Design on pricing by Pete Mosley in the Nov/Dec issue - in particular, it covers the issue of devaluing work by underpricing. One thing that stood out was a line to the effect that if people tell you your work is too expensive (and you've done your research) then ignore them, they are not customers.
If you're in an exhibition however, underpricing not only devalues that maker but also undermines the other makers there.

[pearlescence]

All good in theory, but if you don't sell anything at the 'right' price...?
People buy on price these days, which is why I sit in front of the TV cringing sometimes at the tele shops when they sell pearls. But people buy them.
Someone wanted a reduction in price when they ordered a pearl necklace which was 1cm shorter than I had quoted for. People expect a bracelet to be half the price of a similar necklace. They also expect men's cuff links to be cheaper than women's earrings even though there is more metal in the cuff links.

[ps_bond]

Then you are selling in the wrong place or in the wrong way - that's what the sales aspect is supposed to be about. Marketing, selling the intangible et al. Particularly with handmade work - all of it, not just jewellery - the customer needs more buy-in than just "pretty ring, you buy". Similarly, galleries need to do more than just sit on their arses waiting for someone to say they want to buy something.

That is one area where the teleshopping lot excel - they build the story around the stones, the rings (even if it's BS).

[Nick martin]

I'm finding this a really interesting topic.

I'm not in the marketplace as of yet as I am working on a properly developed website and other avenues with which to sell the items I make. So at present, as I am very restricted on having the time to create new items, its more a case of making things out of love than profit.

But I happen to agree with you Peter, and I think that given the effort people put into making jewellery ( not to mention the resources needed ) its important not to undervalue creations. If people apply the same philosophy to other consumables in their lives ( I.E. cars, houses, cameras, clothes etc ) then it makes sense doesnt it.

Simplistic I know... but I choose to buy expensive Canon L series camera lenses because they're optically excellent. I choose to buy decent nearly new cars because they're reliable and wont need huge maintenance costs, I choose to buy my other half ( sigh... ) expensive handbags and clothes as gifts because they are top quality and dont drop to bits.

I'm sure most of us are the same and I believe in the old saying of 'buy cheap buy twice' with MOST things in life. Where jewellery is concerned, and I appreciate I am by no means an expert in this sector, maybe those of us who handmake stuff should be selling it on its virtues and as Peter says, the same with Galleries.

Make a song and dance of the virtues of handmade jewellery.. such as the quality is often higher, the labour thats gone into its creation, the fact its often unique as opposed to mass produced and common, and that compared to the profit margins the high street jewellers make the prices are often very reasonable by comparison!

If my other half asked me for a piece of jewellery as a gift and I was faced with the choice of purchasing it from a highstreet jewellers, or buying a handmade version which was equally as lovely albeit a bit more expensive, then I would buy the handmade and therefore most likely 'more unique and special' variant. And yes I know, it would be because I would be acutely aware of the effort involved in making it.

My point being that perhaps we all need to be much better marketeers and the same with galleries, agents, websites, boutiques and so on. This will become a big challenge for me too once I'm properly in the place to sell my creations and I know it wont be easy. However I wont be selling my stuff at cost, or at minimal profit based on the fact that the general public are always looking for bargains.
My philosophy is going to be something along the lines of if you want unique, non-mass produced, and hopefully good quality then you'll have to pay a fair price for it or go elsewhere!

Im rambling on too much I know, apologies everyone but I just cant help getting very enthusiastic on topics I find interesting!

Nick

[enigma]

I think its when you add the X 2 for retail price that it gets tricky, perhaps they work to a different format?
ie: if their retail price is £78 less £25.50 costs that leaves £52.50 as two hours labour and marketing/overhead costs.
So say £15 p/h that leaves £22.50 for marketing and overheads, perhaps they consider that enough?
Etsy for example costs me around 8-10% in marketing and sales costs, FB is harder to work out but I would say costs me less than 1%, other advertising costs me around another 5% so in total getting nowhere close to X2 of wholesale price.

Having said that I do agree with what you are saying re people underpricing so much as to drag the prices down- just have a look at what some people are selling handmade items on Etsy for and even without considering retail versus wholesale you have to wonder how they are making any kind of hourly rate.
Answer is many aren't and are doing it as a hobby with another income I suppose. :/

[ps_bond]

I think its when you add the X 2 for retail price that it gets tricky, perhaps they work to a different format?
ie: if their retail price is £78 less £25.50 costs that leaves £52.50 as two hours labour and marketing/overhead costs.
So say £15 p/h that leaves £22.50 for marketing and overheads, perhaps they consider that enough?
Etsy for example costs me around 8-10% in marketing and sales costs, FB is harder to work out but I would say costs me less than 1%, other advertising costs me around another 5% so in total getting nowhere close to X2 of wholesale price.

+ time to photograph the things, do the writeups, deal with posting them out, customer queries, returns etc. etc. - factor that in and I suspect it'll be a lot closer. Equally there's the issue that you cannot undercut your other sales outlets and still expect them to stock your work. If you have a website then that needs paying for - including maintenance.

In this case, there's additional costs with the exhibition, including the need to do several days stewarding (time which needs to be paid for - hence cost of sales), fuel costs, the costs of the exhibition itself and so on. All mounts up; I did a fairly detailed spreadsheet to try and capture all the glossed-over costs and distributed it. You can lead a horse to water...

Having said that I do agree with what you are saying re people underpricing so much as to drag the prices down- just have a look at what some people are selling handmade items on Etsy for and even without considering retail versus wholesale you have to wonder how they are making any kind of hourly rate.
Answer is many aren't and are doing it as a hobby with another income I suppose. :/

Again, flipping burgers is more lucrative if that's the approach being taken.

If you are selling your work you are doing 2 jobs - both of them need to be paid for the time taken.

[Gemsetterchris]

It's quite possible for some of us to produce something like a "mega-buck" item, the problem is having to lay out on the material in the first place & then sell it.
Unless you can get in with the right circle of people It's abit tricky, since they'll more likely head somewhere established as a known luxury brand & not from someone working in the garage
There are exceptions, as one of the best hand engravers in the world does in fact work in his garage..& being a benchworker, isn't a millionaire.
At least you'll be rich in job satisfaction while struggling with the bills.

[Petal]

Interesting thread this. IMO, having just done three shows, two of which were curated and one wasn't I'm definitely going down the curated only shows from now on. I also want to see an exhibitors list before I book an event, so I can see what people are selling, what the quality is and the price! At all three shows we met some wonderful customers, some returners from previous years, plus new ones. I only had one person who wanted a 'bargain' and wanted to haggle me down. They paid the full price and I told them that my prices were going up next year!

[BarryM]

There is no such thing as the "right price" based on a formula of total cost times some markup multiplier. The sales price of an item depends on many factors other than the cost of production - quality, demand, economic conditions, rarity, marketing strategy, fashion etc.
A low price does not necessarily equate to "tat", which seems to be a common interpretation - just look at the price of antiques - the sales price of which vary more with fashion than many other factors.
It is not the responsibility of anyone to preserve a price point "for the good of the market" - a market by definition is a competitive environment. If it suits me to sell my products at cost or even lower or at 10 times the cost then that is MY decision and mine alone - we all have different drivers and motivation.
Hobby makers (such as myself) are a tiny, tiny fraction of the total jewellery market and will not offer serious competition to a professional jeweller, the main danger is from imported goods where manufacturing costs are significantly lower than the UK and volumes are huge.
One cannot blame the customer for buying "cheap imported tat" in preference to hand made, high quality, high price items - our culture is changing to a "throw away and buy another" attitude for many items - from computers to clothes and also (sadly) jewellery. Quality and longevity are less important than price and availability. "I want it now and I want it cheap" rather than "I'll wait and also pay a high price for exactly what I want"
It is the customer who drives the market, not the producer.



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[pearlescence]

Totally agree BarryM. As for price v Value. Mrs Thatcher's pearl necklace sold yesterday for £32.5k...I could make you a nice new one, probably with rounder and certainly with shinier pearls and 18k gold clasp for £1k tops, probably closer to £500
However (avoiding a 'but' there!) the 'just a hobby' brigade do drive prices down with their replacement of materials prices, nothing for their time or profit, while some of us also have to charge VAT and corp tax...<sigh> You can't even point out they would probably save money if they went legit and put it on their tax return. It's a hobby so it doesn't figure