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Thread: Pricing... Again.

  1. #1
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    Default Pricing... Again.

    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.
    Last edited by ps_bond; 15-12-2015 at 09:51 AM. Reason: Name spelling

  2. #2
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    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.
    Author: Pearls A Practical Guide
    www.pearlsapractical.guide
    www.Pearlescence.co.uk

  3. #3
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    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).

  4. #4
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    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
    Last edited by Nick martin; 15-12-2015 at 10:55 AM.

  5. #5
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    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. :/

  6. #6
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    Quote Originally Posted by enigma View Post
    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.

  7. #7
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    In an ideal world all consumers would plump for excellent hand made crafted work. But they don't. They buy Gemporia, which is amazing for the prices and just got etailer of the year I think. Deservedly. But Steve's pearls are not top quality..but they are a whole lot cheaper than mine and the average consumer isn't that worried about a small mark or two more on a pearl, or that it isn't metallic lustre - when maybe they haven't seen metallic lustre and top quality
    You can get handbags for a tenner in my local post office while a Hermes costs in the tens of thousands...
    Pricing and reliable shipping are the two most difficult things in selling today.
    Author: Pearls A Practical Guide
    www.pearlsapractical.guide
    www.Pearlescence.co.uk

  8. #8
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    It's a useful formula, Peter, and for an established professional probably not hard to apply. But for someone who's learning, it may have to be tweaked considerably. First, because a relative amateur with little track record may find it harder to win buyers' confidence, make sales and build that track record if they try to charge the same prices as the pro. Second, because items involving new techniques are likely to take longer and result in more wastage than tried and tested "production work".

    I use a similar kind of formula as a starting point, taking into account materials, time and investment/growth/development, as you suggest, but I often then adjust final prices as I think fit to suit my market. Occasionally, particularly with a new or experimental design, my hourly rate would add up to very small peanuts if calculated strictly according to the formula - on the other hand, if the customer is covering my basic costs and a little more, then I'm effectively getting a load of research and development for free.

    Regarding devaluing work by underpricing, that's a thorny issue. Yes, undervaluing your own work can definitely backfire on you; and being sensitive and respectful to others with whom you are sharing a platform (in all aspects, including pricing) is important; but in an open and free market, if one person wants to value their time at £3 an hour, another at £30 and another at £300, who's to say they can't? Provided you can justify yourself to yourself, your customers and those around you who may be directly affected (not indirectly, simply as competitors in the wider market), then pricing is entirely your own affair.

    Alan

    PS - If money were the only object, we might all be flipping burgers or stacking shelves, or training to be lawyers/accountants/etc, but there are all kinds of other reasons why people choose to be self-employed and/or pursue creative work.

  9. #9
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    I've been venting about this for the past week - mostly because I'm having to put prices up in the new year and I've been sitting costing everything out (I've just realised I've seriously mis-weighed some waxes and I've earned diddly-squat ).

    There seems to be a very fine line between what I can charge before sales drop off. At the end of the day, I can only (unfortunately) charge what the market will bear if I want the sales.

    I cost out materials + consumables, then pay myself an hourly wage I'm happy with, but it leaves NO wriggle room for anything going wrong.
    If I sold things for what I'm 'supposed to', I'd never sell a thing.

  10. #10
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    I struggle with this constantly. If I charged what I should be for the time it takes me to make things (I like to spend ages polishing!) I would never sell anything.

    I did start to try and price things properly, but then someone else just copied my design, gets their stuff mass produced overseas and sold it for less than half what I was charging, which is just depressing

    I've got to the stage where I do materials and pay myself an hourly wage, but I don't then double that for a retail price, and I'm realising I also don't take into account things like insurance, website, photography etc.

    I need to have a serious rethink in the new year, but as Lucie said there is a limit to what people will pay, especially if you work in silver.

    I actually got sent a message from someone on Etsy, saying "Oh, I think you've made an error with this listing. The price?" Gah!!!

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