We’ve discussed the Etsy basics, market research, and setting up your shop. You’re almost ready to start listing items to sell, but first we need to talk about pricing. We do want to make money, after all! Pricing can be tricky. Despite what anyone tells you, there is no perfect formula to calculate the prices your should charge. We will look at a few ways to figure your prices, then you can decide what works best for your situation. I’ll also share some tips on shipping and other pricing concerns.
Price Components
Before you calculate or estimate any prices, you will need to gather some figures for each of the items you plan to sell.
Materials
How much do the supplies used to make your item cost? Be sure to include partial costs for partially used items. For example if you use 1/4 of a roll of ribbon, include 1/4 of the ribbon’s price.
I usually get my supplies for a discount, but when I figure my prices I make sure to use the regular price. If I have to run to Michael’s in a pinch and don’t have a coupon, I want make sure I’m not losing money. Using regular supply prices to calculate my costs means that when I find great deals or buy supplies in bulk, the savings go straight to increasing my profit.
Labor
This is the part where you get paid! How long does it take you to make each item? What do you want your hourly wage to be? Do a little multiplication and you’ve got your labor cost.
Sometimes it’s not about an hourly wage. Maybe you designed a digital pattern or printable. You put in all the work upfront. Even though each sale will take you virtually no time at all, you still need to pay yourself for the work you’ve already done.
Expenses
Expenses are the costs that apply to your business as a whole like the equipment you use or the studio you rent. It can be a little tricky to figure out how to divide these costs into a per order charge, especially in the beginning. It is important to think about expenses and make sure that your business is somehow covering its expenses. Once your shop is up and running and you know your average number of sales, you can spread your average monthly expense cost out among those orders.
Other expenses to keep in mind are Etsy and Paypal fees. You can read more details about Etsy’s costs here, but here’s the important part:
Etsy fees
- $.20 per listing + 3.5% of the price when the item sells
Payment fees (just choose ONE for your price calculation)
- Paypal= $.30 flat fee per transaction + 2.7% of the total money collected (price + shipping)
- Etsy Direct Checkout= $.25 flat fee per transaction + 3% of the total money collected (price + shipping)
You must take the fees into consideration when deciding on your prices. The tricky part is that you need at least an estimated price in order to figure out the fees since they are percentages.
Profit
In addition to paying yourself an hourly wage, you should make a profit as well. This is money that you can invest back into your business. Think of it this way: If your shop grew to where you needed to hire help, you would still want to make money even on the inventory that your employee produced. Your employee would get the hourly wage and you (or your business) would get the profit.
Formulas
There is no magic formula for pricing your handmade crafts and creations, but here are a few popular ones that you can try. In every case, you’ll want to compare your price with the market research you did. You are most likely to be successful if your price is within that range.
#1
Materials + Labor + Expenses + Profit = Wholesale Price
Wholesale x 2 = Retail Price
#2
(Materials + Labor + Expenses) x 2 = Wholesale Price
In this formula, the “x 2” accounts for profit. This formula can have a much steeper profit than #1 in many cases. Because of that, I would use this formula for pricing items that have a small labor cost.
Wholesale x 2 = Retail Price
The good thing about these formulas is that they take wholesale versus retail into consideration. The Retail Price is what you would charge on Etsy. If someone comes to your shop and wants to buy A LOT of something, they are going to expect a serious discount. If you don’t take that possibility into consideration in the beginning, you won’t be able to afford to offer a deal.
Another Way
When I first started my Etsy shop, I created a price calculating spreadsheet where I would plug in the materials and expenses (including fees) to calculate the total cost to create each item. Once I had figured the cost, I experimented with numbers in a labor/profit column (I didn’t differentiate between the two). I didn’t explicitly give myself an hourly wage, but I thought about the work involved to make each of my items.
I thought “Would I be willing to make this item for $__ ?” I made sure that I was happy with the profit on my items. Because I had done plenty of market research, I knew the range of prices. Looking at the prices I had come up with, I made sure mine were in the range of sellers of similar items. Over the years, my prices have gone up, just like the price of milk and gas have gone up.
While my prices were within the normal range, there were plenty of sellers who were selling similar items for a lot less. Looking at my spreadsheet, I could see that trying to compete with the lowest prices would mean pathetic profits for me. When it’s all there in black and white, it’s easy to say “There is no way I am going to spend __ hours making ___ and only earn $___.”
Low Prices
While some customers will jump at low prices, many people equate a low price with low quality and immediately are turned off by the thought of an artist not valuing his or her own time and talent. They figure if you don’t value what you do, then they shouldn’t either.
Sometimes I see things priced for a dollar. I want to send the seller a convo and help them crunch the numbers.
$.20 (listing fee) + $.035 (3.5% Etsy fee) +$.30 (PayPal flat fee) + $.027 (PayPal fee) = $.56
On listings that cost $1, the seller loses $0.56 to fees. With the remaining $.44 they have to pay for materials, make the item, list the item, take pictures, package the item, mail the item, and possibly answer customer emails regarding the item. I don’t even want to think about what my hourly wage would be if I were only getting 44 cents to do all of that.
So why do people do it? I wonder the same thing. My guess is that they aren’t tracking their numbers. The don’t notice the PayPal and Direct Checkout fees because that money disappears before their earnings are ever disbursed to them. At a ridiculously low price they are getting lots of order, so they are crazy busy and just figure that they are making money.
Don’t compete for the low price. Focus on selling awesome things for a price that is fair to you!
Shipping
Set a proper shipping cost, so that shipping supplies and postage don’t eat into your Etsy earnings. You should not have to subsidize any of the shipping costs. Package and weigh your items and do research on the best way to ship your creations. Be especially diligent about international shipping. It’s more expensive than you think!
You can purchase shipping labels through Etsy. I love this feature! Not only is the shipping price cheaper than at the post office, you don’t have to stand in line either! You just need a postal scale or other scale that measures in ounces. The cost of shipping labels will be added to your Etsy bill.
Shipping Tips
- Add the price of your mailing supplies to the shipping cost, otherwise the cost of the bubble mailer or box is coming out of your profit. I have found the best prices on bubble mailers from this seller on Amazon
. When I order in bulk the price is 20-30 cents a piece, which is much better than you’ll do at Office Max.
- Keep in mind that PayPal and Etsy Direct Checkout collect their percentage on your shipping cost as well as your item cost. Your shipping charge should be at least 3% more than the actual postage plus packaging to make up for that.
- Free shipping gimmicks aren’t really big on Etsy. Etsy shoppers expect to pay shipping. Unlike ebay, where you can compare and sort by price + shipping, on Etsy you have to click on the shipping tab from the item’s listing page to see the shipping costs, so free shipping won’t set you apart like it will on ebay.
- However, having a free shipping code to share with your blog readers or past customers is a nice touch. Etsy makes coupon codes easy.
Final Notes on Pricing
- If you sell something that has a low price, sell it in larger sets so the total earnings make it worth selling. For example, instead of selling a single greeting card, sell a set of greeting cards.
- If your work takes lots of time or expensive materials and thus deserves a price that is higher than what you think the market would pay, think creatively. Could you sell a pattern or a tutorial? While I might not be willing to pay big bucks for a hand sewn children’s quiet book, I would be willing to buy a pattern and invest my own time into making it.
- Don’t be afraid to try listing your items at a higher price. You might be surprised! Sometimes when I am browsing I’ll see something that looks like it has an outrageous price. Out of curiosity I’ll check to see if the item actually sells and sure enough it does!
- If you are frugal like me, you will have a hard time pricing things for what they are worth. Stop thinking “What would I pay for ___?” It doesn’t matter what price you would pay, only what your customers will pay.
Veteran Etsy sellers, how did you decide on your prices? Do you have any other pricing tips or strategies to share?
Next Time
For the 5th and final (I think) post in the Earning on Etsy series, we’ll talk about marketing and an assortment of other important tips. See you then!
More in the Earning on Etsy Series
- Part 1: Etsy Basics
- Part 2: Market Research
- Part 3: Setting up your Shop
- Part 5: Marketing and Other Tips
- Bonus: Don’t Forget the Taxes!: Tax Notes for Etsy Shop or Small Business
(Note: This post contains affiliate links. For more information, see my disclosure policy.)
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Thanks for the effort to educate us in “how-to” for Etsy. I’m a newbie there and your information was a very valuable tool for me. I feel more comfortable now launching into Etsy, and really appreciate your clear-headed and full instructions.
Thanks for including the thought on using the retail cost of materials vs the actual cost you paid. I find myself getting into trouble when I try to recreate the same item I made out of discounted materials and have to purchase new materials at the current retail price. Sometimes the difference can be as much as a 50% increase. I always try to buy on sale but you never know what items are going to be a hit.
What about sales tax? Are you required to charge and collect tax? Does etsy send you a 1099 or anything?
These are some great tips! I can’t even remember how I got here now (lol) but I’m so glad I stumbled upon your page!
The one thing I’m curious about is how much you think is worth it to invest to get your store started up. Like the old saying goes, “you have to spend money to make money.” I wouldn’t want to stockpile hundreds of dollars of materials and have none of my items sell, but at the same time, you need to have enough stuff in your store to make people stop and look. How do you find the balance?
With both my blog and etsy shop I try to “bootstrap” as much as possible by investing a portion of the profits back into the business and starting out slow. Of course there will almost always be some initial expenses, but try to keep them minimal until you’re profitable.
Also am on a fixed income, able to get good prices on materials but not been considering other costs which I will do having read your advice. Any other things you think I’d benefit by?
I make handcrafted jewelry with gemstone beads and faceted and cabochon gems, using whole precious, not plated, metals. I have had many compliments on my pieces and 12 years ago I was on ebay, selling multiple pieces per week. Then I was injured, disabled and unable to work. Now I want to try Etsy and get back on ebay. I just found your 4th article VERY helpful and will read the others. Do you think there is a market in this economy? I guess I will have to try and findout. Would appreciate your input. How can I send pics to you to show my work?
Virginia Vincent
I just opened my shop about a month ago and I feel getting so many favorites and views on my handprinted letters and my “expensive” original artworks, but what does that mean? They just think it’s pretty to favorite and no one wants to pay for my stuff? 🙁
Or maybe I’m just being impatient… I’ve been promoting my Etsy shop every day as much as I can on my social media accounts and on websites for promoting shops and I only get views and favorites… Is my pricing way off? I keep changing prices on all of my products because I see others with similar handpainted letters like my own and I see their prices being very low compared to mine but I can’t sell each letter for $8… No way. 🙁
Help
Definitely don’t lower your prices just to compete. It looks like you’ve had some sales now! 🙂
Thanks, Stephanie! My husband and I opened an etsy store recently and I’ve been thinking we’re priced too high, but he’s setting prices based on ‘is it worth my time’ to make this for x amount.
I absolutely loved it when you noted that it doesn’t matter what I would pay for it, it’s what the customer will pay…the market. It’s just hard when there are people selling seemingly similar items for so much less.
Anyways, this gave me the confidence to keep with the current plan!
I heard recently that making your first Etsy sale w/i the first 3 months is considered “good”. Has that been your experience, or is it just hit or miss?
Thanks! Kristiina (www.smallbatchwoodshop.etsy.com)
Thanks for the series, it’s super helpful. I have to say though, I applied the second formula I cringed at how high the retail price was! I was willing to stop at just the wholesale price. In your opinion is it still profitable to set the resulted wholesale price as the retail price?
Thank you in advance
I totally understand what you are saying Ricky! I don’t completely follow that formula either. I think the most important thing is just to be aware of all the expenses that go into creating and selling your products and allow for enough margin that you really are making a profit. It’s nice to have a little bit of wiggle room in your prices so that you can lower them a bit if a customer wants to buy in bulk or combine items into a big order.
This was really useful thanks, but I had the exact same issue (even with the first formula). My main worry is how high to set your profit margins because this can leave me in the same predicament.
Looking on Etsy there are so many sellers claiming 50%, 70% 100%+ profit margins, but if I add anything more than a 8% profit margin on my items (i’m basing this on the costs of my labour and materials not the final price to customers) I’m already putting myself right at the top of the market.
Do you have any advice on how to measure your profit margin? Thank you so much for any advice!
This post (and the series) is incredibly helpful. Thank you a million times over for writing it. I am also concerned about taxation (see Amy B’s comment).
Etsy just added the feature to automatically calculate shipping costs based on a person’s zip code, which is wonderful and also a little confusing for me. How would this impact your formula, if at all?
Thanks again!
Thank you for this series. I have made knit and crochet items (almost compulsively, actually) since I was in middle school, and have always wondered if I could make some money with it. Now I’m a stay at home mom in need of cash, and I am taking a serious look at etsy. Your articles are easy to read and make sense. I feel better prepared to give this a go.
A concern I do have is this: what do I have to know about taxes? If I am making money making things, it seems to me it’s a whole different ballgame than working at someone else’s company, and I don’t want to get into trouble.
Perhaps I will talk to H&R, I was just wondering if you had any advice.
Dear Stephanie,
I live in South Africa and would like to sell my crafts on Etsy. Would I need to price my products in dollars and how do payments work? Do sales of products go to you and then you pay me or is it the other way around?
Look forward to hearing from you.
Jill
Hi Jill! I’m no affiliated with Etsy at all (other than being a seller). If you choose to open your own Etsy shop, you will price your items yourself (I’m pretty sure you can choose the currency), and your pay will either come through Etsy as a direct deposit to your checking account (for customers who use Etsy’s Direct Checkout) or PayPal (for customers who use PayPal). Hope that helps!
I’m trying to think of your formula. Say I have an item I want to sell for $25. In your fee break down, basically I would lose $.56 per every dollar. So for that $25 item I lose $14 and only profit $11? Would that be correct?
Nope! Thankfully that math’s not correct (or no one would make any money)!
For a $25 item, your fees would be:
$.20 (flat listing fee)
$.88 (3.5% of price)
$.30 (flat fee to PayPal)
$.68 (2.7% of price to PayPal)
Your total fees for the sale of a $25 item would be just $2.06.
If you use Etsy’s Direct Checkout, the fees would vary slightly:
$.20 (flat listing fee)
$.88 (3.5% of price)
$.25 (flat fee to PayPal)
$.75 (3% of price to PayPal)
The total for using Etsy’s Direct Checkout (instead of PayPal) is $2.08.
I accept both payment methods so that buyers can do whatever is most convenient for them.
this summary was very helpful. thank you
Thank you! Very useful info. But here in Holland we have the monopoly of this private postal company post.nl and their tarriffs are just ridiculous: for example it will cost for me to send a parcel from here to UK 9 euro without any track and trace options and it will take about a week… Also they made the same price for all the parcels up to 2 kg and I have pretty light items so for me it is no good at all…
I was talking to my friend from US and I understood that it will be about 3 times cheaper to send the same parcel to UK from US! It is incredibly hard to make some profits with such high delivery prices…
That is so frustrating Lina. I wish I had a good solution for you!
Thanks Stephanie for these very structured reports on how to manage an Etsy shop. It really did help me understand the big picture and the small details of Etsy. It gives me a good push to start on the right foot!
Taking way too long to open up our Etsy shop of fresh roasted coffee beans. What should be simple seems to be messing me up. Just started adding items and when I preview there is one price advertised on what is to be choices of sizes/prices. Add to that the shipping! If it isn’t flat rate then that would vary for the zip code. I’m confused how to do that. Guess I need to do a lot of research. lol
When you create an Etsy listing, you can allow some variations (size, type, etc). On the actual listing it will show up as a drop down menu in the upper right on the screen, I believe. I’m not sure about varying the shipping rate depending on location. I’ll have to take a look at that (though you may have already figured it out by now!).
This is a wonderful series! I’ve been operating my Etsy shop for about 6 months now and always enjoy reading tips and tricks for more success on Etsy. I always struggle with pricing.. People tell me my items are priced too low, but I worry they won’t sell at a higher rate (and see evidence of this when I increase my price). I enjoyed reading your series. Thanks for posting!
Thanks Chelsey. If you raise your prices, you may sell fewer items, buy you could make the same (or more!) more in less time and with fewer resources. Just be sure that you aren’t cheating yourself and that you’re willing to work for the wage you’re earning. 🙂
This is a great series! Thank you so much. I’ve been making things for a hypothetical Etsy shop for a while, but never felt ready to start one. I used your link to get started, and as soon as I get home, I am excited to start taking pictures and adding photos. You made it seem less big and scary and more fun and possible 🙂
Sorry for the slow reply Leetra! Congrats on going forward with your Etsy shop! I’m glad the series was helpful!
Hey I found your blog at the linky party on livingwellspendingless.com. I absolutely love this post and will be bookmarking your page and reading your whole etsy series. I am considering opening up a printables shop on etsy and this was a great article! Thank you so much!
That’s a great idea Ashley. The nice thing about printables is once the design is made, there is no limit to how much you can make! Best of luck!
Pricing is one of the toughest parts about Etsy, I think! When I started, I was pricing way too low – I’ve been inching up my prices over time, but I still don’t use a pricing formula at this time. When I set goals for my business at the beginning of this year, one of them was to start using a pricing formula consistently for all of my products. This post reminded me that I need to get started on that goal!!
I don’t think there is anything magical about a formula, but if it helps you to make your prices make sense, then go for it! The most important part in pricing is just being aware of all the costs (though some are not always visible) and making sure you are paying yourself enough so you aren’t working for free!
This is what I struggle with! I’ve raised my prices since I wasn’t making anything before. 🙁 I’m still not sure they’re high enough. When I figure my total earnings for the year, they’re no where near what they should be. I have to remind myself that I’m not WalMart! I worry that I won’t sell anything. Someplace I read an article where the author said that instead of celebrating selling 4 $10 necklaces, she should’ve been celebrating selling one $40 necklace. In other words she was selling herself short. Makes me think….
I think you have a great niche Mona. My kids love footie pjs, but there are a couple of problems, which your jammies solve. My kids are tall, so they grow out of them really fast. The other problem is that I potty train my kids pretty early and taking one-piece jammies off to go potty in the middle of the night is no fun (and it makes them cold). It’s also hard to find larger sizes.
Anyway, what I’m trying to say is that you have a great idea. Don’t be afraid to charge for it! Without doing the research (but I do sew), I would say that your prices are low. I would also try to get some nice pictures in natural light. Maybe you could hang the set on a clothes line or fence. Just an idea 🙂
Thank you for taking a look! 🙂 And for the ideas.