Thursday, 2 February 2012

FAQS: Getting your price right, and why you need to!

Getting your prices right is important. Not only could you be ripping yourself off; if you want to develop your business, getting your retail price wrong could be a deal-breaker when it comes to stockist enquiries.  And low-pricing could be why you're getting the evil eye at trading events...  in this blog post I'll give my perspective on:
the difference between wholesale and retail pricing 
ways you can price up your products
how correct pricing will benefit your little enterprise
how ignoring advice might impact it

Tatty Devine Price Ticket Pin

♥ What's a wholesale price and what's a retail price?
The retail price is the price a customer pays - on your website, in a shop, etc.  The wholesale price is what the shopkeeper (or 'buyer' if you're dealing with a big business) buys it for. They will want to sell your work on to their customers at the same price you do on your website/stall, but make a profit for themselves too (fair's fair!).

♥ Start with the wholesale price and end with the retail price:
Don't make the mistake of guessing how much someone would pay for your work and go with it.  Start by formulating a wholesale price you are comfortable with and use that to calculate your retail price.

♥ How to calculate your wholesale price:
The calculation isn't 'one size fits all', but you need to take into account the following:
What would you like your hourly rate to be?
How many of these pieces can you comfortably make in that time?
How much did you spend on supplies for each item?
Did you use any equipment to make it, such as a sewing machine, that might need to be replaced at some point?
Are you going to spend time photographing the piece? Make sure you charge for that!
Is there any special packaging/printing that comes with the piece?
Overheads including things like stall fees, your website hosting fees etc

The price you end up with should be a price you feel comfortable with selling at without any 'But! I won't make any money if I sell at that price!' feelings.

♥How to calculate a retail price
Different shops and galleries mark up at different rates.  If you want to gain some wholesale orders (if you're not sure of the different between wholesale and consignment, please read my previous FAQ), you stockists will love it if they can make a great profit.  Begin by tripling your wholesale price.

Don't stop there.

♥ Increase your "perceived value"
Once you have your retail price, it's time to consider if it reflects you and your brand.  Increasing the price more could increase confidence in your product, boost feelings of exclusivity and its owner will cherish it, and not simply wear it once and toss it aside.  Think about the difference between your feelings on a bracelet you bought from Primark compared to if you bought a bracelet from, say, Thomas SaboIf your product is well made, limited edition and pretty unique, don't be afraid of upping the price.

♥ Don't compete with the high street on price
An easy mistake to make is to think that if someone can buy a product off the high street at once price, your alternative should be the same price.  It won't work and we don't have the buying power or sweat shops they use.  Of course, we are in competition with them, so compete on service and quality of product instead.

♥ So what if my prices are low? More people will buy my work!
Loss-leaders can be a fantastic way to do one-off promotions and get your name known, but that's what it must be, a short term promotion with your name pretty much plastered all over it so your customers remember you and come back to something you can actually make a profit from.
Shop and gallery owners may assume a super low wholesale price until they realise you haven't priced properly and you have to start again from scratch, and they will in turn lose confidence in you.
A good fair/market organiser will recognise inappropriate pricing and decline you from events because they know their good, regular traders will get pissed off if you are effectively competing with them on price.
If you slip through the net and are accepted, you won't be making many friends with other traders at the event (it's my major pet peeve!).

♥ Still think your retail price is too much even with the minimum wholesale price?
Then it might be time to rethink your product.  Source your materials from somewhere cheaper, find a quicker way of working or design something new that will make a better return.

Hope this has helped! Remember, if you have a biz-related question that you think I might be able to help with, just ask, and I'll see what I can do...

Anything I missed off? What tips do you have to share for pricing work?


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pesky33 said...

Hey there! Great advice (as usual) - I was lucky enough that you gave me some advice when we worked together (for a brief while) and it definitely helped me.

One thing I learnt from someone else is how to cost when using materials you haven't paid for, which I do a lot. So if I'm using old books, I use the rule of "£30 of stock made in an hour" - ie if something I'm making with recycled stuff I haven't paid for takes me an hour to make, then the retail value is £30. The wholesale price can then be £15, which covers my time and a bit of profit.

Dolly Cool Clare said...

I've found in general that most regular shops will want anything from a (gasp!) 230%-250% mark up on your wholesale price....worth bearing in mind when doing your costings....

Sarah said...

Great tips! This is something so many new small businesses struggle with I think.

Love the jewellery too!