How To Price Your Items and Build Shipping Costs Into Them
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So you’ve created a great product, but what do you sell it for? Deciding what you are going to price your item at is one of the toughest decisions to make when you sell online. Is this too high? Too low? Who knows! Well, this is my step by step process on how to price your items correctly.
HOW TO PRICE YOUR ITEMS
-First, you are going to search for your item online. Search Google, Etsy, Amazon etc. Write down what other people are selling their item that’s similar to yours and then find the average.
-Second, you are going to write down how much it COSTS you to make that item. This includes the materials, a % of the tools used and even the envelope and business card. If you want to BUILD SHIPPING INTO YOUR PRICING you’ll put your shipping costs into this number. Also, write down how long it takes you to make and pack this item.
-Third, you’re going to need to find out the average amount you pay in taxes. So I live in MD and it typically works out that I pay 30% in taxes combined to federal and state with my current income level (this number changes by state and income level- research yours or ask your CPA) so we will use this for the example.
Now let’s calculate. If you use Etsy you’ll want to use THIS calculator. THIS one for eBay. THIS on for Shopify. THIS one for PayPal. THIS on for Stripe. (The last three ONLY account for fees and you will have to do some of your own math. I only use the Etsy one since typically they charge the most fees and I will just end up with more of a profit if I sell at the same price elsewhere.)
Okay so taking your work from the steps prior you will fill this out. Let’s say I’m selling a big sticker pack. So box one is the median price I found that my competition is selling their sticker packs for which was 26.99. However, I built the cost of shipping into my price which is about $3 country-wide so I added that in. I don’t want to “eat” the price of shipping but I want my items to include shipping so I have less abandoned carts. then since they aren’t paying any additional shipping I’ll set the next box to $0. Now my item costs $5 to make but $3 to ship so my total cost for this item is $8. Now, this makes my profit $19.14. But I’M NOT DONE. I still have to pay taxes so I'm going to subtract 30% from that number since I typically pay 30% in taxes. This number is $5.74 so I subtract that from the $19.14 which makes my take-home pay $13.4. Also, I like to take this moment to double-check myself if I would put stuff on sale. So If I ran a 10% off sale I’d make $11.47.
Now with this same example say it takes me 15 minutes to assemble, pack and fulfill one sticker pack order. That sort of means I make $53.60/ hr selling sticker packs. HOWEVER, you should still consider the time it takes to advertise, market, create and build a listing for one item which will eat into this paid by the hour time.
UH-OH WAIT
What if my final price was only $1-$5?
-You either need to raise your prices, lower your costs or bulk make your items to save time. Maybe also consider selling digital items to make a residual income to add to your physical item income so you can continue to make what you love for profit.
What if my items are too expensive?
-If your items don’t sell at this price, lower them a little bit at a time until they do sell.
How do I price my items if they are international?
-Add an average shipping price into the shipping section minus what you already built-in. Say that it costs around $13 to ship around the world. You already built $3 into this example - only charge international buyers $10 for shipping.
Should I offer a discount to people who ask or when people order multiples?
-Do you buy more at Walmart and expect to pay less? No. Do you work less when people buy more? No. This answer is simple - don’t give handouts.
Should I offer bulk discounts for a business that wants to resell?
-I typically price at cost plus 20% so we can both make a profit.
WHEN SHOULD I RAISE PRICES
It’s simple to know that if your shipping costs go up (they do yearly) or your product cost goes up you need to change your price, but there are other times to charge more too. If an item is customized or someone wants expedited shipping or rush making times you need to always charge a fee. Every year after the holidays you should raise your prices a few cents to a few dollars to account for inflation. If you start to dominate your niche/ competition/ market space you can charge more too!
In the end, remember this is your business. Charge what you think your product is fairly worth. If you have a perfect and exquisite item ou should price it that way. If your item has flaws or could be improved you need to price it that way. It’s also okay if you cannot afford your own items. Some of us sell truly luxury things and they require a higher price tag.
