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Topic: Underpricing by competitors  (Read 1836 times)
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craftcobbler
« on: November 27, 2011 08:27:11 PM »

I recently starting sewing the microwaveable potato bags. I bought the batting in bulk - a huge roll to save on cost but had to buy the fabric by the yard. I did just now find a wholesale fabric group on FB so will be able to purchase the fabric at a better price.

When I price an item, I include everything - this is a passion for me and a business - so cost of time, fabric, batting, thread, packing materials, etc, is included in the price.

At a recent craft fair when I first sold the bags, I sold a few, among many other items. But, I received one comment that bothered me. "I bought one similar to yours for $5 at a recent craft fair." She did buy the bag but it still bothered me. I knew who she was talking about too. I have seen the woman selling. She undersells everything. She works at a JoAnns an hour from where I live and she sells every item she makes almost exactly at cost of materials. I cannot do that with three little boys to provide for. I explained to the woman what is included in my cost. Then another lady loved one of my dog collars (a top seller for me at every fair and online - I can barely keep up with making them!) and was preparing to buy it. I guess she did not read the price tag and price sign. When she asked me what she owed and I said $15, she said "WHAT? I would pay five dollars and no more." I was actually offended and did not even bother explaining to her what the price includes. I felt like saying "I don't work in a sweatshop and mass produce in a third world country" but obviously that would not be appropriate and would not be good customer service. I smiled to her and said I'm sorry you are not happy with the price. It is a well made collar and it is worth the cost. I know you would get years of use out of it for your pet. She did not buy it.

$15 includes cost of supplies and my roughly 25 minutes to cut, iron, sew, and iron again. I strive to make $15/hour as a crafter and I think that is completely reasonable. I made much more than that in my previous brick/mortar career and my mother in law who is from Europe thinks I under charge.

Anyone else have similar experience?
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Chris in VT
« Reply #1 on: November 30, 2011 04:51:12 AM »

Everybody who does shows has this experience. Everybody who is in business has this experience. It's called competition. Get used to it.

At the small school fairs a lot of exhibitors are just doing this for extra money or to just sell their hobby. And they will always have lower prices. You need to find better (higher priced) shows that draw a better customer base.

And we all have the customer who is basically a Wally World shopper and doesn't understand the idea of handcrafted. Ignore them and just smile.
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There's NOTHING at a craft show, or on Etsy, anybody NEEDS. NOTHING.
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jamanarchy
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« Reply #2 on: December 19, 2011 07:22:45 AM »

I agree with the above. Smile and move on!

We got some of this at our last show as our biggest competitor is Amish made jam. Some people do not understand that much of the Amish made jam (at least in my area) is not "homemade" it is mass produced. So of course they can sell their jam for half of what I sell mine for.

At the end of the day the budget shopper is not my market and I know that. So I just smile and move on.

I will say though that trying to put an hourly rate on craft items is about impossible and you will drive yourself crazy with that mindset.

Kay
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Chris in VT
« Reply #3 on: December 19, 2011 08:29:52 AM »

I will say though that trying to put an hourly rate on craft items is about impossible and you will drive yourself crazy with that mindset.
I've been doing shows for over 30 years and never figured in my time. If I can't deduct it, I don't add it.

Besides, nobody ever adds up all the time they spend. Nobody. They just add up the time they actually spend making and never add the time purchasing, shopping, packaging, or the time spent doing the show itself.
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There's NOTHING at a craft show, or on Etsy, anybody NEEDS. NOTHING.
www.shadypinestudio s.com
craftcobbler
« Reply #4 on: December 19, 2011 09:03:17 AM »

I only figure in my time to craft it and the group of crafters with whom I have a good relationship here all figure in their time. It is both a passion and a source of income. I don't know why either of you feel you cannot incorporate labor costs into your item cost. Further, my sister owns her own business. Five years after starting, she is very successful at it and she incorporates her labor time into cost of the item. People have grown to respect her product and for a good product, they are willing to pay her for her time. After all, isn't your time valuable? I'm sorry if you don't agree but I would pay more for a hand crafted item knowing that my money was helping support an American family.

I did smile and move on. I was just asking about who else had the same experience and what you did. I didn't intend to make myself come across as a money hungry person.
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jamanarchy
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« Reply #5 on: December 19, 2011 09:41:36 AM »

Gosh I hope you are not upset by my post as for sure that is not how I meant it.

As to getting paid per hour to do crafts. I have been in this industry 25 years. It doesn't work. You may fool yourself into thinking it does but it really doesn't. What you should be doing is making a profit off materials. Now how much profit does take into consideration how long an item takes or how detailed it is.

But if we all truly set an hourly rate much of our stuff would be so high priced you could never get enough money for it.

Like said above you could never really account for time spent picking up materials, marketing, website work, time to ship a package etc etc.

Crafting will never be an "hourly job" that is why so many of us love it.

I find it is really hard for people new to this to get past the hourly mindset. Once you do though, you will find much more freedom and usually higher sales.

I explain more in depth in my blog. I hope its okay to put a link. If not someone can take it out and let me know.

http://www.kayslistofworkfromhome.com/2011/10/pricing-craft-items-to-sell.html
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craftcobbler
« Reply #6 on: December 19, 2011 09:58:58 AM »

I am so happy with what I do. I love every minute of it. It does not feel like a job and it does not stress me. I guess I don't understand the issue but I will read your blog. Like I said, my sister has been doing this for five years - okay not your 25 - and she's very successful in the US and with her international customers. She has plenty of freedom with what she does and I feel like I do as well. Again, I'll read your blog post. Thank you for posting it.
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craftcobbler
« Reply #7 on: December 19, 2011 12:35:28 PM »

I read the blog post and comments posted. Good insight. Here are my thoughts:

I'm still not going to change how I do things. I have never once lost money at a craft fair and I include cost of booth rent and gas in my involved cost. I always triple to quadruple my craft fair fee at small events and make way more than that at larger more prominent fairs that carry more traffic. I also have garnered quite a group of customers who pretty much look me up at every event I do.

My dog collars - $15 - are pretty much priced the way most of my colleagues price them both at fairs and on Etsy. Actually pretty much everything I sell is priced comparably to other sellers in the virtual world and those at craft fairs. I've only had Just this month alone at fairs, on Etsy, and on my own website, I've sold so many dog collars, and other items, that I completely funded Christmas for my three children and gifts for my hubby.

Sure my dog collars and other items that are under $20 sell the best. Do I sell my $40 or $60 purses as often? No - probably ten a year. I'm okay with that. The custom bag I just sewed and sold for $75 - did I really make that much money? No. It was a completely new pattern I drew that I'd never done. But I gained a loyal customer who'd asked many crafters to custom design it for her and all declined. So for me the profit or lack thereof was outweighed by gaining a customer.

I looked at my price sheet on Excel which is a formula that I wrote up to incorporate my costs and time. I took out time and tripled cost like you said - almost everything was the same price I currently sell it for and many things were more expensive. So in the end, I'm not really doing anything wrong in my pricing. I have only had those two comments about two items in an entire year.
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jamanarchy
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« Reply #8 on: December 19, 2011 12:48:51 PM »

Hey if its working for you then for sure keep doing it!

Most of the time the crafters I meet say "oh my gosh I am only making 2.00 per hour!" Or like you they say they make 15.00 per hour but cant sell anything. So I say kudos to you if you can make 15.00 an hour and still sell things.

I still think though it would be impossible to really know. Especially if you are at craft shows. Because is your hourly rate including that? Or just the time to make the item? See what I am trying to say? Our last show was 3 days from 8 am to 10 pm. Long long days. I could try to figure an hourly rate which would be a nightmare. Or I could just take what the show cost me, the cost of making the jam sold and subtract sales and then I know what I made.

When it comes to tax time most of us will use this method. Once you do your taxes you will see what you really made or did not make.

For me I am always making several batches of jam at the same time. So I might make 4 batches and then hop on Facebook  Smiley for 30 mins. But thats the beauty of working from home.

Imagine being a retail store owner and trying to figure out your hourly wage. Its much the same concept in crafts because we all do have a retail store especially if you sell online.

I have never lost money on a craft show but see a lot that do. I hate it for them. Especially in this economy when people are trying so hard to make extra money.

It always shocks me when someone asks me to help them price something and they have no idea of what it cost them in materials to make the item.

Anyway this is not meant at all personally. I just love talking about pricing and the business end of crafting.
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craftcobbler
« Reply #9 on: December 19, 2011 01:06:08 PM »

Oh I see what you mean on the craft fairs. No. That $15/hour is strictly crafting time in prep for a fair, or an order, etc. I do not calculate my time at the fair. Then I would really make no money. And I timed myself - no distractions, nothing, what's the quickest I can make this type thing. Does it often take me longer? Oh man yes. But that's the nature of having three children ages 2 and 1/2 and twin 10 month old boys. So I have plenty of distractions when I typically craft. Or I craft while watching TV, because I'm sure like you, I can't just sit and watch TV!

And you are completely right about one thing - even if I wasn't making $15/hour, it would still be worth it. Because now, I don't have to get up at 5 a.m. every day, get all three babies up and out of the house to the sitter and to teaching by 7. Home at 6 and stay up until 1 or 2 a.m. to grade lessons and plan. Oh it's worth it regardless. I am grateful I can make the money I do at home. I don't want to ever go back to a brick/mortar type job - oh unless it's to work in a fabric/craft store. Now that I'd love! Funny enough several crafters I know do just that! They craft and work at our local JoAnns or Hobby Lobby or our other local mom and pop sewing shop.

Actually, I think I'd like going to fairs even if I didn't make money, know what I mean? They are FUN, for me anyway. I LOVE LOVE the people I meet, both customers and crafters. Several of my closest friends are crafters I met. I never would have met them otherwise.

And of course I could never afford to figure in the cost of hosting my own website into my item price. That would be, as my ten year old nephew put it, "insanity in a can." (Gotta love what kids say...)
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« Reply #10 on: December 19, 2011 01:31:48 PM »

I so love it when women can do this and stay home with their kids. Over the years it helped me stay home with 4! Best thing I ever did.

There are so many advantages to working from home. Working in jammies is one of my favorites.

I also love the shows but that last 3 day show wore me out I have to say. And I had help. Its so fun to get out and talk to customers and other crafters etc. The jam is a ton of fun because we give out samples so its a lot of fun to hear what people say when they taste it.
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Chris in VT
« Reply #11 on: December 20, 2011 04:36:04 AM »

This type of discussion, whether or not to charge for your time has been going on since shows first started.

If I have a shop I would have to hire people.

I would need a purchasing agent. S/he gets paid an hourly rate.
I would need a person to receive the product. S/he gets an hourly wage.
I would need someone to stock the shelves. S/he gets an hourly wage.
I would need someone to drive the truck to the suppliers. S/he would get an hourly wage.
I would need a salesperson. Hourly wage or comission?
I would need a bookkeeper. S/he would get an hourly wage.

But if I have a shop, would I take all these things into consideration?

Nope.

I would just keystone everything and just double the wholesale prices. Then deduct those costs of running the business, and what's left over is mine.

But we can't do that. But if we only charge an hourly rate for one portion of the business, and not all the aspects, we're cheating ourselves. And that's why I don't charge an hourly rate.

My way of doing business has been to first find the market value of my product. Then I find the least expensive and most time efficient way of making it, thus increasing my profit. Currently, my profit margin is around 900%. I can make around $3,000 worth of product in 30 hours, or 3 days. That's how I'm able to do 40 shows here in the northeast USA per year.
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There's NOTHING at a craft show, or on Etsy, anybody NEEDS. NOTHING.
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craftcobbler
« Reply #12 on: December 20, 2011 07:20:36 AM »

Chris,

For your product, that may work. For mine it wouldn't. So I do not think anyone is really 100% right. Different strokes for different folks right? That makes the world go around. If we all did things the same way, it would be boring. And since this is something

I work to be time efficient where possible but I also work at a pace where I know I won't make mistakes on stitching an item. Of course I also look at market values. As I've said before, my prices match almost all other colleagues in my field on Etsy and most at craft fairs. Only those two times mentioned have I encountered problems.

In sewing, there is no way humanly possible to make a 900% profit unless I have people in a third world country sew my products and pay them next to nothing. That is just not feasible. Kudos to you for getting that profit margin. I don't know anyone here who can do that. Your product is pretty different from any one else I know though and creating it is probably a much different process than mine.

Maybe another reason my way works is that, no offense, I view what I sew as useful. I think people do need them. I need them. I absolutely needed a better diaper bag. So I sewed one. Then I took one to a craft fair and sold custom orders of them. What mama doesn't need a good diaper bag? I needed something so that I wouldn't constantly lose my flashdrive and chapstick. So I designed a cozy for them. It's one of my most popular designs. It's functional. Dogs need dog collars so I sew them. I promote my products as useful things - functional and beautifully crafted. If I went into my craft fairs as nothing I have anyone needs, I wouldn't sell. Again, that isn't meant to be offensive but I could never have that mindset and be successful at what I do. I am glad you can be with a 900% profit margin but I think that is rare for a crafter.
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Chris in VT
« Reply #13 on: December 21, 2011 04:48:47 AM »

I have the statement that there's nothing at any show anybody needs because that's what an old timer told me at the very first show I did in 1980. It has kept me grounded for all these years.

Every purchase at a craft show is an impulse purchase with disposable income.

People need food. People need shoes. People need transportation. Crafts are nowhere near on the list of needs. So it's up to us to convince the customers they want what we have. And we do that by having an attractive display and an engaging demeanor at the show.

Like me, you have found items that are useful. And there is definitely a need for those items, but  do the customers need your versions of them? No. Just as the customers don't need my version of my product.

But if you're the only one selling what you make at the shows, naturally you will do well, as that's the secret to a successful show. Have what nobody else has. The last thing any show needs is another jeweler.
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There's NOTHING at a craft show, or on Etsy, anybody NEEDS. NOTHING.
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« Reply #14 on: December 22, 2011 06:49:28 AM »

There is more gray area these days between need and want. How many folks living in this country limit themselves to food, clothing, and shelter? I personally "need" more than that, and so do others. You can call it "want" if you like, but it matters very little. Back to the pricing thing, though, unless you have a one-size-fits-all product like Chris in VT, you have to figure out prices you can live with, based on 1) the cost of materials, 2) how much will it take to make you comfortable transferring ownership of a given item to a buyer, 3) how much effort you will put into marketing (the more effort, the bigger the price you can have), and 4) how ambitious your future plans are (wholesale deals, manufacturing). Come to terms that a business owner works on salary and not on hourly pay. You will never earn hourly pay. Never, ever, ever.
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