I have never used Shopify, but they have a collection of articles about how to set the price for your products that touches on some of the things I'm discussing. I'm sharing what I learned in my words because when I read some of the resources like theirs I didn't see how it applied to what I was trying to do. And their presentation might help you more than my discussion of it. This is why I like to present ideas and sources. I want us all to succeed! Anyway, here it is.
So far we've talked about how to set the right price for your created item that takes into consideration your Cost of Goods (what it costs to buy the actual goods used to make what you're selling), your Value and Worth (making sure that you are compensated for your time and effort so that you can keep creating your art, and your Overhead (the expenses that make up what it costs to operate your business that are beyond just the cost of goods for each item).
Now we're going to talk about finding and maximizing the Profit Margin.
Tip #1 - Get yourself a good tool
When I was managing the Boutique, and before I was able to use a real retail point of sale, I found this online tool for calculating profit margin. According to the explanation on that page:
Net Profit Margin = Net Profit / Revenue
Where, Net Profit = Revenue - Cost
I love that the e-commerce site through Wix, like all good retail Point of Sale programs, has this formula built right in. Here is an example I created just to show you how it looks for me. As you change the cost of goods and/or the price you can see the profit margin. This just helps you see how much room you have to adjust the cost down, or if you need to increase the cost (or find a supplier who can give you a lower cost of goods).
Tip #2 - Research The Market
If you want to make sure you're pricing your creations correctly, it is a good idea to poke around on the internet to see what other people and places are charging. If you do a general Google (or other search engine) search, and you might need to select "Shopping", you will be able to see what similar items are going for. It helps if you have a realistic idea of how your creation measures up against the other items you see. If what you've made is a lot nicer, you can price the value higher than what you see. If what you've made is in the same ballpark, you can start with a price that is similar (and takes into consideration your costs and profit margin). If your product is not quite as good as what you're finding, just know you need to price it down a bit if you want to hit your target.
Please don't think your products need to be perfect before you can sell them. Yes, they need to be quality, they need to work, they need to not have major problems or lack structural integrity, but even corporations don't make things that are perfect. As you improve over time you will be able to charge more for your work. In the meantime, an honest assessment will help you move product and keep having the opportunity to create your items to sell.
Tip #3 - Make it personal
If there is something about you that can increase the value of your item, it's not exploiting yourself to make it known. Are you the first person in your family to go to college and you're selling your creations to help pay for it? Share that. Are you creating with a disability? Woman or Minority own business? LGBTQIA+Artist? Trying to raise money for, or donating a portion of your profits, to a cause? Especially over the last few years, we want to know.
Customers want to know who you are, and where our money is going. I like to "vote" with my money. I want to support people and causes that mean a lot to me. I'm not the only one. If something is a genuine part of who you are and what you believe, there's no reason to hide it.
As an example, over the summer of 2020 I was part of the network of people who were making masks. One group I was in would get regular requests for masks to be sent to hospitals for the office staff, or so that the nurses could extend the life of their N95 mask - or, when it was really bad, their 1 surgical mask they might have to wear for days at a time. I sold masks, and for every mask that was purchased, I donated a mask. It was a very real (and surreal) time, and I wanted to be able to do the most I could to help. I am incredibly grateful to everyone who bought masks and allowed me to keep making and donating masks to those who needed them.
If you share things like this with your prospective customers, make sure you are being very honest. If you aren't, it will eventually come out and there will be repercussions. But when you share who you are, share why you're doing what you're doing, you can connect with your customers and they will be happy to help support you while being able to purchase your special creations. It's so much better than buying mass produced items by impersonal corporations who are exploiting their workers.
Tip #4 - Be flexible and pay attention
Sometimes a thing won't sell because you've got it overpriced. Sometimes it won't sell because you've got it undervalued. When you see something not selling, and you are paying attention, you can adjust. By using your Profit Margin calculator you can make sure you keep within the profit margin you are targeting.
I've been examining this for some items I've been selling. For some of the items I have been unable to find anything exactly like them to gauge my price. For some, I'm confident that the price is reasonable, but the market I'm in is not connecting to it. It's time to adjust some of the prices and, combined with a new display arrangement, see if I can get more traction with them.
The more tuned into your customers, the more swiftly you can pivot and meet the market where it is.
Tip #5 - Get to selling!
There is a lot you can do before your item goes on sale - hunt for great materials with low cost of goods, choose to make things you enjoy making and that allow you to make enough of your creations to make your profit goals, keep your overhead low, and connect to your audience, and use the right tools. There is also a lot that we all have to learn while we're feeling our way through the process of just getting started. If you're brave enough to do these things, it's time!
Whether you're ready to jump in with both feet, or just start dipping. your toe in the water, You've got this!
Please share your journey
I would love to hear about you and your creations - and if you've learned something in these articles, or want to contribute something you've learned that I didn't cover, please share! We really are all in this together - and we aren't in competition. We can all win!
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