The True Cost of Selling on Etsy

>> 18 January 2011

I've been sitting here doing some math and realizing I often undersell myself on Etsy just because I price things on what I'd be willing to pay for them. According to all I've been reading, this is just plain foolish.

Before I share with you how I got my bearings on what to charge, first you need to know a little bit more about what I was thinking (which honestly, I really wasn't :).

In poring over Etsy's highly informative members blog called Storque I've come to realize that I need to be more mindful in taking into account my true costs and that includes overhead costs such as Etsy and Paypal fees as well as packaging costs. I also need to consider the time involved to prepare an item for listing which includes photography work and description writing.

It Adds Up!

Any Etsyan will tell you it costs $.20 per listing plus 3.5% of total sale to list an item on Etsy. It also costs $.30 per transaction and 2.9% of the transaction amount to make your customer's life a little easier by using PayPal.

So remember to add the combined costs per listing/transaction of $0.50 ($0.20 + $0.30) plus the 6.4% (3.5% + 2.9%) when figuring out your price for a listing.

That's $.50 + 6.4% in costs and fees to list your item so use this equation when factoring the price!

These costs ain't bad if you're doing all your sales on-line and don't have to worry about renting out a brick and mortar space or sales booth but they do add up.

It's important to keep in mind that these figures are only the base line. They don't take into account whatever it cost you in purchasing supplies, transportation costs, interest fees if you use a credit card to leverage creating items for sale, tools and equipment, taking photos, creating listings or your work hours.

And let's talk about shipping for a minute: I usually charge the true price of shipping plus whatever it costs for the packaging. That includes the manilla envelopes, packing bubbles, boxes, big juicy 1/2 sheet shipping label, tape, business card and promotional items, packing slip, etc. If it's an awkward number of just a few cents, I'll round it up to make the math easier for me in my head but I don't aim to overcharge on shipping.

One Friend's Pricing Method

I have a friend who manufactures high quality silk and wool scarves that retails at finer department stores. She runs her business out of the California Mart in downtown Los Angeles. The venue is home to hundreds of wholesale showrooms for fashion, textiles, gifts and home decor. She told me her pricing method was to take into account all her true costs plus her hourly wage which she wouldn't tell me but she threw out the the imaginary amount of say $30.00 per hour. That includes developing and creating the item, as well as preparing it for listing and ultimately handling it for shipping.

Then she said to take all those numbers: the itemized costs, the hourly rate and add it all together and THEN multiply that sum by three to come to a price. That's right: triple the number!

While I don't do all that, as I mentioned from the start, I also undersell myself, too. Like I said, I usually price an item to what I'd be willing to pay for it. I also take into consideration that my sales are not my lifeblood when figuring out what I hope is a fair price. I mean, the stuff I put up on Etsy is not my business per se. It's an avocation. So I don't have other things to consider like employees, insurance, licenses, taxes, etc. But minimizing my production efforts and comparing them to a successful apparel manufacturer is self-defeating. I need to work smarter!

Presenting: The Etsy Fee Calculator

The Etsy Fee Calculator by Ryan Olbe
Determining the true cost of your work and what to fairly charge a customer can get complicated -- yes ma'am it sure does. I got kerfuffled. Doing math is not my idea of fun. But after spending hours freaking out over the numbers, I found this really great tool called the "Etsy Fee Calculator" by Ryan Olbe. It's pretty cool and it made my life so much easier.

The Etsy Fee Calculator is a free web-based tool can be used to easily calculate Etsy fees and PayPal fees for any amount. It also supports multiple quantity listings and has a special field for your "cost of materials".

I especially like the Reverse Fee Mode feature. This allows you to enter the amount you want to receive after fees and the calculator can tell you what price you would need to sell your item for or how much to charge for shipping & handling, to receive that amount.

This Etsy Fee Calculator is just so super awesome that I had to share it. Now you can quickly determine your what your Etsy fees would be and how much profit you can make from selling an item. That said, most of what I sell on Etsy was initially created out of the sheer joy of making. It's fun and that's why I do it! But I'm interested to know how other crafters determine the price for what they sell whether it be on Etsy or otherwise.

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