Thursday, September 10, 2015

The Real Price of Handmade



It has happened to all of us. We go to a craft fair and spot "THE PERFECT" thing-a-ma-bob.

"Oh it is perfect!" "It is so beautiful!" "I want it! I want it! I want it!"

Then you glance at the price tag and almost drop it!

You think "What? Why is this so expensive? I can get something similar at Walmart."

Lets clear this up right now, yes you can find a cheap, low quality thing-a-ma-bob at Walmart any day of the week. That is not why you went to the craft show. You wanted to find that perfect, handmade, high quality thing-a-ma-bob. Not the same one that twenty of your closest friends will buy from Walmart next week!

But that does not tell you why it is so expensive, does it?

Well I am going to take a minute to try to break down some of the costs involved in pricing for craft shows. Lets look at this Labradorite Pebble Necklace that is marked $75.00.

https://www.etsy.com/listing/197627790/labradorite-jewelry-labradorite-beach?ref=shop_home_active_9
The entire piece took me about 10 hours to make, that includes 6 hours to cut the stones used to make this piece.  So if you break down the price of $75.00 over that 10 hours, you will see that I made $7.50/hour. Less than minimum wage.

Opps, we forgot to subtract the cost of the raw materials used to make this piece. To make this simple, lets say I have about $15 of raw materials in this piece (that is pretty close, I think it was somewhere like $17.34). That would bring my hourly rate down to $6.00/hour.



I also have to pay sales tax on the final price of the piece. I include it in the total price to make it easier during check out at a craft show, since I really want to offer you excellent customer service and not make you wait for me to calculate the tax at the show.   In my state the sales tax is 6.75%. So on a $75.00 piece,  that is $5.06 that goes to the government's pocket, rather than my pocket.

While I am looking at the total costs, I also need to account for my operating costs. This includes items like marketing materials, bags, tags, displays, tools, electricity, and transportation costs. All of that has to be factored into the prices.

According to a paper by Sageworks.com, the average overhead for a private retailer is approximately 22% of their sales. So for this piece that would be $16.50 in overhead.



So where are we on hourly rate now? Lets see.....

$75 (price) -$5.06 (tax) - 16.5 (overhead) - $15.00 (materials) = 38.44/10 hours =$3.84/hour

But there is one more piece of the price puzzle. The show fees.

You may not realize it, but artisans and crafters have to pay to sell at craft shows and fairs. A great show can run upwards of $1000/day. However you can find a relatively good show for about $100/day in my area.

To cover the costs of the show, the fee is split among each item sold. If I sold twenty items during a show, each item sold covers $5.00 of the fee.

So my final per hour cost would actually be $3.34/hour. Not close to minimum wage or even a living wage (currently touted as $15/hr).

If I were to charge a living wage to make this, it would actually cost $214.89. Wow. Was that $75 really that expensive after all?



4 comments:

  1. Oh so very true. I had to give up the craft shows as they were getting just too expensive and I found that most of the vendors at these shows were doing the same craft that I was . . . handcrafted jewelry. :( True there were many different forms of it but to the buying public, jewelry is jewelry.
    I think what is really annoying is that I'd see stained glass artists that would have a display of jewelry that they had crafted using pieces of stained glass; potters and ceramic artists would have a line of jewelry that featured little pieces of their ceramic work; wood carvers made little wooden pendants, dangles for earrings and even cuff-links. So it's no wonder that the public feels like there's jewelry everywhere and, unfortunately, when there is too much of something it does tend to devalue it.
    I think your labradorite pendant is lovely and if it were sold in a jewelry store it would be priced at least around the $200 to $300 mark. Now if we could just educate the public. :)

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    1. Thank you. I understand what you are saying about other types of artists making jewelry and selling it at shows. I have encountered that as well, but I choose not to get upset about it, as my ideal customer may not be the same as the one who shops in their booths for jewelry.

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  2. Thank you April for speaking for the "Handmade Crafters'". My friends always tell me I am underpricing my items - your assessment of totals is completely correct. You did forget to mention that on top of all those fees for materials, time, etc., are the fees that Etsy charges, then the Credit Card or Paypal fees. So in reality, I often am only making $3 - $4/hr - Isn't minimum wage $15/hr now?
    Thanks for speaking for all of us!!

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  3. What a wonderful and enlightening post, April. All of us who create things to sell understand this. I wish I could hand this out to everyone who comes into a show and make them read it right there at the entrance! LOL! Will share from here.

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