Hi All, I have been doing a small side business making leather accessories for women for about a year. I haven't put too much time into it but without virtually any marketing or a website I have been making sales and it has been profitable since day 1, which is good.
Things are starting to get more serious and I'm doing a craft fair coming up and needing to hammer out pricing. I thought I wanted to factor in wholesale into my pricing structure, but when I do that my retail prices become very expensive.
I exist in a market where other people are selling handmade leather bags similar to mine for $300-$500. I'm making my products by hand, using all american materials—which I think is something that sets me apart from other people who are usually not doing anything 'made in usa' (I can see why... it's very expensive.)
My materials for a bag cost me about $60-$70. It takes about 5 hours to make a bag, and I would like to charge $12/hr as I think that's a fair wage if my project takes off... so that's another $60 into the bags. Not factoring in the cost of shipping, and other things (bags if I'm selling them at craft fairs, buying new needles every once in a while, etc.) what I was doing to come up with a number is 120+50 for profit = $170 for wholesale price, *2.2 for retail = $374. This seems really high to me, and to some people I have talked to about it. I think my bags are nice, but in reality I wouldn't be able to afford one at that price. I feel like this a common problem that people face when making handmade stuff, especially leather.
For clarity here's what goes into a bag: I have to cut the leather bag and straps, puncture the holes to stitch it up, stitch the handles on, stitch up the bag (all of the stitching is done by hand), finish the edges, and oil it... some of my other products I add in some tooling detail and even hand-dying the leather. Sometimes even hand-braiding is required.
Do I NEED to factor wholesale into my pricing structure? Am I shooting myself in the foot if I don't? For clarification, my half-baked plan is to create a really nice luxury-style website to sell my leather goods (I do this for a living and know how to code, so this isn't a cost to me, really.) and sell through the site year round, then possibly do 2-3 craft fairs a year, where I will find out in a few weeks how much I can make from those. I've projected about $4-5k per show, but I haven't done one yet. I was also considering doing wholesale on a limited basis, with stores that ONLY meet the image of my brand. Such as luxury handmade good stores, and cooler fashion boutiques that are more in my price range. I've gotten 5 wholesale inquiries without much marketing, no website, but they have mostly been lower end boutiques or vintage stores that probably don't fit the price range I think I would end up being in... so I've declined for now.
For now this will be a side business—but when I see the number $374, in my head I think of all the big ideas I could accomplish sooner with that profit margin if I can get people to buy, but some other people see it as a price too high to be worth it. Then again, I live in NYC where people have lots of disposable income and want luxury. $374 is also much higher than the $145 I was charging for the bags when they were made out of cheaper materials (which I realized I was making basically no money off of what I was doing, because it still took 5 hours to make a bag even if the materials were cheap.)
Thanks for your time and input!
Things are starting to get more serious and I'm doing a craft fair coming up and needing to hammer out pricing. I thought I wanted to factor in wholesale into my pricing structure, but when I do that my retail prices become very expensive.
I exist in a market where other people are selling handmade leather bags similar to mine for $300-$500. I'm making my products by hand, using all american materials—which I think is something that sets me apart from other people who are usually not doing anything 'made in usa' (I can see why... it's very expensive.)
My materials for a bag cost me about $60-$70. It takes about 5 hours to make a bag, and I would like to charge $12/hr as I think that's a fair wage if my project takes off... so that's another $60 into the bags. Not factoring in the cost of shipping, and other things (bags if I'm selling them at craft fairs, buying new needles every once in a while, etc.) what I was doing to come up with a number is 120+50 for profit = $170 for wholesale price, *2.2 for retail = $374. This seems really high to me, and to some people I have talked to about it. I think my bags are nice, but in reality I wouldn't be able to afford one at that price. I feel like this a common problem that people face when making handmade stuff, especially leather.
For clarity here's what goes into a bag: I have to cut the leather bag and straps, puncture the holes to stitch it up, stitch the handles on, stitch up the bag (all of the stitching is done by hand), finish the edges, and oil it... some of my other products I add in some tooling detail and even hand-dying the leather. Sometimes even hand-braiding is required.
Do I NEED to factor wholesale into my pricing structure? Am I shooting myself in the foot if I don't? For clarification, my half-baked plan is to create a really nice luxury-style website to sell my leather goods (I do this for a living and know how to code, so this isn't a cost to me, really.) and sell through the site year round, then possibly do 2-3 craft fairs a year, where I will find out in a few weeks how much I can make from those. I've projected about $4-5k per show, but I haven't done one yet. I was also considering doing wholesale on a limited basis, with stores that ONLY meet the image of my brand. Such as luxury handmade good stores, and cooler fashion boutiques that are more in my price range. I've gotten 5 wholesale inquiries without much marketing, no website, but they have mostly been lower end boutiques or vintage stores that probably don't fit the price range I think I would end up being in... so I've declined for now.
For now this will be a side business—but when I see the number $374, in my head I think of all the big ideas I could accomplish sooner with that profit margin if I can get people to buy, but some other people see it as a price too high to be worth it. Then again, I live in NYC where people have lots of disposable income and want luxury. $374 is also much higher than the $145 I was charging for the bags when they were made out of cheaper materials (which I realized I was making basically no money off of what I was doing, because it still took 5 hours to make a bag even if the materials were cheap.)
Thanks for your time and input!
via Small-Business-Forum.net http://www.small-business-forum.net/starting-your-business/10229-pricing-handmade-items.html
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