Pricing Your Jewellery

Selling your handmade jewellery is a good way to cover costs, making your hobby support itself. You may even want go further and build a business from your jewellery making. It is possible - not always easy – but definitely possible! Jewellery has always been one of the most sought-after and prized luxuries available.

All successful selling starts with good pricing. Without sustainable pricing, you will have trouble maintaining and increasing sales. The aim of this article is to show one way to determine wholesale and retail prices for your work. This should allow you to sell your work directly or through shops and galleries, and still be in profit.

There are probably as many different methods for pricing as there are beads in your bead box. As with every other technique in jewellery-making, it is best to try out various methods and see what works best for you. I offer this as one possible opinion, detailing methods I have used successfully when dealing with shops and galleries and found to be highly workable.

Wholesale and retail prices

Put simply, the wholesale price is the lowest you can to sell your work to anyone for and still make a profit.

However you sell - be that directly to end customers or indirectly through shops and galleries - you will need to determine wholesale prices for anything you make.

The wholesale price must cover all the costs of making the item. That includes the cost of materials, labour-charges for time spent making it and a little profit on top too. Whoever you sell to, that wholesale price is the absolute minimum you can accept and still be profitable. Any lower and your jewellery-making becomes an act of charity, not of business.

When selling outright or on a purely Sale-or-Return basis to shops, things are usually simple. They buy your work in at your wholesale (or "trade") prices. They then mark those items up to a higher, retail price and sell them on at profit. With outright sales, the gallery will buy your stock there and then at your wholesale. With Sale or Return they still pay your wholesale price, only they wait until the item sells before actually paying you for it. But more on the mechanics of that in another article I think!

If you are selling your jewellery using these methods, then the retail pricing is very flexible.

After all, you have already agreed your wholesale prices with the shop and you know those prices cover your costs and profit. Whatever the shop or gallery then sells your work on for is probably more their concern than yours. They know their customers better than you do.

Retail mark-ups vary - there is no set formula of what that mark-up should be. In my experience most shops want at least a 100 percent mark-up on the wholesale prices. This sounds expensive, but remember all the expenses they have to cover too.

So usually the shop or gallery set their own retail prices. But sometimes they will ask you to suggest retail prices for your work. It is a good idea to work out ballpark retail prices in advance, just in case they ask. The gaping haddock look is never a good one.

If you can offer products that allow for bigger mark-ups, the shops will be far more interested in taking your work. I would always aim in offering shops and galleries work that allows that magical 100 percent mark-up. In the expensive part of the world where I live (London and the South-East of England), that seems to be the bare minimum any shops operate on.

In other parts of the world smaller, or larger, mark-ups may well be the norm, so don't be afraid to ask the purchaser what they feel is right for retail, but never allow them to set your wholesale or trade prices!

Percentage of Retail - Don't be fooled!

Some galleries and co-operatives operate instead on a "percentage of retail" basis. So they ask you to set the retail price for the work, and when it sells they take off their agreed percentage from that figure and pass over the remainder to you.

To my mind this is just another way of doing the same thing. With "percentage of retail" sales, the gallery is still charging the end customer one price (retail), paying you another price (wholesale) and then pocketing the difference.

Here it is every bit as important to calculate wholesale prices first. You need to know what your costs actually are to be sure they will be covered once the gallery has taken their cut. Once you have that baseline, you can set the retail price accordingly so it allows for both your wholesale and the gallery owners percentage comfortably.

In this type of selling, you must always set the retail price yourself - do not allow the gallery to dictate the selling price. Because it is the retail price that ultimately determines how much you get paid. Only you know how much money you need to make.

Don't allow yourself to be confused by the figures either! "Mark up" percentages from wholesale and commission percentages set from retail are not to be confused with each other, for example:

A gallery wanting a commission of "50 percent of retail" is offering the same deal as the gallery wanting to mark up your wholesale prices by 100 percent. Both ways around, the gallery is getting half the money the end-customer pays and you are getting the other half. Yet to many ears, subconsciously at least, the first deal sounds "better" simply because we key into that that lower percentage figure.

So, when dealing with "Percentage of Retail" situations - you still need to understand wholesale and retail pricing. Calculate what you think would be a fair retail price and then see what the gallery's cut would be - does it still leave enough money to cover your wholesale?

If you do your sums based on a retail price double your wholesale - that will usually allow enough to cover most galleries' commissions. Once you have done the sums, you can then see if you can afford to bring the retail price down a notch.

To work out a percentage of retail, divide the proposed retail price by 100 then multiply it by the gallery's commission percentage, for example:

A bracelet is for sale at £20. The gallery wants a 30 percent commission. £20 divided by 100 = £0.20. Times this by 30 and you can see the gallery will take £6.00 when the bracelet sells and you get the remaining £14.00. Is it enough to cover your costs? Is it more than enough? Is it too little?

How to work out wholesale prices

So just how do you calculate these magical wholesale prices for your jewellery designs? Well basically, its the following simple sum:

Materials + Overheads + Labour + Profit = Wholesale Price

But let's look at those different costs in a little more detail.

Materials

It’s easy to work out the true cost of your materials. One method is to simply divide the price you paid for each strand or bag of beads by the number of beads it contains. That gives you the unit price per bead.

When you buy beads by mail order, remember to factor in postage and packing charges. Count up the number of items bought. Then divide the postage and packing charges by this number and add it on to each unit price.

e.g. You buy 2 strands of beads at £1.00 each. The P&P charge on the order was an additional 50p. So each strand of beads has really cost you £1.25 in total. It sounds simple and obvious, but it's easy to forget these hidden costs.

Check also if the prices include any VAT or Sales Tax. Some companies' invoices show prices including the tax. Others will show the tax at the end as a separate charge. If tax is shown separately you will need to factor it in to the unit costs just like the postage.

If you price up supplies when they arrive and write their unit cost on the bag, it is really simple to tot up the materials costs when pricing jewellery.

Overheads or other business expenses

You should also consider the other expenses incurred in creating your designs. This might include internet costs, electricity, travel, renting a studio, craft fair table costs and so on.

This may not be a big issue at first but is something to consider as you expand. You will need to look at all these expenses and find a way of factoring them in to your pricing. For example, imagine you make and sell 100 pairs of earrings in an average month. You might then total all your additional expenses per month, divide that figure by 100 and add the result on to each pair when pricing as a “cost of doing business” expense.

This is one area where you will need to look at your own individual expenses and find a formula that works for you. Just be aware that there are more overheads than just the cost of the materials when making jewellery, and they should be factored into your pricing somehow.

Labour

Many people forget to pay themselves wages for making their jewellery. Or they feel that because they enjoy making it they don’t need to pay themselves. That is fine if your jewellery making stays a hobby, but what happens when you get a large order and need to employ others? You might work for nothing, but your staff won’t! So for each design to be profitable in a business sense, you must include labour costs for the time spent making it.

Working out labour costs is easy. Decide how much you want to earn per hour and then time how long it takes you to make the item. Multiply the hourly rate by the time taken.

Profit

Lastly, when pricing your work you should add on some profit – else how will your business grow?

How much profit you make is your own affair – maybe 10 percent, maybe 100! This is an area where you can be flexible and look at what you think the market will bear. You may find you can add more profit on some items and rather less on others.

But always add on SOME profit, otherwise even with healthy sales you would end up just treading water.

Pricing your direct sales - Why you should sell at retail too!

If you only sell your work direct to the public, you can happily sell at your wholesale prices and still make money.

But if you also want to sell through shops and galleries, remember they will need to buy in at that price and sell your work on at higher, retail prices to their own customers.

So when you sell both direct to the public yourself and also through other outlets, there is the potential for a conflict of interests. The shops and galleries will expect your work to be evenly priced wherever it is offered for sale. They will expect that a customer should pay roughly the same whether she buys from you or from them. Otherwise what incentive has the gallery for backing you as an artist and taking your work? Certainly none if the only thanks they get is you undercutting them with your own direct sales.

In this situation then, it is far better to price your own direct sales also at retail and keep the playing field level. Without that consistency of pricing, you would soon lose credibility in the eyes of your stockists. If they learn you are undercutting them they certainly won’t be placing repeat orders next season! Also, this means you get more profit on your direct sales.

The purchasing managers of most shops and galleries are often very astute on this issue. In my experience they do check eBay and the internet to see if you sell direct online. They can also have a varying knowledge of the local arts and crafts scene and may well hear if you are exhibiting at craft fairs and undercutting them.

And do not underestimate the tactlessness of some people either. There is a small minority of people who, if having seen your work cheaper elsewhere, will take almost absurd delight in telling the gallery owner all about it! "Oh I can get that SO much cheaper from her website you know!" are not words gallery owners like to hear, it makes them appear "greedy" for wanting a fair profit.

How much???

Once you have done the sums you may feel your designs cannot support this method of wholesale and retail pricing. That everything comes out "too expensive"

All I can say then is maybe some other part of the equation needs a re-think. Because from a profitability point of view, those prices are most likely fair and correct.

If you want to sell through other outlets - everyone in the chain needs to make a profit. You cannot sacrifice all of your profit to bring the price down, nor can the gallery. The only way to bring prices down is to look at ways to genuinely reduce costs, but you cannot do away with any one of them completely or just shave numbers off the bottom line until it feels better. Don't be tempted to just casually kick your own profit or your labour charges under the table to lower costs - that isn't being realistic.

If you calculate wholesale and retail prices and they turn out higher than you think is fair, you need to stop and ask some questions.

Firstly - are you absolutely SURE it is too expensive? 99 times out of 100 I see beautifully-made jewellery being totally under priced. Think for a moment what people will spend on a diamond ring. Hell, just think what some people spend on beer every Friday night!

As artists, and especially as women (which most of us are) we are notoriously bad at realising our own worth. We think because we made this, "anyone can do it" or its "nothing". Not so. And not so in the eyes of the customer either. Actually, under-pricing your work can sometimes get you less sales, not more!

Perceived value is a funny thing. If you pay £50 for a bracelet, chances are you will feel it to be far more important, far more special than one you only paid £5 for - even if the components are the same. That is perceived value. If something is priced cheaply, often people think it IS cheap. Cheap and nasty.

If your work is beautifully designed, if you use quality components, if you put your heart and soul into your work, then surely it is worth a fair price?

Evaluate your market

So don't be too quick to assume something is "too expensive". Many times I hear people say "well, my customers would never pay that!". Half the time they are just wrong and people will and do pay it readily. You are selling jewellery, not potatoes! And you deserve to be paid properly for your time and skill.

If it really is that other half-of-the-time though, and your customers really won't pay fair prices - maybe the obvious solution is to change your customers!

We live in an ever-shrinking world. Most of us have email, telephones etc at our fingertips. It is not impossible to seek new outlets or reach into other areas and markets to find clients that will better appreciate our work.

The internet is a fantastic tool for direct and indirect sales. Online stores and eBay auctions can reach new customers the world over. Nearly every large gallery and many gift shops, boutiques etc now have websites and their purchasers are easily contactable by email. In short, as self-representing artists and designers, we never had it so good!

Anyway, that all comes under the umbrella of good marketing skills and is rather beyond the scope of this article. But it is certainly possible with determination and tenacity to expand your market beyond your immediate physical location.

Evaluate your designs!

If you don't want to change your customers and they won't change their spending habits, your only alternative is to modify your designs.

If your design goes through the pricing machine and still comes out "too expensive", then try to make it more cost effective. For example there are excellent plated accent beads and findings that can provide cost-effective alternatives to precious metal components. Or you might decide to use just one focal bead instead of several. Maybe you could use facetted glass instead of semi-precious beads? You get the idea.

There are always ways to modify a design - and to be brutally honest, as rubbish as we girls can be at valuing ourselves, we are VERY good at economising! We are experts at working to budget: we do it with our money, our calories - even with our time and our emotions! It can actually be quite an enjoyable and creative process in itself.

Evaluate your choice of sales outlet - direct or indirect sales?

Finally you may wish to continue with the design exactly as it is, but decide it just cannot support a third party in the sales chain. So you concentrate only on direct sales where you can sell at wholesale prices and still turn a profit. It is better to do this and sell one thing well, than sell two but lose money on them or have to make creative modifications you are not happy with.

You might also consider designing different ranges for different sales venues. For example, you may find sterling earrings sell well in galleries and shops; they are high profit and fast movers. Yet your bracelets work best if you only sell them direct at craft fairs or from your website. Understanding, evaluating and constantly re-testing your market is key to answering these questions.

There is always a solution to the "how much" issue - it is just a case of tweaking things around. You have to match the product with the customer and find the best method of reaching them - direct or indirect.

Why bother?

So why bother pricing correctly? It sounds like a lot of hassle. It can't really matter?

Why? Well, because if you are in it for the long-haul, however you sell - you need to be sure your prices work.

This is especially true when selling through other retail outlets. Shops and galleries can help expand your business better than you ever could alone and correct pricing is the absolute foundation stone in building long-term relationships with them.

If you are able to design jewellery that will sell well in multiple galleries, it stands to reason you will do better for sales than by going it alone. But that can only happen if everyone involved makes enough to make it worth their while and you design products that customers love enough to cheerfully pay realistic prices for.

By being business-like and understanding the needs of the galleries, you stand much better chance of their continued support season after season. In turn, the perceived value of your work increases as it is exhibited in upmarket establishments, selling for prices commensurate with your talent and flair. In short you turn from amateur to professional, from hobby to business.

Both states are valid and equally respectable in my view. Not everyone wants to be "profitable" and that is ok when you are making just for friends and family or for your own relaxation. Lots of people play golf and they don't all want to be Tiger Woods!

But if you do wish to expand into a business, it's no good approaching it from an unrealistic perspective. Business is by definition birthed from the brutal fires of maximising sales and turning profits, like some number-crunching, report-guzzling phoenix. You may as well embrace that side of things early on and learn to love it or you will have a bummer of a ride.

Lastly, but in many ways most importantly, by pricing your work correctly you don't undercut other designers. You do yourself and your jewellery-making sisters no favours by selling your own work at unrealistic prices. Even if you are working only for "pin-money" do remember that many are not. Many designers out there need regular, healthy sales to pay their bills and feed their kids. It is hard enough competing with the mass-produced junk on the market. To see good designers selling good jewellery too cheaply is especially heart-breaking!

Correct pricing can be scary, annoying or even just plain boring - but it is important. We need to remember we are selling something beautiful, something unique and original. Something we care deeply about. Our true customers know and understand this intrinsically.

Realistic pricing helps keep this industry healthy, sustainable and profitable for all.

Why does that matter? Well, because it is YOUR industry too now!

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