All’s (Un)fair in Competition & Pricing

Contributor post by Rena Tom

I'm most of the way through a book called  Cheap: The High Cost of Discount Culture by Ellen Ruppel Shell. It’s a great read about pricing, discounting, the glut of cheap (and cheaply made) consumer goods and how the retail landscape is changing dramatically around the world.

I work with many makers of handmade goods, and almost all of them have difficulties pricing their work. Due to economies of scale, handmade goods are seen by some as being unusually expensive compared to a similar mass-produced item. Therefore, some would argue, there is almost no reason to shop handmade. In a culture that prizes “getting a deal” above all else, handmade no longer makes sense.




Sadly, this creates a pricing dilemma for makers. It produces a stigma around pricing something too high - when too high might mean making a profit and not just covering costs. And yet, profit is required to sustain and grow a business. Is it unreasonable for people to want to make a living from their work?

I love books like this because they try to explain why people think and act they way they do; the research on perception and fairness is especially interesting. Much of discount culture today is driven by the customer but some is from innate values on the part of the maker as well. People new to selling often find it hard to price properly in the face of demands from others.

Many makers start out as hobbyists who are happily making work for themselves. Some do this purely out of the joy of making and others as a cost-saving measure so that they can have what they can’t afford to buy. At some point, their friends may want this work and this is how many businesses begin.

While a maker is still in the hobbyist phase, that is fine. However, once they begin to sell their work and act like a business in earnest, they have trouble letting themselves charge customers enough money for their products. Why? Because it doesn’t seem fair: if they would or could never buy their own product for a certain price, why should they charge someone else that amount? Won’t they be perceived as greedy or somehow being dishonest?

This is just one argument for artificially low pricing that makers sometimes use. She might also argue that she wants to remain competitive in her field. Unfortunately, handmade makers cannot use price to compare themselves to companies that manufacture; it’s like apples and oranges and should not be done. Etsy is one arena where handmade makers are pitting their work against each other, creating sustainable pricing for nobody.

These ways of thinking limit makers who are seriously making a go of their business. Instead of finding ways to make prices lower, you need to think of how you can add value to justify charging the amount that makes sense for your business. A savvy maker will offer higher-quality materials, more original designs, more beautiful packaging - as well as have the marketing skills to communicate that to the world so that people understand where the price comes from. Not everybody will be able to buy, but you will be selling to the people who can sustain your business - and that’s fair, too.