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.

Jan Halvarson


Danie at Pasadya said...

I really love this post, especially since this completely applies to what I'm going through. Thanks so much for sharing. Definitely going to read that book soon!

Fiona Cartolina said...

Great post!

We sell wholesale to retailers.
We started out a few years ago with a $5 card in the US. Did really well with the $5 card until we changed distribution and were encouraged to sell a $3.50 card. Our sales dropped with the $3.50 card - we were lumped in with low end discount cards in the stores - not perceived as 'special' because we had a $3.50 price tag like the mass market products.

We have recently put our prices back up and our sales have increased substantially to where they should be. We are back in the beautiful stores where we know we do well - no price resistance at all from the retailers.

Pricing isn't easy - don't sell yourself short!


Jan Halvarson said...

Fiona - thanks for sharing your example - so good to know - especially coming from someone who's been doing it for a while.

Unknown said...

Great advice for new sellers. I try to explain this to people all the time when they're starting out. I also feel if you don't value your work, your customer won't either. If they want Walmart they won't be looking for handmade. Thanks for the post. I'm going to put a link on my facebook page. Mary

Lauren said...

Great post! I think I'm going to have to check out the book - it sounds pretty interesting.

Anonymous said...

Thank you so much for sharing this. I'm in the process of rethinking and revamping my whole business and practice and this has confirmed what I was already thinking.I am now making a point of ensuring people know exactly what sets my work apart and why they are actually getting a bargain and a future heirloom rather than a mass produced disposable item.I agree with Mary, we need to value ourselves and our work - this is often the hardest part! x

Tamari. said...

It is a lovely post only it's not that simple. The fact is we still have other handmade creators whom you need to stand up with. Sometimes the problem isn't the "big market" but the small buissneses you're up against.
Ive been thinking about changing The pricing for all my products cos it is indid hard to make any profit. But it is also very hard to even make a sell or be visible this days when you have so many of everything! So the need to cover costs or to even just start selling something and setting up some sort of system running is very intense.
Valueing yourself as high as you think for making a profit is not easy with the market being so rough and busy...

Barbara Matson said...

Great post Jan! My daughter {who has taken a hiatus from painting due to the demands of school} was frustrated with selling her work, she really researched how to price her art and found that she needed to make sure she gave it value based on her time and creativity, yet found sales slow. Big learning curve. She was frustrated with those who simply slapped a few paint lines on their art and managed to sell hundreds because of their name but not any creativity. The only creative part was their marketing. Hard to encourage a 15 year old when they see the obvious and feel discouraged by it. Hopefully this summer she can pick up where she left off.

Unknown said...

I tend to lean to under pricing myself...because my thought pattern is basically everything lined out in this article. I just know that if I'm between two pieces at a fair, odds are I'll go with the cheaper one. I hate the idea of undercutting my fellows, but really want to at least break even. It's so tough.