After a slow festive season, UK online sellers need to increase their sales before the end of the tax year in April. When it comes to your tax return, it isn't about the numbers you sell, but the profit margin you make.
Pricing is not a race to the bottom. Undercutting your competition will not put food on the table and pay your rent. Under pricing your products in the hope you will be spotted over your competition, is a sure way to put yourself out of business. Consumers do understand that they get what they pay for and if you are offering the cheapest version of something, they will question why, especially if it is handmade or unique.
If you are selling online, you need to consider a competitive but 'doable' cost per unit. Then you need to look at your postage and whether you are charging P&P or offering free shipping. Next, you need to incorporate the fees that the platform you use will charge you for listing and selling the item. There are some great online calculators online that help you to do these sums in advance of a sale. Here's a useful Etsy fees calculator.
You also need to look at the costs you incur to make the item and the price for your time in making and doing the admin. What small business owners often fail to factor in, is their own value. If you sat in an office all day, you would expect to be paid by the hour, so why would you give your time for free just because you work for yourself? You are not worth less.
The minimum wage for adults over 23 in the UK is now £9.50 an hour. You need to work out how long it takes you to make something and calculate the proportion of an hour or hours that it takes. As far as the final ticket price of your item is concerned, this is easier if you are making products with a substantial cost to them, but you have to be reasonable and decide what items are worth your time and effort to make in order to make the necessary profit to keep you in business. If you are losing money on certain product lines, you need to consider repricing or discontinuing them.
Of course, sometimes charging your actual time will price you out of the market. Let's take an example where factoring in the labour cost can't always be justified.....
I have opened a new department in my shop this year. I am upcycling wrapping paper and cards into gift bows and tags. Let's say it takes me 20 minutes to make a set of tags. It takes me another 20 minutes to photograph and list them. I can't sell a pack of upcycled tags for £9.50 even if I have no financial outlay for the components of the tags themselves. And this doesn't even take into account Etsy's listing and sales fees.
When I look at the competition on Etsy, I see people selling packs of up to 15 tags for £3.00 with free shipping. This is unsustainable as a business model, but they may be hobbyists who don't need the money and are more focused on the upcycle aspect of what they do.
So, instead, I have to offer something different. Something better. In my case it's the ethics behind what I do, the variety of what I offer, how it diversifies my online store and the convenience of the product. Yes, someone else could make the same thing themselves at home, but maybe they just don't have the time or the inclination, or maybe they like supporting local businesses rather than big faceless corporations who manufacture most of their products abroad. It may be they just like the convenience of not having to go to a shop to buy a similar item.
It isn't always the bottom line that matters, but you need to understand the other values a product gives your business and decide if the trade-off is really worth it. Think about your target market and what it is that you offer that is different and how that draws new business to your store. That is where price can become secondary, or at least, not the be all and end all of a product sale. Sometimes a product can be a vehicle to bigger things.
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