One of the questions I get most often at Western Frontier Traders is: how do I price my jewellery? So I have decided to dedicate a blog post to help you price your jewellery correctly.
Many jewellers undersell their work. There is a common myth that cheaper items move faster, but in the case of handmade items this is not always true. Customers expect to pay a higher price for bespoke and handmade goods and prices that are too low can make them second-guess the quality. Once you know the formula it is quite simple, but it’s important to understand the reasoning behind it.
My number one tip: don’t absorb anything.
Charge the customer what the item costs. This may sound obvious but believe me, many jewellers don’t do this one simple thing. A piece of jewellery isn’t just that. It’s the effort involved in designing it, making it, packaging it, researching shops to sell it in, paying designers for your logo, paying for rental space, website rental, Facebook advertising, business cards, price tags, shipping, driving to those little out of the way suppliers, it all adds up. It seems small, but you better believe that your departure slip is included in the price of your airline ticket or that your ‘free’ shower gel is snuck into the room fee. To make a profit from jewellery, you have to pass these costs onto the customer.
Whenever I order anything, I single it down to how much it costs per unit. My business cards cost $125 for 500, so I know that each card costs $0.25 and as every item of jewellery comes with a card, I know I have to add this cost onto each item. If I sell 500 pieces of jewellery in a year and decide to absorb my card’s cost, that is $125 I take away from my profit. Doesn’t seem like much, but what about if I decide to then absorb the price tag? That is another $50. And what about the two tanks of petrol I spend a year going to that out of the way shop? Another $100. And I guess the bags aren’t too expense, so that’s another $250. And all of a sudden that is $525 worth of profit.
Now imagine all the other little bits and pieces I don’t even both to add up. Electricity, gas, oxygen, cleaners, oxidising solution, rouge, Tripoli, the list goes on. These items are why you must have a contingency. A $0.50 cost to the customer can end up costing you a lot more.
Having a contingency also gives you some wiggle room. Some jewellers don’t mind a little haggle. If you have a contingency percentage, you are able to give that regular customer a discount, or give the woman buying her three daughters necklaces 10% off.
So here is my pricing formula:
((Material Cost x 4) + Labour) x 1.1 = Min Retail
((Material Cost x 4) + Labour) x 1.5 = Mid Retail
((Material Cost x 4) + Labour) x 1.8 = Max Retail
I have created a useful calculator with the formulas already input. Download HERE.
In regards to labour, lots of jewellers don’t pay themselves enough. My standard hourly rate is $40 p/h and $50 p/h for commissioned work.
What about Wholesale?
You will notice I have added a wholesale price on the calculator. I generally go on the premise that a wholesale price is half of the retail price. This is why it’s important to multiply your material costs by four. It’s also important to stick to your guns with minimum quantity orders if businesses want the wholesale price. If you have a MQO of 15, don’t let companies try and worm their way down to 10. You are selling them a product at half of the price and they payoff is that they order multiples. It’s your business, don’t let others dictate how you run it.
Time vs Material Costs
For me personally, time is always at a premium. And when you are making lower cost handmade items, there are certain things you can do to save time. I am a big believer in pre-made findings. If I am making a bespoke pair of 18ct gold and pink tourmaline earrings, I will most certainly make my own ear wires, but if I am making multiple pairs of lower cost earrings, I will use pre-made sterling silver ear hooks. The same goes for ear posts, butterflies and bails. I cannot justify spending an extra two hours on simple findings when I can buy them for a great price. Our sterling silver findings can be found HERE.
Final tip: I cannot stress how important your time is. I have met jewellers, and artists for that matter, that don’t charge for their time. You cannot make a successful business just charging for materials.
I hope this sheds some light on this sticky subject, and that you are now better prepared to price your jewellery reflective of your time and efforts.
Ruth – Western Frontier Traders