A Fool-Proof Formula for Pricing and Selling Your Jewelry
QUESTION:
Can you make serious money by making jewelry?
ANSWER:
Yes you can, but you have to be smart about it.
I offer a series of business of craft classes in Nashville. One of my most popular classes is called PRICING AND SELLING YOUR JEWELRY. In it, I go over a pricing formula that is easy to do, accounts for costs of PARTS, LABOR and OVERHEAD, and fits with the realities the jewelry designer faces, most notably, that they wear different hats — manufacturer, wholesale and retailer — and each “hat” requires a different way or related costs to prices.
I also go over various business and marketing strategies very related to Pricing.
In this article, I go over…
- BUSINESS STRATEGIES
2. PRICING STRATEGIES
3. APPLYING PRICING FORMULA
4. PROFIT and POST-PROFIT
5. MARKETING YOUR JEWELRY
6. RETAIL, CONSIGNMENT, WHOLESALE
7. BRANDING
BUSINESS STRATEGIES
a. Buy Parts Cheaply
When starting, go after depth rather than breadth of inventory.
Buy a limited selection of parts, colors, sizes, so you can purchase in greater volume, thus getting a lower price
Don’t try to meet every contingency. If someone wants the piece in red, and you only have purple, don’t try to get the pieces in red. You won’t be able to buy them in volume and get a good price on them.
Learn how to say “NO!” to the face.
“Pretty Please, Pretty Please, Pretty Please”
“Do It For Me” “I’m your best friend.” “I’m your sister”
“I’ll show everyone what you made for me”
“Please please please!!!!”
You have to hold your ground for 60 seconds. Just 60 seconds. Then the person usually says, OK, I’ll take it in the color you have. (Most people cannot hold their ground for 60 seconds …. But, you have to.)
Initially, you will move from a creative mode to a production mode. A lot of jewelry artists give up and fail right at this point.
When in “production” mode, you will need to develop strategies to keep from getting “bored”. After 1 year of selling, you can begin to change strategies. You can add another color or size and expand your inventory. Eventually, you will be able to add colors/styles and have more fun, freedom and flexibility to create.
b. Know Your Market
Who are your customers? What are they willing to pay?
What will it cost you to link up with this market (travel, displays, packaging, timing)?
c. Know Your Competition
Check out similar merchandise in places your customer base goes to.
What are they charging? How are they merchandising and marketing their products? How are they presenting their competitive advantages? What is their reputation?
d. Mark Up and Price To Make A Sufficient Profit
A sufficient profit…
…covers ALL costs
…gives yourself some payment
…allows you to reinvest 15–25% into expanding your inventory
…means your customer feels they got a fair deal
NOTE: It is always easier to lower a price than to raise it. So it’s better to start on the high end, than on the low end, when you decide on a price.
e. Don’t discount to family, friends and co-workers
Through word of mouth, this ends up spreading expectations about getting low prices from you. It is easy to lower prices, but very difficult to raise them.
They are already getting a discount. Your price will be much lower than if they bought the same piece in a boutique or department store.
2. PRICING STRATEGIES
Most jewelry designers (and other craft artists) are not smart about pricing their jewelry.
Often, they “underprice” their pieces. They give friends, relatives and co-workers discounts. They don’t charge for their labor. They feel awkward asking for a higher price.
Othertimes, designers and artists “overprice” their pieces. They see high prices in high end boutiques, and think they should match these prices. They sometimes overvalue their labor.
In either case, there is a lack of knowledge about the true costs of all the parts and activities that go into creating a piece of jewelry, and how to manage all these costs. Also making things confusing is that the artist often wears 3 hats: manufacturer, distributor, and retailer.
3 Pricing Strategies:
A. Keystone
B. What Market Will Bear
C. Fair Value
A. Keystone-ing (multiply cost by 2x)
Triple Keystone = multiply cost by 3x)
Works well for a gift store or jewelry store where the owner buys already made pieces and puts them out for sale.
Does not work so well for jewelry designer who has to accommodate having to make items, have parts inventory on hand, and has to market items.
B. What the market will bear (highest price you think you can get)
Works well in tourist areas where customers are not regulars, and expect to pay somewhat higher prices. Very short term strategy. While at time of sale, seller and customer are happy, when the customer returns home and finds out they paid too much for an item, they may, even if never returning to the area, may spread bad word of mouth.
C. Fair Value (both seller and customer get good value, leave the transaction happy, and stay happy)
This method is more long term. This method forces the artist to account for all costs involved, and in the process, forces the artist to more realistically evaluate whether a particular piece of jewelry will sell at a particular price.
This is the formula I teach, and what is discussed and outlined below.
3. APPLYING PRICING FORMULA
THE BASIC RETAIL FORMULA
(To compute “minimum” fair retail price (MinFRP)
P = “typical” cost of parts
L = labor
O = overhead estimate
NOTE:”typical cost” is what you’d normally expect to pay; if you purchased at discount, you do NOT use that discounted price. “Labor” is make-it time, NOT design-it time. “Overhead” stands for everything else: rent, electricity, wear and tear on equipment, admin time, etc.
So, MinFRP = 2P+L+.2(P+L)
If parts cost $15.00, you spent 43 minutes making the piece, then,
MinFRP=2*15+7.50+.2(15+7.50)
=30 + 7.50 + .2(22.50)
=37.50 + 4.50
=42.00
**LOOK HOW I ORGANIZE MY NUMBERS!
We have 5 variables.
We list these in a column.
We fill in correct information after each “=” sign.
where the variables in the formula are…
P = parts
L = labor
Overhead estimated with
.2(P+L)
FIRST, write these 5 pieces of variable information into a column:
*ROW 1: One times P =
*ROW 2: Two times P =
*ROW 3: Labor =
Usually figured as $10/hour, charged off in 15 minute intervals. Thus,
12 minutes = $2.50
17 minutes = $5.00
*ROW 4: Sum of one times P plus one times L)
*ROW 5: 2/10 times the sum of P plus L
SECOND, plug these numbers into our FORMULA, and compute a MINIMUM FAIR PRICE:
The FORMULA uses ROW 2 + ROW 3 + ROW 5 pieces of information.
THIRD: Use the BASIC RETAIL FORMULA TO COMPUTE A MAXIMUM FAIR PRICE.
(To compute a “maximum” fair retail price)
We multiply the “minimum fair price” by 1.5.
Thus, we end up with a range of possible acceptable and fair prices,
and we pick a price within this range.
If the price we think we can get in reality is either below or above this range, we need to do some re-thinking. We cannot just charge a lower (or higher price) outside our range, because then the price would no longer be fair.
So, we have to re-think our project.
We can do different things to bring the lower (or higher) price within an acceptable range. The formula actually tells us what we can manipulate. Change quality of parts. Charge less or more for labor. Change the setting we are manufacturing things in. Change our target market niche. Change our design. Change packaging.
THE BASIC WHOLESALE FORMULA
(To compute a range of fair wholesale prices)
So, we multiply the cost of our parts by 1.4 instead of 2.
To get the maximum fair wholesale price, we multiply the minimum by 1.5.
WHEN TO USE RETAIL vs WHOLESALE:
1. If you are selling less than 10 similar pieces at one time, use the RETAIL FORMULA …even if you are selling to another business for re-sale
2. If you are selling more than 10 similar pieces at one time, use the WHOLESALE FORMULA
PRACTICE MAKES PERFECT
Example 1: Bead Strung Piece
Let’s practice applying the Pricing Formula.
2P + L + .2(P + L) = Minimum Fair Retail Price
1.5 (Minimum Fair Retail Price) = Maximum Fair Retail Price
Minimum Fair Retail Price =
Maximum Fair Retail Price =
Example 2: Bead Woven Piece
Let’s practice applying the Pricing Formula.
2P + L + .2(P + L) = Minimum Fair Retail Price
1.5 (Minimum Fair Retail Price) = Maximum Fair Retail Price
Minimum Fair Retail Price =
Maximum Fair Retail Price =
Example 3: Wire Work Piece
Let’s practice applying the Pricing Formula.
2P + L + .2(P + L) = Minimum Fair Retail Price
1.5 (Minimum Fair Retail Price) = Maximum Fair Retail Price
Let’s also compute the minimum and maximum wholesale prices.
.4P + L + .2(P + L) = Minimum Fair Wholesale Price
1.5 (Minimum Fair Wholesale Price) = Maximum Fair Wholesale Price
Minimum Fair Retail Price =
Maximum Fair Retail Price =
Minimum and Maximum Fair Wholesale Prices =
Can the artist sell this piece to the retailer at a fair wholesale price so that the retailer can sell it at a fair retail price?
You know ahead of time that the retailer will want to at least double the cost of the piece (that is, the price the retailer will pay you).
If you set a price within the fair range of the wholesale prices you are going to charge the retailer, what would his world look like? You can determine that by applying the retail formula, because that represents what the retailer would think about. Assuming the retailer will double what he pays you, will he end up with a fair price he can charge his customers?
4. PROFIT and POST-PROFIT
Many people think that if a necklace cost them $5.00 to make, and they sold it for $20.00, that they have $15.00 profit to put in their pockets. However, they do not. This $15.00 represents “Pre-Profit”. Typically, the true, bottom line profit will be about 8–15% of your gross sales. So in this case, there are a lot of Post-Profit costs that will leave you with about $1.60 to $3.00 of money you can put in your pocket.
PRE-PROFIT COSTS
Costs of inputs (inventory, supplies, equipment, personnel)
Costs of throughputs (travel, phone, time, brochures, business cards, costs of getting suppliers; costs of getting personnel; costs of doing marketing or selling)
POST-PROFIT COSTS
Costs of outputs (pay off credit card debt and interest; pay sales taxes; pay income taxes; pay bank loan/interest; reinvest profits to expand inventory; repair, upkeep, replace equipment and tools; pay overhead like rent and utilities)
All these costs will have to be accounted for when you are setting prices for your merchandise.
Maintaining a level of “Velocity” in your sales. Velocity represents the rate of turn, from making pieces to selling pieces to making more pieces to sell and then selling them and so forth. Maintaining a constant (or increasing) velocity will keep you from having cash flow issues and going out of business. With jewelry (and other crafts), there are usually seasonal variations in velocity. You need to have strategies about how to bring in money during those times when the velocity has slowed down too much.
Your Profit: PRICE — TOTAL OF ALL COSTS = PROFIT
5. MARKETING YOUR JEWELRY
A lot of your success will come down to how well you market. Marketing is more than advertising. There are several steps or components to marketing. You need to become an expert in each one.
a. Product Goals: Your product is designed to meet what customer need(s)?
What are your customer’s needs, and how can this product meet those needs?
What is your “competitive advantage”? That is, why should your product be perceived as better than anyone else’s? (attractiveness, price, access, uniqueness, other)
b. Target Market/Niche: What are your customer shopping behaviors?
Where do your customers live and shop? What are their typical shopping behaviors?
What are your market boundaries? (by location, by age, by lifestyle) Are you targeting a more narrow market segment within these boundaries?
c. Product Development: What aspects of your product are critical in attracting attention, and what are the associated costs involved in attracting that attention?
What are your product’s attributes? What are your product’s benefits? What are the costs associated with your product? What kinds of things (tangible and intangible) have to be in place in order to make your product? What should product be named? Should product be part of series or collection?
d. Product Distribution: Where will your products be sold, and how will they get there?
Where will your product be sold? How will it get there?
e. Promote/Position Your Product: How will you gain visibility for your product?
How will your target market come to know about your product, and be able to buy it?
What is your target message — those words/images/phrases that will motivate your target market to make the effort to buy your product?
Set your promotional budget: Your promotional budget is usually 5–20% of your product costs. Example: If you are trying to sell 50 pieces which cost you $5.00 each, your promotional budget will be between $12.50 and $50.00 (.05 * $250.00 to .20 * $250.00).
f. Pricing To Sell: How will you determine a fair price?
Use the pricing formula to compute a minimum and maximum fair retail price.
Then step back. The formula is a guide, not an absolute.
What influences the price in your local market?
If you think your target market is not willing to spend the minimum fair price, then what kinds of things can you change, to bring the price in line with this market?
If you think your target market is willing to spend more than the maximum fair price, then what kinds of things can you change, to bring the price in line with this market?
Things you can change:
g. Evaluation and Feedback: How will you get feedback about whether you are on the right track, or not?
Formally and/or informally, get your customers’ reactions to your product.
Think about things you can measure: survey, likes, feedback, returns of merchandise, repeat sales.
Get your own reactions to your product. Are there improvements in efficiency or effectiveness that you can make?
MORE PRACTICE
- STRETCHY BRACELET
2. BOHEMIAN NECKLACE
6. RETAIL, CONSIGNMENT, WHOLESALE
It is important to understand the differences among retail, consignment and wholesale.
Retail: Here, you have an original manufacturer (called the jobber), usually a go-between called a distributor or rep (called the wholesaler), and a seller, in this case, a retailer. Wholesalers buy from jobbers, usually at a mark-up of 25–40% (that is, the wholesale price is 25–40% above the jobber price). Retailers buy from wholesalers, usually at a mark-up of 100 or more % (that is, the retail price is typically at least twice what the wholesale price was — this is called “keystone”). In jewelry, the retail mark-up is often 3x the wholesale cost (this is called “triple keystone”).
Consignment: Here you bring items to a shop or gallery, and work out a deal with the shop’s owner. In exchange for the shop taking a risk and taking up shelf space (and in a few cases, costing advertising dollars) with your pieces(s), you agree to receive a certain percentage when the piece sells. You don’t get any money up front, and it may be months before you get any money. A typical “deal” is to get 40% and the store keeps 60%. In consignment, the store always is taking the greater risk. Any split greater than 40/60 or 60/40, such as 70/30 or 30/70, is a yellow flag. It suggests the business owner does not understand consignment and its risk for their store. Because of this, it suggests to the artist that s/he may never get paid, or that the business won’t put any effort towards selling/marketing your pieces, or even keeping them clean and displayed well.
Consignment may be the only option for getting started. If your pieces do well on consignment at a particular location, try to re-negotiate your arrangement to a wholesale one.
Wholesale: When you sell wholesale, you usually drop your price (thus, gross profit), considerably, in exchange for selling more pieces (volume). When you sell wholesale, there is a great savings to you in selling more pieces, and knowing ahead of time that you will be selling more pieces. So, it’s easier to lower your price in exchange for volume.
As a guide, you are ready to sell “wholesale” when you are selling 10 or more similar pieces at a time to a particular business.
7. BRANDING
One of the most important marketing goals for a designer is to be “branded”.
This means positioning yourself so that you stick out among the competition.
This means building relationships and emotional connections with your customers.
Marketing is what you do. Branding is what you are. You can market, market, market without success because you failed to have a branding strategy.
Branding includes…
…developing a signature style and unique design approach
…coherency and consistency among your products in terms of materials, styles, prices, ways they are packaged and displayed
…telling your story (or other techniques) to form an emotional attachment between your customer and your products
…having great business name, product names and logo
…delivering to your customer what they expect to be delivered — quality, emotional connection, connection to you the artist, an understanding of your vision as an artist
…rewarding your customers who love your brand, to cultivate loyalty and have them spread positive word-of-mouth about you
…staying relevant and flexible — well managed brands always make adjustments; branding is an ongoing process
…measure its effectiveness
Develop Your Elevator Pitch
Develop catchy elevator pitch — a 30 second summary of you, your work and personality -o- just in case you meet some body really important in the elevator and have his or her full attention. This pitch should be reflected in your marketing materials and “personal story”. It should be something that you can enthusiastically repeat over and over again.
Develop Your Tag Line
Develop a killer tag line. This has to be concise and clear, pronounceable and sound pleasant to the ear. It has got to be less than a mouthful. Remember this will be repeated over and over and over again. It has to make your customer say “Ohhhhh!” or “Sweeeeet!” or “Yes!!!”. The tag line represents your brand image and gives it a voice.
Here’s to your continued Jewelry Business successs!!!!
Other Articles of Interest by Warren Feld:
Should I Set Up My Craft Business On A Marketplace Online?
The Importance of Self-Promotion: Don’t Be Shy
Are You Prepared For When The Reporter Comes A-Calling?
A Fool-Proof Formula For Pricing And Selling Your Jewelry
Designer Connect Profile: Tony Perrin, Jewelry Designer
My Aunt Gert: Illustrating Some Lessons In Business Smarts
Copyrighting Your Pieces: Let’s Not Confuse The Moral With The Legal Issues
Naming Your Business / Naming Your Jewelry
Jewelry Making Materials: Knowing What To Do
To What Extent Should Business Concerns Influence Artistic and Jewelry Design Choices
How Creatives Can Successfully Survive In Business
Getting Started In Business: What You Do First To Make It Official
I hope you found this article useful. Be sure to click the CLAP HANDS icon at the bottom of this article.
Also, check out my website (www.warrenfeldjewelry.com).
Subscribe to my Learn To Bead blog (https://blog.landofodds.com).
Visit Land of Odds online (https://www.landofodds.com)for all your jewelry making supplies.
Enroll in my jewelry design and business of craft video tutorials online.
View my video tutorial: Pricing and Selling Your Jewelry
Add your name to my email list.
__________________________________
CONQUERING THE CREATIVE MARKETPLACE: Between the Fickleness of Business and the Pursuit of Design
How dreams are made
between the fickleness of business
and the pursuit of jewelry design
This guidebook is a must-have for anyone serious about making money selling jewelry. I focus on straightforward, workable strategies for integrating business practices with the creative design process. These strategies make balancing your creative self with your productive self easier and more fluid.
Based both on the creation and development of my own jewelry design business, as well as teaching countless students over the past 35+ years about business and craft, I address what should be some of your key concerns and uncertainties. I help you plan your road map.
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· Marketing, Promoting, Branding: competitor analysis, developing message, establishing emotional connections to your products, social media marketing
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· Resiliency: building business, professional and psychological resiliency
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548pp.
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So You Want To Be A Jewelry Designer reinterprets how to apply techniques and modify art theories from the Jewelry Designer’s perspective. To go beyond craft, the jewelry designer needs to become literate in this discipline called Jewelry Design. Literacy means understanding how to answer the question: Why do some pieces of jewelry draw your attention, and others do not? How to develop the authentic, creative self, someone who is fluent, flexible and original. How to gain the necessary design skills and be able to apply them, whether the situation is familiar or not.
588pp, many images and diagrams Ebook , Kindle or Print formats
The Jewelry Journey Podcast
“Building Jewelry That Works: Why Jewelry Design Is Like Architecture”
Podcast, Part 1
Podcast, Part 2
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Easy. Simple. No tools. Anyone Can Do!
I developed a nontraditional technique which does not use tools because I found tools get in the way of tying good and well-positioned knots. I decided to bring two cords through the bead to minimize any negative effects resulting from the pearl rotating around the cord. I only have you glue one knot in the piece. I use a simple overhand knot which is easily centered. I developed a rule for choosing the thickness of your bead cord. I lay out different steps for starting and ending a piece, based on how you want to attach the piece to your clasp assembly.
184pp, many images and diagrams Ebook, Kindle or Print
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198pp, many images and diagrams, Ebook, Kindle or Print
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Learning Bead Stringing Is More Than
Putting Beads On A String And Tying On A Clasp
There is an art and skill to stringing beads. First, of course, is the selection of beads for a design, and the selection of the appropriate stringing material. Then is the selection of a clasp or closure, appropriate to the design and use of the piece.
You want your pieces to be appealing. You want them to wear well. You want someone to wear them or buy them. This means understanding the basic techniques, not only in terms of craft and art, but also with considerations about architecture, mechanics, and some sociology, anthropology and psychology.
In this book, I go into depth about: (1) Choosing stringing materials, and the pros and cons of each type, (2) Choosing clasps, and the pros and cons of different clasps, (3) All about the different jewelry findings and how you use them, (4) Architectural considerations and how to build these into your pieces, (5) How better designers use cable wires and crimp, as well as, use needle and thread to string beads, (6) How best to make stretchy bracelets, (7) How to make adjustable slip knots, coiled wire loops, and silk wraps, (8) How to finish off the ends of thicker cords or ropes, so that you can attach a clasp, (9) How to construct such projects as eyeglass leashes, mask chains, lariats, multi-strand pieces, twist multi-strand pieces, and memory wire bracelets, (10) How different teaching paradigms — craft vs. art vs. design — might influence the types of choices you make.
452 pp, many images, illustrations, diagrams, Ebook, Kindle or Print
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