Retail Price

Let's talk about numbers.

A friend and I have been discussing starting a new shop together. Before we jump into anything, we wanted to talk a little bit about numbers. Since she never ran an online shop before, I was filling her in on what it's like to price your items. The end result surprised her, so I think it's worth writing about…

Let's say you make an item that cost you $5 in supplies and an hour of your time to make. For the sake of simplifying this, let's make the retail price, $100. 

What is your profit?

What would your personal profit be if you had a joint shop?

First of all, you'll want to price your items to pay yourself at least minimum wage. 

Let's say $10/hr. $100 - $10 = $90 

Now deduct the cost of materials: $90 - $5 = $85

Don't forget, the government is going to want some of the money bring in. Many shop owners say it's smart to budget about 30% of the money you make for taxes: $85 - $30 = $55

If you sell your item on Etsy, you're charged a listing fee of $.20, plus 3.5% of the final sale. Payment processing is 3% + $.25 for each order: $55 - $6.5 (because the percentage is from the total BEFORE taxes) - $.45 = $48.05. 

As you can see, that number starts to get real low, real quick. 

If you were hoping to save at least $20 of that for your business (to invest in new materials, advertising, business cards, etc) that means you're left with $28.05 to cover the cost of everything else. If you have a business partner and want to split the profits that's about $14 per person. Not that much.

But, let's go back. 

Let's say you want to sell wholesale, 

because that way you don't have to worry about the individual customer service. 

Wholesale is typically, is 50% of retail price.

So our starting price is now $50. It still cost $5 for materials, $10 for your time and taxes are still going to be about 30%. $50 - $5 - $10 - $15 = $20. If you accept payment through PayPal, they take 3.9% and $.90 per transaction. I'm going to round it up to 4% to make things easier, remember this percentage is out of the payment they processed (the $50). $20 - $2 = $18. Only $18 profit from a item that retails $100 when you sell your item in stores. I bet that's a lot lower than you expected.

Again, if you were hoping to save $20 for the business... well, it looks like you can't even do that. 

This is what selling handmade means. 

This is why handmade items are more expensive than let's say Walmart or Target.

Big brand companies minimize their costs. If they mass produce their products, they know how to keep the costs way down (for one, they don't have to pay someone to hand make each product). So when stores purchase from them even if they lose a big percentage of their retail price, most of what's left is profit.

Many handmade artists (sellers) experience individuals taking time of out their day to write a message saying something like, "Your items are overpriced". This makes me upset, and I honestly believe the individuals who do this have no idea how much goes into handmade. In fact, I believe many of us handmade sellers underprice our items. Being a business owner, you're in charge of charging whatever you want for your products. You're the only one who knows exactly what goes into each item. Don't let anyone bring you down, you know what your worth. 

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PO Box

After debating it for a while now, I finally went to my local post office and filled out a PO Box form. Here, in the city small boxes are $50 for 6 months. I've never used a PO box for my business before, so I'm excited to finally have a business address. 

Even though I filled it out in person, I heard it's pretty easy to reserve a PO box online! The website says small boxes start at $14 for 6 months at some locations, but I haven't seen them any cheaper than $50. 

I know this is something Etsy sellers don't think about at first, but I think it's important to keep your business separated from your personal life. For $10 a month you can do that with your address. So what are you waiting for?

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Printing Postage Through Etsy (Beta)

At this point you've activated direct checkout for your shop, you've applied to join the team--Shipping Improvements, and now you're ready to print labels (beta) from home right through Etsy.

Let's see how it works:

Click on "Print Shipping Label". If this is your first time printing labels through Etsy you'll see this screen:

I wasn't thrilled that shipping will be included in my Etsy Bill. Paypal keeps shipping separate making it easier to categorize finances to do your taxes (but we'll talk more about that later). 

After you confirm your name and mailing address, you'll arrive at this page:

Did you know: A package weighing 1oz and package weighing 3oz ship for the same price in the US.

In case you're new to shipping things out from home, you'll need a postal scale. Any scale that can accurately measure ounces will do. Just remember to round up to the nearest ounce when inputting your info.

(Don't have a scale yet? Postal scales are inexpensive on amazon, and if you mail things regularly you'll make the money back from saving yourself trips to the post office. After you pay for and print the label drop the package in the nearest drop box or even in your own mailbox. It's that easy!)

You won't see the price until the next page (where you'll still have the option to opt out).

Mailing the same package (1-3oz) would have only cost $1.64 through PayPal compared to Etsy's price of $1.95*

*Note: This is the minimum you'll pay for postage through Etsy.

I like that it has the email shipping notification integrated into printing labels--that makes one less step for you, the seller. Your order is automatically marked as shipped and you can track it right from your sold orders page without inputting the tracking number manually. Pretty handy.

Next you're taken to your invoice page which will now have this on it:

Click Download Shipping Label and the label opens in a new window. Print like you would any other webpage document. 

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Shipping Improvements

So now you've activated direct checkout, but you don't like entering in all your buyers information manually on PayPal's ship now form. What now?

Lucky for you, Etsy has a team for sellers who accept direct checkout and are willing to beta test some new services concerning shipping. The team is called Shipping Improvements.

This Prototype is for people who want to test and provide feedback on improvements to Shipping features before they're available to everyone. Some features in the Shipping Prototype will have bugs at times, some will be beta-only for an extended period of time, and others may be discontinued.

I joined last week and so far I've noticed I now have access to two new features: printing postage through Etsy and providing 2 shipping times/costs for each item.

I edited out the personal information, but look, "Print Shipping Label"! It eliminates the problem of accepting payment through Etsy and needing PayPal to print a label. 

Then it allows you estimate a processing time:

And then you estimate a delivery time, allowing you to create two options for each location:

Sellers have been complaining about buyers purchasing items through direct checkout and asking if they can upgrade to have their order rushed. With PayPal, sellers can just send the buyer an invoice for the difference in shipping. With direct checkout sellers are not able to send invoices. Being able to provide two shipping times for buyers to choose from eliminates this problem. Personally, I wish we were able to add up to 3 options for: first class mail (3-5 days), priority mail (2-3 days), express (overnight). Overall, I think it's a great addition--I wish they had added this feature years ago.

Etsy is encouraging team members to post feedback on the team to help them improve the site. Things like this make Etsy such a great place and I think all sellers should take advantage of being able to voice their opinion and being heard.

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Direct Checkout

There's been a lot of talk on the Etsy forums lately about Direct Checkout (DC). Some sellers don't mind it, some refuse to use it and others are hesitant. Across the board, I haven't really seen many people say they love it.

So what is it? 

Etsy wrote up this little help article about DC, but in short it's Etsy's way of bypassing PayPal and collecting the fees themselves. After hearing about Regretsy's experience with PayPal, I was relieved to have an alternate for my business. So let's see what Etsy does different than PayPal.  

DC processes buyers credit cards directly on the Etsy platform. In the past, some buyers got confused with PayPal--not realizing they didn't have to make an account with PP just to pay with their credit card, so it's a good idea. Not to mention sellers no longer have to have a PayPal account to sell on Etsy because you link it straight to a bank account (similar to PayPal).

DC charges a processing fee of 3% + $0.25 per order. 

PP charges a processing fee of  2.9% + $0.30 per transaction. 

DC doesn't give the seller access to funds until 3 days have passed since the order was purchase and until the order has been sent out. If sellers make custom items or made-to-order items their funds won't be accessible until they finish the order and mail it out. 

PP allows the seller to have access to the money instantly. 

DC automatically deposits money in the seller's bank account on Mondays or allows sellers to manually transfer funds to their bank account before Monday, if funds are available. 

PP allows sellers to use the funds directly from their PayPal account or allows sellers to transfer money manually into their bank account (3-7 days). Sellers have instant access to their money to make online purchases or by using their PP debit card--which they can use at ATMs and in stores. 

DC does not offer a way to pay for postage. (They are working on this, if you want access to try it join the Shipping Improvements Team) 

PayPal has a "ship it now" button, making it easy to print postage from home. 

Sellers can send partial refunds but not invoices through DC. 

Sellers can send partial refunds and invoices through PP. 

Overall, the fees are comparable, however, PayPal offers more services that Etsy does not.

The shortest amount of time it takes to get paid with Direct Checkout is 3 days + 3-7 days it takes to transfer into your account. Total 6-10 days if you mail out the order within 3 days. 

With PayPal funds are available instantly. 

This is what it used to look like when sellers accepted PayPal. The visual implies you can pay with credit cards by paying with PayPal:

This shows what it currently looks like when a seller accepts both Direct Checkout and PayPal as a shipping methods. The visual implies paying with a credit card is a separate option than paying with PayPal. I think it's a bit deceiving, and especially harmful for the shops that don't accept DC.

I offer both in my shop, but as a business owner, I currently prefer PayPal. I hope that Etsy listens to its sellers and continues to change Direct Checkout to make it the preferred way to receive money. 

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The Start of Something New

When I originally started my other blog, I had intended on it being for my etsy shop, LoveErica. I was selling photo prints at the time, and thought that I would write about my photo adventures and Etsy things. I was living in a dorm at the time and I quickly learned that I wasn't so keen in writing for 'business' --I was writing enough for school. So my blog took a personal turn. It's a diary of sorts. A broken catalog of my last few years. It is rather emotional for me to read through --even though I tried to filter those emotions out before publishing. I still remember.

Looking back on where I've been and what I've learned on this online I'm realizing that blog has little to do with my business adventures. Although it has a mix of everything, I'd like a new place to write about what I've learned. That's where this blog comes in. This is where I'll string together experiences as constellations. This is where I'll post my findings.

I'm not sure exactly of what's to come. I can't say exactly where all this will take me. Or how often I'll even post here. Of course it won't be exclusively professional --the photo above is from an adventure I took with some good friends yesterday. We went to Bristol, VT, to the Bartlett Falls for the 4th. &That's the birthday girl sitting above the water.

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