Pricing Handmade goods in the WalMart era

I’m currently reading Overdressed The Shockingly High Cost of Cheap Fashion by Elizabeth Cline. There is a discussion of pricing a hypothetical dress on page 73:

If it cost $633 for materials and labor to make the dress, the price would then be doubled for the wholesale price… If the dress is sold through a store, the store marks it up 2.25 times over the wholesale price, at the very least, which would land the new dress on the rack for $2848.50

If you make goods for sale, is your pricing truly anywhere near retail?

Take this bag I made from a Michelle pattern. Let’s say it has $8 in materials, which is probably a conservative estimate since it has a magnetic snap, zipper and interfacing as well as the inner and outer fabrics. I added a zippered inside pocket and a cell phone pocket inside as well. We’ll say it took 2 hours to make. I’m fairly certain it took me quite a bit longer than that as I recall some unpleasantries at one point when I was reading and re-reading a section of the instructions. Minimum wage here is $7.25, so we’ll use that to determine the labor expense, even though it’s ignoring some of the other costs. So, this bag cost $14.50+$8 = $22.50 and should then wholesale at $45. Using the formula above, it would not be unreasonable to give it a retail price of $101.25. Now, this is a nice bag. I like it a lot. However, I very much doubt anyone would pay $100 for it.

So what’s going on here?

Well, first, we could probably lower our materials cost if we were buying in larger quantities, so maybe it only cost $4 in materials. That doesn’t help much; it’s the labor that’s driving up the price. Let’s send it to a country with a labor cost of $1/hour. Look, now it has a total cost of $6, a wholesale cost of $12 and a retail price of $27. Is that an acceptable price to the American consumer? Perhaps it is. As a matter of fact, I found an etsy seller offering this bag (without the extra pockets I added) for $29 and another offering it for $28. But, neither of these sellers lives in a location where labor costs are $1/hour.

Perhaps the sellers offering this bag look at the $28 price and see it as they are earning $20 since their materials cost $8. But are they really? Maybe that $10/hour for two hours of sewing the bag doesn’t seem too bad.

How long did it take to photograph the item and prepare the sale listing? What about the fees for selling in the etsy marketplace or the additional fees taken by Paypal or etsy for processing the payment? Did the bag pack itself, print a shipping label and hop over to the mail drop or post office without the seller’s involvement?

And if no one is willing to pay $100 for my lovely bag, how are sellers supposed to price their goods?

I don’t know what the answer is, but I’d love to hear your thoughts.

Kelly

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