"Underpricing"

I am on the etsy forums a lot, and I have noticed a lot of people complaining about something they characterize as "underpricing". I am still trying to figure out what "underpricing" is. Is it merely that someone can sell an item for less than the person complaining? is it something legitimate? I am honestly confused.

I have seen about 30 different pricing strategies on various "selling your craft" websites, books, etc. They all are some sort of calculation based on cost of materials, labor, overhead, and some additive or multiplier. Many of the numbers are very subjective and personal. How then, do people determine what constituttes "underpricing"?

For example, I have 3 web-based businesses: Carried Away By Angela, a bag company; Camelot Cats Clothing, a clothing company; and Coqui Ainjelfire which is my jewelry and new age items.

For Carried Away by Angela, all of my bags are made out of recycled upholstery fabric samples and/or liquidation or estate sale fabrics. I get them relatively cheap, usually. I pay way less than retail because I have found people who help the warehouses clear out their inventory, and I am able and willing to buy in bulk (which is usually a requirement). Most of my fabric, if I don't buy it, will end up in a dumpster or a land fill. Because of this, my material costs are very low. I can make my gorgeous bags for MUCH LESS than if I even paid wholesale for my fabrics. Am I underpricing because I am passing my savings along to my consumers?

A similar thing applies to my jewelry. I buy many of my gemstones in bulk. Part ofthe fun, to me, is identifying the stones I get. I even tumble many of my own stones, and but rocks for tumbling, which are relatively inexpensive. I make a lot of copper jewelry, and I use copper wire that is made for electromagnets and electrical work purposes. Again, I buy in bulk from elecrtical suppliers, and I can get the wire for less than from jewelry suppliers. I've mixed up my jewelry wire and my electrical wire, and I can't visually tell them apart. However, I pay a lot less per foot for the electrical wire. Am I underpricing if I pass these savings on? Should I mark my jewelry up, just so I am pricing the same as someone who pays "jewelry wire"prices? is that realy ethical? Either I am making more profit (If I sell) on an item thant I am really comfortable with merely to price my items competitively, or I am undercutting my competitors?

It bothers me when I see some of the very high prices of hand-made goods. I am NEVER going to tell someone that they shouldn't price their items to make a profit, but if you are paying retail for your materials, putting extra time into making something for a competitive labor cost, and then using one of the pricing calculators, it quickly gets easy to price out of people's cost range. Many of the cost cutting strategies that people employ just aren't that hard, and do NOT affect the quality of the final product.

1. Get a wholesale and/or tax number. (these are different in some states) There are all sorts of online suppliers that will sell to you at wholesale prices, but you NEED that wholesale number. Yes, it will be a little more paperwork, because you have to show that the items you purchased with your wholesale or tax numbers went into your items, so you are not bilking the government out of their tax money. yes, this is oversimplified.

2. Whenever possible, buy in bulk. Find out if suppliers offer bulk discounts. Figure out what you use a lot of, and see if you can find someone who makes it in bulk. Almost always, it costs less to buy 10 or something than to buy 2, if you can find the right person to buy from.

3. Work on your efficiency. Efficiency is different from speed. Look at how you're making something. Where are the slow downs? Why? Can you do things in a diferent order and have them go more quickly? Are there certain necessary slow points in your creation process? For example, I am the world's slowest hand stitcher. I am NOT good at it, and it takes me a long time to get my stitches relatively even and straight. I have to put a few hand stitches into every one of my bags, because of the turning process with the lining. I will make three or four bags up to the hand stitching point, go upstairs, put on some nice music, get comfy on the couch, and hand stitch all of the bags at one time. Because I am doing them all at once, I am saving the time I lose by switching gears to hand stitching. Because I have a hand stitching "spot", separate from my regular sewing area, I have my hand needles, pin cushion, and a few small spools of assorted colored threads already there, so I don't have to hunt for them. This saves me about 5-10 minutes per bag. It doesn't seem like a lot, but 5-10 minutes over 10 bags is another bag, thus uncreasing my production. My hand stitching isn't any faster, I am just a little more efficient.

All of these things can lead to you spending just a little less time on your items. Now, it's up to you to decide whether or not to pass those savings on to your customers, but I always do. Am I underpricing? I don't think so. But who determines what underpricing is, anyway? If you are making a profit and a reasonable amount of labor money/wage on your item, I don't think you are underpricing, no matter what anyone else may feel.

Well, that was my $.02. I hope no one feels they overpaid. ;)