Pricing Jewellery

Try this: http://www.businesslink.gov.uk/bdotg/action/layer?topicId=1073899859

But here's my ROUGH guideline for a quick reckoner

TRADE PRICE = cost of materials + (hours spent on the piece x hourly rate)
RETAIL PRICE = Trade price + margin(%)

e.g. a ring, materials cost £80 (including gas, studio rent etc), took 3 hours to make at an hourly rate of £25
trade price = 80 + (3 x 25) = £155
retail price = £155 + 30% = £201.50

You set your own margin (set it high enough so you can discount and still make a profit) and your own hourly rate (set it high enough so you can make a living without having to work all the hours god sends, and so you can offer discount to repeat trade customers).

Good rule of thumb: your hourly rate should be your ideal annual salary divided by 1000 hours, so £35,000 pa = £35 per hour. Why 1000? Because a calendar year = 1000 working hours give or take.

You can work out your hourly rate more scientifically than that, and would have to if doing a business plan (rent/mortgage, loans, gas, electricity, petrol, council tax etc)

But the formula above separates your business costs from your living costs. Don't forget to include studio rent and power etc in the business cost, as well as tools, storage of materials, insurance etc. You can break that down hourly as well across 1000 hours.

The other even easier but less scientific way to set your price is to look at what similar things sell for and price accordingly. Ask a friendly retailer what their margin is and that will get you to the trade price.
i.e. if a necklace is selling for £150 and their margin is 40%, the trade price was (150/1.40) = £107

But remember: your price must a) cover the cost of the materials and b) cover your cost of living and c) have enough padding that it won't matter if the piece takes time to sell. c is important - it's called cash flow...
Selling for less than that = a loss. Never price your work so cheaply you can't make a living off it.

I agree, I know what I would charge for pieces, but Im struggling with wholesale prices if anyone can shed some light...

basically your trade price should be your basic fee,

your cost of materials, consumables, ect, + your time taken to produce the piece,

this is the price that you should sell your work to retailers for.
your retail price is the trade price plus a margin of profit. usually in jewellery it can be anything from 30% to 300%: this is the price that a retailer will sell your work at.

However, Many jewellers can sell their work directly to the public (online, shows, markets ect) as well as through retailers, but in this situation it is seen as "bad form" to offer a significant discount, so in most cases the jeweller will sell their work according to the retail value, meaning that you will make a very large profit on your initial investment.

it may be the case that my post repeats a lot of the larger one above. sorry!!

Wholesale and trade prices are the same thing by the way,

Anyone who takes a slice of your profit, etsy, retailer, ebay, etc etc they are all middle men. The only time a transaction is without a middle man, is if you sell your work directly to a person, they give you the money, you give them the jewellery.

but the answer is yes! you should include a margin, and yes when you sell at trade fairs or directly you should be including a similar or identical margin, its good for you, and its good for your retailers too, as your not undercutting there prices, trust me, they can get really pissed about that!

although it seems that you are loosing out by selling at a trade price, you have the benefit of having a larger order placed, for example, although you charge less, hopefully they will be instantly buying a few pieces off you, meaning you should take a substantial sum up-front. For example, rather than selling one ring to a customer at £250, you sell ten rings to a shop at £95 each, £95 x 10 = £950 they then try to sell your ten rings at £250 each, meaning they take £2500 providing they sell them all.

most retailers will aim to get a 30%-50% profit margin on all sales, however jewellery and luxury retailers will try to get as much as 400% profit margins,

if we take the example above of you £250 ring, providing the retailer sold all of the ten rings at £250, they would make a 38% gross profit,

but then!! if you are selling your work through retailers "sale or return" then you should try to push for them to take a percentage commission (such as 25% on the RETAIL price), rather than only paying you the trade price and them selling the retail price, as this mean that they are making a large profit from no risk. however this does mean that they will be more likely to take your work into their shop in the first place!

i hope this makes sense, i'm not sure if i'm explaining it terribly well, does anyone understand what i'm talking about???? haha

I agree with kate on her first comment, however.... where is your profit!

You need to be able to run a business with your profit margins even in trade/wholesale, especially in your first years of trading as you have to keep re-investing.

If you make your jewellery business your full time job and only pay yourself a wage and cover you costs then you're not really in it for business, just for fun??

Most jewellers look to retailers/ galleries to sell their work in, so it's really important make sure you're getting a profit from your trade price (as they are definitely making one themselves!)

There's no set profit guidelines, and most jewellers probably wouldn't tell you theirs. So try and price your work accurately and then decide what you're happy with, it can vary from an extra 33% to 100% of your production cost (i.e materials, hourly rate, expenses etc) .

I.e : £99 to produce = £132 trade price (33% profit) 

or £99 to produce = £198 trade price (100% profit)

And finally,

DO vary your profit margins depending on your market. Do your research and look at pricing from other designers. You may have to cut your profit a little to make sure your ring sits at the right place in the market to be competitive, but you may also raise your profit if you costing including profit seem to be priced to low in comparison to your competition - and you never know, this may also mean that you sell more pieces if your price is right - then you'll make more profit anyway!

Elizabeth

@Elizabeth Humble great post

@ Will Cutler thanks!

@ Kate Pickering - sale or return basically means that if the retailer/ gallery don't sell your work they'll send it back to you. If they have specified 45% it means a ring at £250 would leave you with 55% equalling £137.50. (Easiest way to calculate is work out 1% of the retail price and multiply by the percentage you'll receive, i.e £250 ring = £2.50 x 55 = £137.50)

Hope this helps!

Elizabeth

Generally when I sell independently I take my material cost x3 then add my hourly wage. When I do 'sale or return' I am lucky in the fact that I tell the vendor what price I need and then they add 30% to that price, good rate I know. I have made mistakes in the past and ended up doing myself out of pennies! excellent second time I am sending this apparently I cannot add! Yikes!

in the case of the £250 ring at 45% commision 

the shop that sells the ring will get £112.50 from that sale, you as a jeweller will get £137.50 however to get a more realistic profit figure you have to take away your trade price, so -£95 gives you £42.50 profit,

but remember that you also paid yourself at the begining when you worked out your trade price, so your final income will be higher,

lets say that you spent 2 hours working on one ring, and you charge your time at £25 an hour, your final income would be £50 + £42.50 = £92.50

so in this case, the retailer will take a much larger chunk of the profits than you, due to you absorbing the cost of manufacture.

@Kate & @Will - absolutely, you'd have to be happy with receiving the £137.50 to cover everything including your profit. I guess thats where your profit discretion comes in!

Elizabeth

Wow! This is without a doubt the best discussion I've seen on pricing in many a year. As an accountant working with designers / creatives, pricing is something that we're always talking to clients about. I'm now gonna reference this post, as everything you could possibly wish to know is here.

We always encourage clients to work out their break-even price - what is it costing them to make something. Then try to figure out what the market price might be. Hopefully it'll be more than your production cost!

Also, as you become better known, be confident about charging more for your work. Your Brand value increases over time, so make sure that's reflected in your pricing.

Great post!

Ali

This convo has been so interesting to read through.  I find it difficult to price work sometimes...not so much the work itself but when galleries sell at different commission rates...it would mean shops would have similar products but different pricing.  In this case what price would you sell on your website?!

and more so...I visited somewhere recently that charges a much higher rate than I am used to...what do you do with pricing on that front, I think keep my costs to what my costs are and charge what I usually would do and their rate is what must be expected in said gallery.

Very interesting discussion, but what happens when you add the dreaded VAT into the mix? The retailer has £50 VAT to pay on the £250 sale which cuts the margin they make considerably

i didn't talk about the v.a.t element because its quite a complicated subject.. it depends on many things,  such as who is vat registered, and who isn't.

however its true that most retailers will have to pay VAT on their sales, but these retailers will take it into account when they negotiate their comission rate.

If the gallery pays VAT on the price of the piece would you have to pay VAT on the piece as well?  I have never considered this! 

The VAT threshold for 2011 is £73,000. This means you do not legally need to pay VAT or claim VAT back on your purchases until your business turnsover this amount. 

Can I just agree with Lizzie that Wholesale/Trade price is NOT the same as Cost price. You need to work out your cost price accurately ( working out hourly rate properly, costing materials for piece + making time ) but you should still make a profit even on Wholesale! Although the odd piece can always be a loss leader.

Re Vat - what @Christina Hirst said :)

It is likely that most retailers will be vat registered, so they will have to pay vat on selling your goods. To work out how much that is, at current rates the vat element will be 1/6 of the selling price. You should base any commission on the net of vat figure.

Ali

@Ali, am i missing something? how can VAT be 1/6 of the selling amount? if VAT is 20% then it must be 1/5? 

or am i being stupid here?

you can also multiply by 0.2 such as £100 x 0.2 = £20

Very interesting thread - pricing always gets me in a pickle, but i really need to get to grips with it now and get pricing my work! :D

As Molly said earlier...
"...when galleries sell at different commission rates...it would mean shops would have similar products but different pricing. In this case what price would you sell on your website?!"

This is something i was wondering about too out of interest - say if you have somewhere marking up at 40% and another at 140% - which do you price on your own website at, so as not to cause a problem with your retailers?! :)

Steffi x

Steffi,

Are you talking about places which have your work on SOR? What I tend to do is work out my cost price and then set my RRP, I times by 3. When I did wholesale I would make sure that on my wholesale catalogue I had my RRP as well as my wholesale price so oulets would know what I expected the piece to retail for (some of them have a hard time pricing too!!). For SOR I would take off from RRP whatever mark up they would put on and that would then be what I would get for the piece.

This means that you mostly (with the exception of Electrum and other major galleries) get more for SOR which is as it should be because you are giving your stock to someone with no idea of whether it will sell and why should an outlet which is not prepared to buy your work make as much profit as an outlet that is! More risk on your part should provide more return.

So set your work on your own website at your RRP but make it a good RRP!! don't under sell yourself.

Cx 

Unless you're offering retailers exclusivity for a design, they can't really complain. They set your price, you set yours. So long as the price you sell it to them is fair, it's up to them what they add on as mark-up. It's called competition.

But to be honest, you should see the retailer's price as a good ball park figure for your own. If they're selling it for £150, why aren't you?

There are two contradictory aspects to this. The first is that online retailing is generally seen as being cheaper than physical retailing - so web-only stores are cheaper than bricks-and-mortar stores. On the other hand, buying direct from the maker has a certain cachet to it, so you might expect to pay more when dealing with the actual craftsperson.

So consider your "brand". If you don't want to be seen as "cheap" or "cut price" don't offer your jewellery cheaper than it is elsewhere and never discount a design unless you tell any retailer to offer the same discount. If you're not selling mass-produced stuff, then don't sell it as if you are. There's a premium involved in buying one-off pieces and your customers understand that.

If you're wanting to get rid of old inventory, consider selling it either through a third party or using another brand name, but never on your own site or without telling people stocking the same design.

Another thing to consider is this: list your items and list where they are available with a link to your retailers. Then list it yourself for a slightly higher price but list it as "direct from the maker" and offer it with a certificate of authenticity or a special box or something. It's called "value added". If you can negotiate a commission from any retailers who sell your stuff from the link you provide, even better! (Look how Amazon do it - try to buy shoes or jewellery or books and see how they list their price and other supplier's. Amazon get a commission for all sales).

One other thing to consider is this: the 80:20 rule (also known as the Pareto Principle). Some of you will remember it from a lecture I gave ;-)

Basically the rule states that 80% of your business will come from 20% of your customers.
It is these 20% you have to spend most of your time keeping sweet. Annoying those 20% to try and chase sales somewhere else isn't worth it. Don't risk losing good will from the one or two shops that sell lots of your jewellery just to get a few more sales at a lower price.

This assumes you see your retailers as your customers which you probably should as that will be easier than chasing individual consumers all the time where the 80:20 rule works against you: 80% of your time will be spent on just 20% of your customers but they won't necessarily be delivering 80% of your income!

Your business plan should state clearly who your customers are and where you see the bulk of your money coming from.
That then informs your marketing plan - how to attract the right people, how to set your prices, how to market yourself etc

I just price my work by considering how much I would be willing to pay for it. It probably means my prices are lower than they should be but I always feel a bit guilty charging loads! 

I was told at uni that you should charge £20/hour min + material costs. But that can prove a bit difficult if you do things like acid etching where it may be in for 3-4 hours and you're not physically doing much on the piece.... 

£20/hr works out at £20,000 earnings a year. That's not very much is it!

If I sold everything at the price I'd be prepared to pay for it, I'd be giving stuff away. But then I'm a Yorkshireman. Stingy buggers, us lot.

Another thing to consider for pricing when selling at craft fairs or otherwise directly to customers.

If you have a ring that costs £100 and you decide that you will sell for £150 at craft fairs or to galleries (who then sell for £300). If you sit at a craft fair for 8 hours and sell that ring, you need to cover the cost of your stall and your time working that day too.

Morning!

Wow, so many helpful pointers there! Have left the pricing issue for a while but getting back in to sorting it again now so it's really helpful to read through this thread, thanks all! :)

I was only going to charge my time @ approx £8/10 p/hr, is that too cheap do you think?!

Interesting points too about making sure your own website prices match up with what you set as RRP through galleries, etc.

I guess another thing to consider is the changing costs of materials too, such as Gold & Silver etc to keep your prices current? :)

Thanks all, really usefull discussion! Steffi x

I know it's been a while since this has been posted on but thought I'd comment seeing as I've found it.

I really really wouldn't consider charging anywhere near £8 an hour for your work (even before the other cost considerations) ... receptionists can earn that and being a designer/artist means putting yourself in a MUCH higher wage bracket. At a minimum you should look at £15 an hour (if you're new to the scene that's a more realistic place to be - ofcourse if you have ten years wage on the scene then you should be charging in the £40ph + area)

You need to start with figuring out your wholesale price as going backwards (retail to wholesale) usually involves not taking everything into proper consideration.

You need to decide on your hourly rate. Decide how many pieces you can create in that time. Figure out the material cost. Any packaging used. Then you figure out your overheads, fees, sewing machine repairs, new tool buys that you expect in the year and divide that by the amount of items you will be making each month. (ie I'll make 100 pieces per month, my overheads for the year total £18k so divide that by 1200) You add that figure to the price of each item). And if you photograph the item then your hourly rate needs to account for the time taken to do this.

That's an easy way to figure out wholesale pricing. Then for retail. Depends on yourself. Some people add a percentage. I find tripling the wholesale best. BUT you then also add on your perceived value. If you want to be high end, charge high end - you're not a high street shop so don't price like it!

And yes you charge at the retail price if you sell it yourself. You will find most people you wholesale to will NOT appreciate being undercut, so I don't recommend doing it. You could lose further business with them and they may bad mouth you as sometime to buy from to other clients or potential clients.

(And unless you plan to pay VAT ignore it - that's their problem!)