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Pricing talk


#1

I have been seeing questions about pricing on this list off and on
for several months. It is of little importance if the price being
considered is wholesale or retail. A price for a given item is the
amount you want to receive for that item. Below are tips found on
another listing of interest to me; leather crafting. In one answer
on that list, the answer was more pointed; price an item at least
twice your cost (including your labor and overhead). By that
example, you have an item in a display case or on a shelf in the shop
and it is marked at two times what you paid for the materials. If a
client (customer) asks for a particular item that you are temporarily
out of, agree to make one for the client if he/she pays a
non-refundable 50% deposit. This would cover the cost of your
materials. If the client wants a special design (i.e… a custom
piece) charge three times your material and again request a 50%
deposit.

Thank you,
Jim Good


#2

Jim, Unfortunately your pricing suggestions fail to take into a
account all of the costs associated with running a business. I can
assure you that in an urban area, simply marking your material cost
up 2 times (especially if you are actually producing the item and own
a retail storefront), will have you out of business shortly. There
are far too many costs associated with pricing your goods to use a
simple markup as you suggest, starting with the labor you put into
the piece. By your formula, someone producing a piece of silver
jewelry with $20 in silver in it should charge $40 for it regardless
of whether it took them 10 minutes or 3 hours to make. That is
simply not going to work. There have been a number of previous
discussions on list about how to price your work and many of them
take into account all of the costs associated with actually producing
the work (look at David Geller’s postings if nothing else) so I am
not going to get back into them here. Perhaps you should go back and
take another look at them yourself, however.

Daniel R. Spirer, GG
Spirer Somes Jewelers
1794 Massachusetts Ave
Cambridge, MA 02140
617-491-6000
@spirersomes
www.spirersomes.com


#3

Yes, for example there’s Peter Aloisson www.aloisson.com who makes
solid gold faceplates for mobile phones. On his website he states
that a particular model has 75 gm of 18 K gold, so maybe 2 troy
ounces of gold, worth about $760 today. Yet the item itself goes for
$24,000, according to various reports. So pricing isn’t necessarily
just a matter of marking up 100% over the cost of materials, though
it can be that way for jewelry that is more in the class of a
commodity.

Seems like there was an article addressing this on the Lapidary
Journal website. Or maybe it was somewhere else, now that I’m
searching for it again. Anyway, the author talked about how many
craftspeople undervalue their own creativity, and that you really
have to charge for that. If you just charge double the cost of
materials, you’re putting your jewelry in the same class as a
department store jewelry rack.

DMGreer, LLC
www.luxefon.com


#4

Great post from Daniel

Here’s my largely uneducated 2 cents, from 30+ years in the
industry. Comments gladly accepted.

Calculating trade shop pricing vs. retail pricing…

An accountant once explained to me a theory of pricing for small
trade shops (like my one man shop). The first thing to do is add up
ALL of your costs for whatever period of time, like one month. This
includes living expenses, wages, taxes, store rent, everything. You
then divide that result with the number of hours worked in that month
to obtain the hourly cost to “keep the doors open and keep food on
the table”. You need to be honest about how many truly productive
hours you will actually have in that month. It’s probably not as many
as you think. Now you can calculate your minimum hourly rate based on
the real numbers of hours of full production to establish what kind
of profit you are planning for. To take it a bit further, you can
calculate knowns, such as how long it take to size a ring, and the
income from that, and so on.

Retail pricing is basically the same, except you use assumptions of
sales figures, usually based on history. Rather than hourly rates,
you can use daily cost to keep the doors open, then figure in the
profit you are planning for… If you have no history, your
assumptions will be educated guesses. When I write business plans I
have to make assumptions like this, and it always worries me, so I
research demographics. I especially look at store design to make sure
customers will enjoy coming in! I’ve seen attractive retail jewelry
stores done at relatively low cost by handy craftsmen.

I haven’t been following this thread, but if it was about wholesale
pricing, that’s largely the same as retail pricing. The difference
being the amount of sales made is higher so the margin can be lower.
Thus the basic difference between retail and wholesale is in quantity
of goods sold. Many years ago I used to shop at one jewelry
wholesaler in S.F. whose wholesale pricing for gold items almost
always exactly matched twice the cost of materials. At those rates,
they did pretty well. Retailers back then got by at ‘keystone plus
10’ for low rent locations. I think that works out to almost a 5 time
markup from material costs! Mall locations are a completely different
matter entirely!

In recent years, the jewelry industry has seen some drastically
significant changes in the way business is done. I witnessed a nearly
total destruction of American jewelry manufacturing in the past 20
years or so. For instance, take a look at ACN (one of the jewelry
sales channels) on Cable TV. Their pricing is such that I can not
purchase, at wholesale, the materials to make finished jewelry as
inexpensively as they retail some finished products for! It’s a wild
ride. Another ‘fer instance’… I once (1985) approached Ben Bridge
Jewelers to make stock for them. The manager explained to me that
their stock items cost them about $1 over the cost of materials
because they have their own shops overseas. wow… I wish us all good
luck, and then some!

Jeffrey Everett


#5

I also haven’t seen the early parts of this thread, but here is how I
was taught to price (anything manufactured): Add up your cost. This
begins with materials, and then figure the labor of the worker or
workers. Add overhead - you can add 10% and be safe, if you’re just
a working stiff. Then multiply that total number by 4, and you have
retail. Ex: $10 parts, plus $10 labor = $20, plus $2 (10%) overhead
=$22. $22 X 4 = $88 retail. Then, “wholesale” is 50%, and a
"jobber" rate (quantity) is 1/3 -“triple key”. even cheaper is "cost

  • 20", which is 30% instead of 33%. This system works quite well,
    and is easy to use. Some caveats:

You should figure cost of materials with a built-in profit - Your
company is buying them, and reselling them to itself at a profit.
“Buy Low, Sell High” Not a lot, but a profit.

If you are Solo, Then you are two people - you are the Worker, and
you are the Owner. Labor is the person who does the work, per hour,
and is a cost factor. The profits realized from the sale go to the
Owner. Think of it as, “What if you contract someone besides
yourself to do the work?”

Lastly, after you do this process, don’t be afraid to sit back and
look at the piece and assess “Zap Value”. Yes, this piece prices out
at $1500, but it’s so fine we can get $2000 for it…