Pricing for sustainability and resilience

When I started selling handspun yarn on etsy, there were so many million other shops doing the same that it was really hard to get going.  But today when I search "handspun yarn" on Etsy, I only get 12,398 results.  How things have changed.  And it got me thinking about sustainability in small cottage industry.  

This is a bit of something I wrote for a different site.

However, I do take time into account when pricing.  

material costs

cost to get material to my place

time to create (what it would cost to hire someone to do this)

packaging (this is things like labelling and measuring - not the shipping packaging, that's separate)

time to package

Basically, if I can get the materials for cheaper or do the work myself, that's awesome.  But I'm also very concerned about resilience and sustainability in pricing.  If I have a huge custom order and I break my arm or my main supplier runs out, how much would it cost to create the item if I bought the supplies at regular price and hire someone to help?  

That gets me to my wholesale customer price (which until this year was my bread and butter).

On Etsy, I put the standard retail markup (which is really important to know for your industry) on my item to bring it inline or a touch higher than the same item in the brick and mortar stores.  I want to encourage customers to support local stores and I'm happy to have fewer Etsy sales if it gets people buying local.  This is a huge part of my branding.

So time is taken into account, but I haven't paid myself a wage yet.  But since I own the company and I don't need the wage to eat (yet), I like the idea of having more money to grow the range of products I can make.  I have no idea if this is going to be a good business model or not because my understanding of budgeting is excessively basic:

1. don't spend money you don't have.
2. the money coming in has to be a bigger number than the money going out.
3. there will be unexpected expenses, keep a buffer in the account for emergencies.

I think you need to factor in labour as much as you can, though I know it can be really hard.  My experience with sales and sales prospecting has led me to believe that you should charge a healthy margin where you can.  As you raise your prices you will have fewer sales, but it can often be more profitable and provide better cash flow.  There's a sweet spot that optimizes profit.  I also firmly believe that you need to factor in lost opportunity costs somehow.  The upshot to me is that you rarely go wrong by picking a high number.  The reality is that it's very hard to capture all the costs, especially with multiple ventures so err on the side of more.

I'm currently struggling with this with pricing my eggs.  I tried to factor in labour by assigning a cost of $10/hr for things.  My landed feed cost alone per dozen eggs is $2.64, accounting for gas and labour but no wear and tear.  Factoring replacement and infrastructure costs, I'm at $3.10/dozen.  If I sell them for $4, I make about $4 an hour on the weekly care.  At $5 a dozen I can make about $9/hr on the weekly care.  This doesn't take into account what I think I could make on the money I've got invested if I used it somewhere else.  It also doesn't really take into account the risk involved in keeping livestock.  I feel strongly that I should be able to get $5 a dozen, but I live in a rural area and that may not be true.  Many people sell them for $3-3.50 a dozen.  Walmart, though, is $3.69 a dozen.  At the gas station they're $5 and they sell out all the time.  Factory eggs.  

I think the market supports $5 a dozen for my eggs.  This is what I think matters most.  I think that you should always charge what the market will bear and keep evaluating what enterprises make you the most and least money.  I think, in general, that people are scared to charge too much for their skills, especially in art and farming.  I hope that one thing that comes out of this pandemic is a realisation of the importance of local food sources and food sovereignty, especially in government.

I think I'm going to sell the eggs for $5 a dozen.  I think they're worth every penny and, right now, I think I would rather give away any extra than take less than $5.  Effective marketting.  

how much would the eggs cost to produce if you had to hire someone to look after the chooks, collect the eggs, sort and wash them, for a few weeks?

If you broke an arm or two and needed help about the farm, could the eggs pay for that help and still break even?

At $5 a dozen I could theoretically pay someone $10 an hour for all the ongoing labour.  Finding someone to do it, though, would be difficult.  As I scale up, if it's profitable, I should be able to cut out some of the labour per dozen, so that would build in profit even if I have to pay someone.  

Today I searched for “handspun yarn” in all of Etsy.  Although I can no longer select "delivers anywhere", I did some experiments and it appears that there are approximately 13,778 results for products that meet the requirement of "handspun yarn".

When I first opened my etsy shop in 2007, the results were over a million.  My memory tells me it was over four million results, but it might be playing tricks on me.  So we'll say it was One Million results 13 years ago.

One million back then
13,000 today

(tries to remember how many zeros go on a million so I can ask the calculator to crunch those numbers)

That's 987,000 fewer listings.

Now imagine each hand spinner had an average of 10 listings (which seemed to be the case back in 2007).  That's approximately 100,000 people who found selling handspun yarn to be unsustainable for one reason or another.  (and I'm starting to make the math go squishy at this stage, so I'll stop finagling the numbers - I think I got to a much smaller number than reality has to say about it)

But let's pretend I got the numbers right for the sake of this thought experiment.  That's partly because people come and go.  New sellers join up every day and old sellers fall away.  It makes my head spin so we grab a number and call the rest a thought experiment.

100,000 people found selling handspun yarn unsustainable.

Maybe the time pressures of real-life plus business life were too much?
Maybe the price they got for their yarn didn't justify the time it took?
Maybe the supplies they bought were too expensive?
Maybe they weren't able to reach their potential customers?
Maybe...

...

I price my yarn at the high end of middle.  Not the most expensive, not by a long shot, but pricy for someone used to buying yarn in a BoxStore.  I talk about all the things I think about when pricing above and I'm happy with the place I settled and my customers seem happy there too as most of my sales are repeat buyers.

I haven't raised my prices in 10 years.  I don't plan to raise them any time soon.

...

Right now the production chain for wool and cotton yarn is showing signs of serious stress.  Some countries are already reporting yarn delays and yarn shortages.  (those with Ravelry accounts can read about it here: https://www.ravelry.com/discuss/remrants/4070182/1-25)

...

Historically, during times of economic decline, people return to fibre arts and the demand for yarn and yarn-related tools skyrockets.  

So why aren't there more handspinners out there on etsy selling their yarn?  Why is my niche empty?  

r ranson wrote:

Historically, during times of economic decline, people return to fibre arts and the demand for yarn and yarn-related tools skyrockets.  

So why aren't there more handspinners out there on etsy selling their yarn?  Why is my niche empty?  

But do they buy the top of the range supplies when times are tight? We don't have etsy or ebay or even amazon here so I had to run round some other individual sites, but hand spun wool here starts at the equivalent of $14 per 100g and went up to $40 per 100g. mohair, alpaca and silk blends went higher.
but the union minimum wage here is $17 per hour. one site said 6 hrs per 100g that's $102 just for time before you add any material or packaging costs in. Basically almost no one can pay that so since it's not possible/easy to make a living from it few people do it. You then also have to add 25% sales tax to your price and then it gets ridiculous. I make socks and each pair takes about 120g (he has HUGE feet) I cannot afford to pay $100+ for a pair of socks, even $40 is to much for something that will wear out in a couple of years (he wears them without slippers round the house GRRR)

I think the answer to the bottom line of yours is that there are a very limited number of people with the means to buy expensive hand made products that are essentially a pure luxury item, so since very few people can buy them, few people can sell them successfully. It may also be that their quality sucks! But I don't believe they could all be bad spinners.

I sell vegetables and I sell them for more than the supermarket, but there is no way I can sell them for a price that would give me minimum wage, that price would be 10-20x what the supermarket charges for basic vegetables. It's better with the higherend items but there are only so many strawberries one can sell.

Skandi Rogers wrote:But do they buy the top of the range supplies when times are tight?

Historically - YES!

The cheaper brands fall away and the high-quality makers grow stronger.  Ashford and Leclerc (two of the top quality makers in this industry) both started during the 1930s depression and the years of economic slumps since then showed huge growth.  Whereas others came, struggled, and vanished.  

I suspect a big problem when setting prices is thinking about how much one, as the maker, would be willing to spend.  

To us, it has less value because it's just easy to make another.  So why spend a huge amount of money on that?

A bit like Zucchini.  Those with gardens know how easy it is to grow and can't imagine why anyone would pay money to buy one in the store.  And yet... they go for up to 4 dollars a pound - and people buy them!

Whereas I've had gardeners pay me to take away their zucchini.    

It's all a matter of perspective.

The perspective of a buyer is not the same as a maker.  

Other things to consider...
Over that time span, there is a good chance that a fair portion of the sellers have died or simply retired.
That starting number was huge - and was likely a peak, which probably represents a saturated market, at least for that site.
In addition to losing sellers, buyers have been in that same time span, and no doubt many have died, lost the too much dexterity of their hands, minds, or financial resources.
In 2008, we experienced in incredible market crash, causing many to lose their financial stability. For many, this meant having to set aside so-called 'hobby' income, in favor of a fulltime, job with benefits, or even 2 or more part time jobs, and there was simply no time left for their preferred pursuits. Some folks never return to previous dreams, after that kind of havoc. So-called hobby markets are some of the first things to suffer, in great financial crisis, and often never recover.

I'm very lucky because my Day Job lets me see a lot of what's going on in the industry.

In that time span, there has been a steady increase in the overall growth of at least 10% per year in Canada.

The customer demographic pre-1999 was mostly over 75, but post-2000, it was a quick shift to the younger demographic.  So by 2007, it was about 50/50 working/retired.   It seems to be holding about 50/50 until a couple of years ago when there was a new surge in younger crafters.  

As for the sellers, it's interesting to see the way the age ranges flow.  When I first started, most of the post-working-age spinners weren't comfortable selling online.  Whereas now there are a lot more post-working age people selling online.  

In North America, at least the customer base is still there.  But most of the sellers are not.  

I've seen the same phenomenon Carla talks about in my field (mostly independent workers subcontracting out or working directly with end clients). Over the past few years a lot of people have left the market for a variety of reasons, but mostly because they didn't have the volume of reliable work coming in to continue when the economy started to slide, and didn't have the reserve to get through this past year when things went really downhill. So they decided to go look for a more secure job where someone pays them and they don't have to do the work as well as the admin/accounting/promo/etc. I have noticed my competition is really thinning out. People bemoan the state of the market, but those of us who had the tools and did the prep are doing quite well.
I wouldn't worry too much about others leaving the market when there appears to still be good demand for handcrafted fiber (and I would imagine it probably starts picking up when you get the first cold snap up there).

It sounds like their business model and pricing scheme were unsustainable.  They had to find a reliable income.  Their business couldn't compete with other life pressures.  

Which brings us back to the start of this thread - pricing and planning for sustainability.  

I have been making and selling stuff for 40 years.
I learned a few things;
- have a point of difference
- dont join the race to the bottom on pricing
- if its not profitable change something
- dont complain about poor sales, do something
- many people expect somebody else to do promotion etc and you get a benefit, it does not work.
- add value to you product,

SOME BRIGHT IDEAS I WOULD TRY
- selling eggs find some odd recipes to share one at a time with a dozen eggs
- selling mats for photos and pictures sell coloured ones
- try running a course to teach others
- dont sit at any stall looking at your phone, engage with potential buyers
- Have photos of your chooks at the egg stall
- brain storm ideas