Here’s how you should set your retail prices in the jewelry industry
Pricing products can be a complicated affair. There are many different things to consider and costs to look at. Selling your jewelry can also be troublesome so it is vital that you get your pricing right to gain the maximum amount of sales. When setting prices for your fashion products and jewelry, there are certain things you should first consider before settling on a final selling price.
Calculate your total production cost
Before you can even begin to contemplate setting a price for your jewelry, you must first understand how much it is costing you to create a piece. Without this understanding, you may price your products too low and end up making a loss. Be sure to cover absolutely every angle, no matter how small the cost may seem. Some of the costs you should include can be seen below:
– Raw material: how much are you paying for your silver and gold etc?
– Labor: how many hours will it take to create one item and what do you expect your hourly rate to be?
– Overheads: how much electricity are you using? Do you have to pay building rent?
– Marketing: what is your marketing budget? How much are you spending to advertise this product?
While it may seem difficult to quantify some of these costs, the process is quite straight forward. For example, how would you calculate your overheads? The basic formula is dividing your total monthly cost, by the number of items you expect to make. Let’s say you average electricity bill for the month is $100.00 and you expect to make 27 items in that time period. Your electricity overhead per item would then be 100/27 – $3.70 per item.
Study competitor pricing and market averages
What are your competitors charging? What is considered to be the average market price for your item of jewelry? Regardless of your associated costs, if you are charging way above the market rate this may be counterproductive. Pricing an item too high could mean you don’t make any sales. While pricing an item too low could result in a price war with competitors and ultimately lead to a market crash.
Choose a suitable markup that allows you a comfortable level of profit
So you have calculated your total costs and have research similar market pricing – Now you can look at adding a margin and deciding your final selling price. There are many formulas available for calculating jewelry selling prices; however, it is more beneficial to consider each item individually and set a selling price that reflects the true cost.
Some jewelry designers simply add a 50% margin to every item they sell – While this will ensure you cover your costs, it is not a flexible pricing strategy. A more efficient and sensible method is to simply consider your total costs, and then add a margin that brings your final selling price up to meet the market average.