Pricing is one of the hardest decisions artisans have to make. Unlike modern retailers who may price their products as a “loss leader” or strategically price them as high as the market will bear, artisans generally price their products with a simple and transparent formula: (the cost of Materials + Time) multiplied by a Markup. In this post we’ll go through each aspect of that formula and explain why artisans charge what they do for their handmade products.
Materials and Outsourcing
Materials are the supplies that are consumed in the process of making the final product. This could include things like fabric, paint, wood, metal, yarn, clay, thread, or buttons in the most traditional sense of craft. Some artisans use non-traditional materials, such as digital artists who use printer paper to print proofs, drafts, and mock-ups.
Few artisans – basket weavers for example – use truly raw materials directly foraged from nature. In most cases, some amount of processing or industrialization has happened to a material before an artisan purchases it.
As anyone who’s entered a craft store will tell you, the materials that artisans use are expensive! That is because when starting out, or when working in small quantities, many artisans have to buy materials at retail prices. Before the artisan even purchases the material at a craft store, it has already been marked up at least three times – by the supplier, the distributor, and the retailer. When dealing in small quantities, materials will always be more expensive. Only when an artisan starts to sell the same thing many times can they begin to invest in wholesale purchases of materials to bring costs down, or to consider the selective purchase and use of outsourcing to reduce material costs.
Artisan Story: Walnut Studiolo
Woodworker Geoff from Walnut Studiolo uses perfectly round pieces of wood in one of his products, the Bicycle Barrel Bag. At first, he purchased boards, cut rough circles with a bandsaw, and then sanded the resulting circles to a good approximation of round. For his early versions of the Barrel Bags, the purchased material was wood and the labor time was significant. But the time spent making a perfect circle was almost the definition of unnecessary. As the popularity of the Barrel Bag grew, he began working with a fellow artisan who used a CNC router, and Geoff started purchasing pre-cut wood rounds made by a computer into perfect circles. His purchased material became precut wood circles and he was able to drop the price because it took so much less time. This was only possible because the number of sales grew.
Artisans are also often at risk of material availability and price volatility. They are still feeling the ripple effects of supply chain disruption from the COVID pandemic, when product unavailability, long wait times, business closures, and significant price increases became more common. An artisan who is able to buy in bulk far in advance might be able to mitigate these risks, but not always. When a tried-and-tested material suddenly leaps in price or becomes unavailable, an artisan has to either spend time recalibrating their sourcing, or bite the bullet and eat the increased cost.
Artisan Story: Drifting Spirits
Ceramicist Lily of Drifting Spirits is in the midst of one of these supply issues: the mine that provides one of her primary glazing materials has closed. There is now limited stock of that ingredient remaining in the world and appropriate substitutes are not yet available in her region. Because she is sometimes unable to purchase that main component and it will one day become totally depleted, Lily has to experiment, reformulating her work using a different material. She then must spend the time and costs of experimenting to see if the latest trial has actually worked.
In addition to the variety of obstacles that may arise, many artisans choose to work with higher quality materials than mass-manufacturers use. Higher quality materials are more expensive, but they also give better results.
Time, Tools, and Transformation
Materials aren’t very useful on their own: a ball of yarn stays a ball of yarn until an artisan knits it into a hat. Tools, time, care, and skill are the factors that transform base materials into a final product.
During the process of transforming base materials into the final product, artisans use many tools. There is an amazing variety of tools. Knitting needles, hammers, carving tools, paintbrushes, looms, electronic drawing tablets, safety equipment, 3-D printers, and kilns are all examples of tools that must be purchased and maintained.
Artisans have to spend time learning their tools and honing their skills. Whether it’s transforming a visual image into a digital rendering using a computer program, or whittling a kiln-dried burl into a bowl, the combination of the artisan’s skill and the sharpness of the tool determines the time spent on making a handmade product.
The simplest way of calculating the cost of labor is to multiply how many hours it took to create a product by an hourly wage. Labor is usually the biggest cost in a product’s price, and getting that calculation right is essential to making sure a product can support the artisan while remaining marketable to customers.
This brings up two questions for many artisans:
- “How do I figure out the exact time I spent making this?”
- “What should my hourly wage be?”
Artisan Story: Stella NC Works
Erin of Stella NC Works has answered the first question with a bit of math. Erin is a potter who does time studies for each product she sells in her shop.
“I’ll record the time it takes to throw 10 mug bodies, pull 10 handles and attach them, etc. – I’ll do that for every step, including glazing, and even packaging for shipment,” Erin said. She then finds the average time for each step, adds those average times together, and she’s left with the average amount of time it takes to make one product. This knowledge of the time invested informs how she prices her final pieces.
The second question, “What should my hourly wage be?” seems to be one of the most difficult questions to answer and at the same time, one of the questions that artisans ask the most. For many artisans, this can be a major trip-up. It can feel like a reflective and existential question and even bring about feelings of frustration and failure, particularly for crafters who want to be paid at the same or better wages than they had in the traditional workplace.
Some artisans use their local minimum wage as a starting place. Others may see their craft as a hobby and use whatever they earn to cover the costs of continuing the work. Still others rely on their artisan income for their full-time living, and can’t afford to price their time below what is needed to pay for health insurance, rent, etc. This is often why there is some disparity in prices between comparable artisan-made items.
Markups for Contingency and Risk
In accounting, the cost of time and materials together is called “Cost of Goods Sold,” or COGS. Businesses have more expenses than just the COGS, so artisans need to “markup” their calculated cost of time and materials in order to keep their businesses running and make a living.
Artisans’ markups need to be significant enough to cover overhead like workspace and utilities, wages spent on non-production time such as customer service, and to cover contingency situations when things go wrong, like waste / ruin, theft, insurance, unpaid invoices, and fraud.
On top of being craftspeople, artisans are also business owners. They spend hours every week communicating with clients, managing shops, packaging and shipping their products, bookkeeping, taking care of tools and workspaces, purchasing supplies, and other administrative things. All this time adds up to much more than just the hours it takes to make the product. Artisans need the markup to cover this labor time that could be spent elsewhere in a paid job.
In addition to the hours spent making a handmade piece, some crafts also present a higher level of risk, and need to be marked up accordingly. There can be greater risks of “ruin” from volatile materials or transformations that result in more waste. Artisans can even be exposed to physical or health risks during their craft.
Artisan Story: Drifting Spirits
Lily at Drifting Spirits considers the danger of different firing processes when she prices her ceramics. One kind of work she does is called Raku ware. Raku is a pottery method that involves moving glowing hot pieces in and out of a kiln. This requires precision and great skill, and it also puts the artisan in more danger than other kinds of pottery would. Because of this extra risk, Lily charges more for her Raku pieces than she does for her less dangerous work.
In order to cover all these extra costs, an artisan’s markup may be as little as two times their COGS, while big brands might charge up to twenty times their COGS. Yet even with the large markup, big brands are able to set a lower product price than handmade artisans can. That’s because the big brands purchase their materials in wholesale quantities for much less money, pay their workers much lower wages, and produce goods at scale using automated processes. Even with all these advantages, shoppers often expect artisans’ prices to be comparable to big brand prices.
Big brands use their big markup to cover the costs of executives, corporate staff pay, marketing, and the increasing costs of customer service. Because they have the funds to do so, big brands have steadily ratcheted up the bar on customer expectations, making it hard for artisans to keep up with modern demands. Many customers expect discounts, free and fast shipping, delivery guarantees, and a full refund or replacement for any reason, even ones completely outside the seller’s control: such as stolen packages, dissatisfaction with the product, or even just changing their mind about their purchase.
Artisans work in a different world. They have spent years developing positive and beneficial relationships with their customers, who are supportive, ethical, patient, kind, and understanding. Along the way, they have developed fair policies that leave both parties feeling satisfied. Artisans hold themselves to a high ethical standard and offer a fair price, even though their costs will always be much higher and their markups much lower than big brands’.
Artisans Love Their Work
On top of all the normal costs of running a small business, handmade artisans often spend extra time and attention on quality control, simply because they care. They enjoy every single step of the creative process, from shopping for the just-right materials to creating the product and lovingly packaging it for its new home. They think about the recipient as they box it up, and express their gratitude in their wrappings and notes. It is a privilege and a gift to make something for someone. It is a trust that is rarely taken for granted and the connection is personal.
While the price tags on authentically handmade goods might seem different from major retailers and brands, that’s because they are different products, created by different people with different values. Every cent is considered and justified, and every purchase is appreciated.
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