Pricing your items for maximum profit requires you to think about value, which determines profit. Profit pays for your time and expertise as well as being the resource you need to invest in future purchases. You need to value your time and expertise (even if you are not an expert yet). I had a hard time with this when I first started selling online because I just wanted to make some extra income. I didn't value my time very much because I was having fun and making some extra money. However, the more time I spent on my business, the more I found that I was giving up other “fun” things in exchange for making money. That's when I realized the value of my time. When I made more than double my money, I felt greedy. However, I also realized that if I didn't make enough profit to pay for my time and to invest in future purchases, I would no longer have a business. So, remember that profit is not greed – it is payment for your time and expertise and an investment in your business.
We reverse engineer our profit to ensure that we are making what we consider an acceptable profit. Keep in mind that an acceptable profit for us may be less or more than what you will consider an acceptable profit. When we first started our shop, I was happy with a 25% – 50% mark up (if we purchased an item for $10, we sold it for $12.50 – $15.00). However, when you have to pay 28-33% tax on an item, 25% was not even covering our costs. I quickly learned that I had to make a minimum of 100% profit (or double the cost I paid for the item), just to make any profit. For example, if I purchased an item for $10, I need to sell it for at least $20. Our current requirement is a 200% profit to grow our business at the rate we desire.
There are three things that I take into consideration in deciding whether I should purchase an item and if so, the price I will charge for that item.
- Value – What is the value based on similar sales?
- Added Value – Can I add value to the item in any way?
- Cost – What is the most I would pay based on a profit of at least 200% or $50?
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Why should you care about value?
Value determines profit and profit determines the future of your business (if you ask Target, Walmart or any other retailer, they will tell you the same thing). Without your time and expertise as well as money to invest, your business is dead (unless you have so much time and money it doesn't matter). Let me tell you a story about value that made me realize that value can determine the amount of profit made on a sale and how profit can grow your business.
When I first started selling online, I sold a shell necklace on ebay for $550 that I paid less than $5 for (when we first started, I didn't buy anything over $5). I was petrified that the buyer would tell me it wasn't what I had described and they didn't want it. However, this was an auction on ebay with a starting price of $24.99 (which I thought was ridiculously high). When the bidding got up to $120, I started panicking that I had described it as something it wasn't or that I had done something to make people think this was a valuable necklace when I didn't think it was (it was made of shells for crying out loud). I did some searching on ebay and saw the same necklace was available for $1,250 from another seller (this was the only other necklace of this type that I could find). That was my “aha” moment – Don't sell anything without doing your research! This was also the moment I realized I could actually make money at this and I used the profits from this sale to grow my inventory and my business. This is an example of profit not being greed, but being a catalyst for growing your business. So, do your happy dance when you make a great profit and use it to be your catalyst for change and growth. By the way, I have looked for this same necklace at every auction, thrift store, flea market and garage sale since (wouldn't you?), but have never seen another one like it so now I understand the price.
How do you determine value?
The value of an item is what someone is actually willing to pay for an item so you need to know what that is. To determine the value of an item, I look at similar sales to see what this item has actually sold for. My first stop is ebay because it is one of the only free sites that actually lists the sold price for items. Sites like Worthpoint give sold prices, but you have to pay a monthly fee to be a member (although they do offer a free trial period and have values for lots of vintage and antique items). We also check the listing price on Ruby Lane, Etsy and other similar sites (depending on the type of item).
When you are checking for similar items, make sure they are truly similar in condition, similar age, color, etc. Just because an item is the same or similar type, does not mean that it has the same value. Some vintage glass values vary based solely on the color of that item. It depends on the condition of your item (any chips, cracks, etc.), the age (is it the first issue or has it been reissued 5 times), etc. You don't want to sell your $550 item for $24.99 as I almost did.
If you can't find a similar item online, you will have to use your best judgment on the value. Is there a buyer for this item? Is it unique enough to be valuable? Can I keep it if I can't sell it (this was my justification when I purchase something that I really like)? Is it cheap enough that I'm not going to lose my shirt if it doesn't sell? If you can't answer yes to any of these questions (especially the last one), don't buy it.
Now that we've talked about why value is important and how to determine value, let's see if we can add value to that item (more value = more profit).
How can you add value to an item? There are numerous ways to add value, which will increase the sales price of an item, which in turn increases your profit. I feel like I'm giving away more secrets, but here we go. These are six ways that can add value:
- Make it work
- Make it pretty
- Add details
- Bundle like or similar items together
- Add a gift box
- Wrap it up
Make it work – simple, quality repairs to an item can determine if an item sells as well as the value of an item.
Antique watches sell well, but you must have a working battery to make sure it works. There is a huge difference in price between a watch that works or doesn't. Martin has learned how to replace watch batteries in order to maximize his profit on watches. I have learned how to make minor repairs to jewelry (loose jump rings, etc.) that would otherwise result in a much lower profit.
If you are comfortable in learning a new skill you can use in your business, you can maximize your profit on certain items.
Make it pretty – cleaning or polishing has an effect on value as shown below (be careful because sometimes it has a negative effect – see our warning below).
This may seem like common sense, but it takes extra time and effort. However, is a great way to increase the value of an item. As you can see by the graphic below, polishing the silver on these silverplate cocktail shakers increased the value of these cocktail shakers by 50-100% or $10 – $15 each.
Keep in mind that cleaning or polishing an item is NOT always a good idea. Sometimes this hurts the value of an item. Old coins, old furniture and other vintage and antique items should not be cleaned or polished unless you are absolutely certain this will not hurt the value of an item.
Add details – adding details to an item increases the opportunity that it sells because people generally search for specific items that they have either seen and desire or want to add to their collection or pieces on hand. For example, if I want a teaspoon to match my mother's silverplate flatware set, Community Plate Morning Star, I am not going to look through all 1,166 listings on Etsy or 3,616 listings on ebay for “silverplate teaspoon”. I may look through 77 results on Etsy or 130 results on ebay for “Community Plate silverplate teaspoon”. However, I would rather narrow down my search and look through 1 listing on Etsy or 15 listings on ebay for “Community Plate Morning Star silverplate teaspoon”. So, how do you find out more details on your vintage item? These are my favorite resources for adding details to a variety of vintage items (I'm giving away more secrets).
My Favorite Resources:
Replacements, Ltd. – silver, silverplate, crystal, glassware, china and porcelain
Sterling Flatware Fashions – this site gives pattern names for silverplate flatware
Illusion Jewels – identifying jewelry and jewelry marks
Vintage Stitching – dating vintage sewing patterns
If you need more resources, do an online search and find your favorite sites and bookmark them for future use.
Bundle items together – put similar items together for a more value and an increased sales price (remember more value = more profit).
Without bundling, I would have sold these items for $70, but because I bundled them together, I sold them for $125. As you can see, bundling items can have a profound effect on value, especially designer items.
Add a gift box – you can purchases empty designer gift boxes online for designer items (be sure they are authentic) to add value to higher priced items.
Value without gift box $275. Cost of box was $21. Value with gift box $350.
Value without gift box $175. Cost of box was $23. Value with gift box $295.
These examples give you an idea of the increased value for a small cost.
Wrap it up – you can add an option to have items gift wrapped (for free or for a nominal fee to cover your costs) which buyers love, especially during holiday seasons. However, you will need to make sure that it is a viable option for you and your shop. Gift wrapping takes time and you will need to keep an inventory of boxes and wrapping supplies on hand. If you sell specialty jewelry items that cost upwards of $50 and sell a manageable amount of items, it may work for you. You must weigh how much time you have available and the resources you will need. However, this can be a great marketing tool during the holidays if you need something to help boost sales.
We actually stopped providing gift wrapping services because of the volume of our shop (we sell 100-250 items per month) and the variety of sizes in the items that we sell.
What is the most I would pay for this item?
My final secret to maximizing your profit is to determine what you will pay for an item. As stated earlier, your profit will depend on a number of things such as how established you are as a seller, the type of merchandise you buy, how quickly you want to turn over our items, and how quickly you need to make a profit.
For example, if you are a new shop, you might be willing to make less profit until you get a good number of positive reviews and some return customers. If you are an established seller, you can increase your profit because your customers know that you have quality merchandise that you will stand behind your merchandise.
Another factor to consider is what you are buying. If you are purchasing vintage glassware and can find it easily at garage sales in your area for $1 – $5, you can make a larger profit. If you are purchasing glassware and it is only available in your area at auction, you may have to pay more and will have a smaller profit margin. You can't change the price based on what you paid for an item – the value is the value.
You will also have to decide how quickly you want to sell your items. If you want to sell quickly, you will most likely make less profit, but you can sell more items in the same period of time so you may make the same amount of profit. This is a conversation for another day because turnover (how quickly you sell an item) is a subject all its own. I price my items to sell within a few months, but I am not willing to sell at rock bottom prices.
If you need to make a profit quickly so you can purchase more items, you will also have to sacrifice some profit. We did this in the beginning because there was only so much money we could spend. Don't worry if this describes you – it described us until we were able to keep a reserve – slow and steady wins the race! We now keep a reserve so that this is not our first concern.
As an example, I purchased this Fenton Silver Crest Epergne for $65.31. The same item with the same condition and age just sold on ebay for $40. Yikes! Needless to say, I will either have to sell this piece for no profit, at a loss or keep it for a long period of time. I have decided to keep it because I know that it will be worth more someday (after all, these break all the time so they only get more valuable). Besides, it is gorgeous so it's not hard to look at.
How do I know these strategies work? As you can see in our stats below, we are making a profit of 247% to 1567% on 11 out of 12 categories. Can you guess what types of items we are no longer buying?
Type – category of item sold
Code – this is our internal code for that that type
Sales – number of sales for that period
Net – Revenue after selling fees
Revenue – Revenue after deducting selling fees and cost of goods sold
Cost – Amount that we purchased these items for
ROI – Return on Investment
(Revenue – Cost of Item = ROI or profit)
You probably guessed that we are no longer buying clothing. Does this mean you shouldn't buy vintage clothing? No, for us it means we didn't focus on this category enough because I know that I can't be all things to all people. Don't steer away from this category because of our states because one of the most successful shops on Etsy is a vintage clothing shop.
I wish you luck in your Etsy shop! I'd love to hear your success stories, questions and struggles so please comment below if you'd like to share. If you have a friend or friends who would be interested in this information, please forward it to them so we can all be successful together.