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How to Set Your Prices as an Etsy Seller

How to Set Your Prices as an Etsy Seller

As an Etsy seller, setting the right price for your products can be a challenging task. You want to ensure that your prices are competitive enough to attract customers, but also high enough to make a profit. Finding the sweet spot between these two can be difficult, but with the right approach, it is achievable.

One of the most important things to consider when setting your prices is the cost of production. You need to factor in the cost of materials, labor, and any other expenses related to creating your products. Once you have a clear understanding of your costs, you can then add a markup to determine your selling price. It’s important to keep in mind that your markup should be reasonable and in line with industry standards.

Understanding Etsy’s Fee Structure

As an Etsy seller, it’s important to understand the fee structure in order to price your items effectively. Etsy charges several types of fees, including:

  • Listing fees: It costs $0.20 to list an item on Etsy, and each listing lasts for four months or until the item is sold.
  • Transaction fees: When you make a sale, Etsy charges a transaction fee of 5% of the item’s price, including shipping costs.
  • Payment processing fees: If you use Etsy Payments to accept payments, there is a payment processing fee of 3% + $0.25 per transaction.

In addition to these fees, there may be additional fees for using Etsy tools such as Etsy Ads or Offsite Ads, or if you purchase shipping labels on Etsy. It’s important to factor in all fees when pricing your items to ensure you are making a profit.

One way to offset these fees is to offer free shipping and include the cost of shipping in the item price. This can make your items more attractive to buyers and help you avoid paying additional fees for shipping labels.

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Determining Your Cost of Goods Sold

As an Etsy seller, it’s important to determine your Cost of Goods Sold (COGS) to ensure that you’re pricing your items correctly. COGS is the total cost of creating and selling your products, including materials, labor, and overhead costs. Here are the three main components of COGS:

Material Costs

The cost of materials is one of the most significant expenses when creating handmade products. It’s important to keep track of the cost of each material used in your products, including shipping and taxes paid. You can calculate the average cost of each material by taking the total amount spent on a material and dividing it by the number of units created with that material.

Labor Costs

Labor costs refer to the amount of time it takes to create each product. If you’re the only person making your products, you’ll need to calculate your hourly rate and multiply it by the time it takes you to create each item. If you have employees, you’ll need to factor in their hourly rate as well.

Overhead Costs

Overhead costs include any expenses that are necessary to run your business but aren’t directly related to creating your products. This can include rent, utilities, and marketing expenses. To calculate your overhead costs, add up all of your monthly expenses and divide them by the number of products you create each month.

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Analyzing Your Competition

Analyzing your competition is a crucial step in setting your prices as an Etsy seller. You need to research and understand what your competitors are charging for similar products to ensure that your pricing is competitive and fair.

One way to analyze your competition is to use eRank’s Competitor Listings report. This report allows you to analyze any Etsy shop’s active listings, including their pricing. You can enter an Etsy shop name or use the “Select a shop” drop-down menu to choose one of the shops you’re tracking. If the shop has over 100 active listings, you’ll see a total count and the data for the 100 that were updated most recently.

Another way to analyze your competition is to research their pricing strategy. Check if they offer discounts, run sales or coupons, and how it impacts their sales volume and overall revenue. You can factor discounts into your pricing strategy early on to understand the impact on both sides of the transaction.

In addition to analyzing your competitors’ prices, you should also research their product offerings, quality, and customer reviews. This information can help you differentiate your products and set your prices accordingly.

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Value-Based Pricing

Value-based pricing is a pricing strategy that sets prices based on the perceived value of a product or service to the customer. This approach requires a deep understanding of your customers and their needs. It involves focusing on the benefits that your product or service provides to your customers, rather than just the features.

To implement value-based pricing, you need to identify the unique value propositions of your product or service. This can be done by asking your customers what they value most about your product or service. Once you have identified the key value propositions, you can use this information to set your prices.

One benefit of value-based pricing is that it allows you to charge a premium for your product or service. This is because customers are willing to pay more for products or services that provide significant value to them. In addition, value-based pricing can help you differentiate your product or service from your competitors, as you are focusing on the unique benefits that you provide.

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Psychology of Pricing

Pricing is a critical factor for any Etsy seller. You want to set prices that are attractive to your customers while still allowing you to make a profit. The psychology of pricing can help you understand how customers perceive your prices and how you can use pricing strategies to your advantage.


Anchoring is a cognitive bias that occurs when people rely too heavily on the first piece of information they receive. As an Etsy seller, you can use anchoring to your advantage by setting a high price for your product and then offering a discount. This makes the discounted price seem like a better deal, even if it is still higher than your competitors.


Scarcity is another powerful psychological principle that can influence pricing. When people perceive a product to be scarce, they are willing to pay more for it. As an Etsy seller, you can create a sense of scarcity by limiting the number of products you offer or creating a sense of urgency by offering limited-time sales.

Perception of Value

The perception of value is another important factor in pricing. Customers are more likely to pay higher prices for products that they perceive to be of higher value. As an Etsy seller, you can increase the perceived value of your products by highlighting their unique features, high-quality materials, and craftsmanship.


Understanding the psychology of pricing can help you set prices that are attractive to your customers while still allowing you to make a profit. By using anchoring, scarcity, and the perception of value, you can create a pricing strategy that works for your Etsy shop.

Adjusting Prices Over Time

As an Etsy seller, it’s important to keep your prices competitive and in line with market trends. However, adjusting your prices too frequently can lead to confusion and mistrust among customers. A good rule of thumb is to reevaluate your prices every few months or when there are significant changes in the market.

When adjusting your prices, consider the following factors:

  • Cost of materials and supplies
  • Time and labor required to make the product
  • Shipping and handling fees
  • Competitor pricing
  • Customer demand

If you’re increasing your prices, be sure to communicate the reasons for the change to your customers. This can be done through a brief note in your product description or an announcement in your shop updates.

On the other hand, if you’re decreasing your prices, consider running a sale or offering a coupon code to entice customers to make a purchase.

Remember, finding the right price point takes time and experimentation. Don’t be afraid to adjust your prices as needed to find the sweet spot that works for you and your customers.

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Communicating Your Prices

Once you have set your prices, it’s important to communicate them effectively to your potential customers. Be transparent about your pricing structure and make sure that your listings clearly state the price of each item. Consider the following tips for effectively communicating your prices:

  • Use clear and concise language to describe your pricing structure. Avoid using confusing or technical terms that may be difficult for your customers to understand.
  • Offer discounts or promotions to incentivize customers to purchase your products. Consider offering a discount for customers who purchase multiple items or who refer a friend to your shop.
  • Be upfront about any additional costs, such as shipping or taxes, that may be added to the price of your products. Clearly state these costs in your listings to avoid any confusion or surprises for your customers.

By effectively communicating your prices, you can build trust with your customers and encourage them to make a purchase from your shop.

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