Justifying your pricing to customers in a Big Box Store world

[Tallbald]

I craft primarily custom laminated belts, rugged unadorned holsters for black powder revolvers and single actions, and belt bags. A few muzzle loading accessory leather items too. There's a world of lower cost similar items available online, much from other areas of the world where wage costs and material expenses are lower than here in the USA, and there's no way I know of that I can compete with such low pricing. I use top notch materials, have a beautiful Cowboy 3500 I've nearly paid for with sales, and I spend a great deal of time and attention to detail and quality construction in my crafts. This is a hobby I want to be self-supporting.

A well made full flap holster from me earns about $100. And although I receive many complements on the quality, design and execution of my leather art I feel I should be selling more. Online auctions and sales sites routinely offer what looks like the same holster I make for maybe $35. I'm making a little less than minimum wage as it is, and wonder now after several years if there's any future for me in emphasizing the differences in construction of my works from other lower priced Big Box Store inventory. I will not lower myself to disparage others works, and won't belittle other crafters efforts to try to elevate my own status.

I used to believe that quality speaks for itself and would bring in a modest string of orders to me but the dry spells make me question my thoughts. And when many people spend $25 for a single meal that goes down the drain the next day, it's frustrating that they may be reluctant to spend the equivalent of four single meals to purchase an item that will last them maybe 30 years!

How does one communicate to potential customers the value of the extra effort and material quality they receive ordering from me and other crafters like me over the crowds of mass production suppliers? Thanks for any thoughts. Don.

[VMTinajero]

Hi Don,

the short answer is you don't. Like you, I make items that have a niche market. Those that in the know can tell the difference in quality & will seek you out, not the other way around. If you try to convince someone who does not appreciate or understand the quality difference you will only give yourself an ulcer, high blood pressure, or worse. As people get more & more into a hobby they usually learn on their own that quality costs more. You cannot force that light bulb to turn on in their brain... 

[LumpenDoodle2]

I know I don't charge enough for my things, most of my customers tell me so.  :-)    Thing is, I consider myself as still an amateur, and price accordingly, but I cover my costs, and make enough money to be happy about it.

I have also had the irritation of a customer complaining about the price.   Apparently, he could have bought the same item, and saved more than half the price by buying from China.   A load of tosh, I know that (and he knows that), but there are some people in this world who would complain about the price, even if it was free.

Get a few reviews from happy customers to do your advertising, and don't pander to the meanies out there.    If a dry spell happens, use it to work on a new idea/item, it might be the thing that carries you over the next dry spell.

[JimTimber]

If you're not getting a push back on price from about 25% of your customers, you're not charging enough.

I make specialty gun parts and I have a very specific client targeted - the un-tactical.  Well, one of my dealer friends said I should lower my price, increasing my sales and thus making more money in volume: the Walmart model.   Another well-meaning friend tried getting me a contract deal with a major manufacturer to license the design and get a royalty off their massive sales volume potential.  Lets examine those two approaches for a minute.

The Walmart model sounds great, right?  Sell zillions of do-dads for a slim profit but in the end you get a pile of money.  Except if you're investing a lot of time in your production and quality control, lowering your price means you make less money the more you sell.  If you sell 10 items a month at $40, you get $400.  If you sell 1000 items a month at $40 you get $40,000, and you have a LOT of time tied up in handling all those extra sales, you have logistics issues, you have capital tied up in inventory and supply streams, and likely employees.  But the Walmart way says we need to be Cheap Cheap Cheap to move that much product, so we need to knock that $40 down to $5 to hit our sales volume.  That $40K just turned into $5K and you had $4,500 in labor to make it happen. You did 100 times more work for 25% more money and you haven't seen your kids other than in passing in 27 days.  Walmart only works when you can make money at the $5 margin, and then you can make it up in volume.

Then there's the licensing approach.  You come up with the design, they pay you a royalty of about 3-5%, and you collect the money while they do all the work.  Woo Hoo, I'm rich!  Right?  No, because if you're in a tiny little market and they sell your stuff for what you did, but they sell 1000x more of it, you're only getting 5% off the top.  $50 per 1K units sold doesn't buy too much, and you'd be better off selling 10 of them at full price.

This is a lesson that a sales manager friend of mine taught me when I was 19.  "Work less, make more."  Not "work more, make more" as is so often the mantra.  If you can carve out a premium spot for yourself, you'll be able to charge higher prices and people will be willing to pay them, even if 25% are grumbling when they get the bill.  There's still people out there who think the price tag dictates the quality, so add on a few bucks for good measure and send out the calling card for those people.  Don't go chasing the bottom feeders, you'll only end up broke with them.

Lastly, it's easy to discount an item if it doesn't sell at a higher price.  Once you've established a cheaper price as the item's value, it's really hard to increase it without losing customers.

Edited March 3, 2017 by JimTimber

[LumpenDoodle2]

Just to add, I've had a couple of opportunities to sell to a dealer/shop, but only did it once, never again.    You sell at a discount so they can get their cut, and end up assembly line making an item for them.

 

[JimTimber]

You need to add that mark-up into your pricing.  Considering they're going to have to deal with the customer, you have less work involved in those sales and that's where their margins come in.  Wholesale is usually somewhere between 50% and 75% of retail.  You've gotta be some hot stuff to command more than that and get dealers who want to sell your stuff to make less than 25% of the sale for their investment.

Lets say you sell an item direct for $50.  We know you have $10 in material, and you spent some time on it so you need to get paid for that too.  Our total cost is $25 for the sake of argument (took 30 minutes and we like making $30/hr so that's where our $15 came from), and we retail them direct to consumer for a handsome 100% mark-up (not bad, but not a "Shark Tank, we're headed for Billionaire" margin either).  Figuring it takes you about 10 minutes to talk to the customer, get their payment situated, and package the item for shipping or what have you, there's another $5 they just burned up, and then the credit card people are going to take their 3%, and the Fleabay people are going to take their 15%, boxes and stuffing aren't free either, then there's the keying up the postage...  See where I'm going here?  You can wholesale a box of 10 for $35 and make more money than selling direct, plus you just got $350 in cash in one shot.  Boo ya!  Dealer is making $15 on every $35 investment for a tidy 33% and they're happy too.

Dealers also expose people to you and add value in marketing your brand.  Don't look at them as just another mouth to feed off your labor - if they're making money, you're making money too (or you shouldn't be in business).

[JLSleather]

I'm still simple (really -- just ask anyone).  I don't pay $100 for a belt.  Somebody can tell me stories about how it's 'real' leather, it's laminated, it's hand stitched, uphill both ways.. and that just isn't going to sway me.   If there's a guy selling grade A Hermann Oak leather  belts, double layer and double stitched, for $70 -- then what will you tell me to suggest that I pay more?

If I pay more for something, it's because either it's something I can't get somewhere else, or it's BETTER.

• Because something is 'handmade' does not make it better.
• Putting a higher price tag on it does not make it better.
• Taking longer to do it does not make it better.
• Adding a video and a blog about it does not make it better.

I could go on, but in the end it's simple. If you hope to charge me more, then tell me how it's BETTER.

Oh, and I might just walk away from someone who started about how many hours they have in it.  Who cares, anyway?  Example:

Guy1 and Guy 2 both use A-grade leather, the same dyes/glue/thread, all the same materials.  The belts look very much alike.  Both guys want $30 per hour.

Guy1 cut his leather with a 7' straight edge, then used a strap cutter to cut the belt strips, then marked out the tip and buckle ends with a stylus, trimmed and punched with tools and a mallet.  This portion of one belt took an hour.

Guy2 ran a back through a strap cutter, making 18 strips.  Then he clicked the ends of the straps.  This portion took an hour.  For 9 belts.

Both belts are the same materials, had the same things done to them.  WHY would I pay more because Guy1 took longer?  I've actually seen videos where guys show how SLOW they can go with their sewing machine.  Seriously.. anybody ever try that at a job interview?  

• 'Why should we pay you $30 per hour?'
• "Well, cuz I'm really, really slow!'
• 

 

[SolarLeatherMachines]

2 hours ago, JLSleather said:

I'm still simple (really -- just ask anyone).  I don't pay $100 for a belt.  Somebody can tell me stories about how it's 'real' leather, it's laminated, it's hand stitched, uphill both ways.. and that just isn't going to sway me.   If there's a guy selling grade A Hermann Oak leather  belts, double layer and double stitched, for $70 -- then what will you tell me to suggest that I pay more?

If I pay more for something, it's because either it's something I can't get somewhere else, or it's BETTER.

• Because something is 'handmade' does not make it better.
• Putting a higher price tag on it does not make it better.
• Taking longer to do it does not make it better.
• Adding a video and a blog about it does not make it better.

I could go on, but in the end it's simple. If you hope to charge me more, then tell me how it's BETTER.

Oh, and I might just walk away from someone who started about how many hours they have in it.  Who cares, anyway?  Example:

Guy1 and Guy 2 both use A-grade leather, the same dyes/glue/thread, all the same materials.  The belts look very much alike.  Both guys want $30 per hour.

Guy1 cut his leather with a 7' straight edge, then used a strap cutter to cut the belt strips, then marked out the tip and buckle ends with a stylus, trimmed and punched with tools and a mallet.  This portion of one belt took an hour.

Guy2 ran a back through a strap cutter, making 18 strips.  Then he clicked the ends of the straps.  This portion took an hour.  For 9 belts.

Both belts are the same materials, had the same things done to them.  WHY would I pay more because Guy1 took longer?  I've actually seen videos where guys show how SLOW they can go with their sewing machine.  Seriously.. anybody ever try that at a job interview?  

• 'Why should we pay you $30 per hour?'
• "Well, cuz I'm really, really slow!'
• 

 

Agree 100% with this.  For my own experience, there are only two ways to make good money on holsters: Make real ART or Mass Produce.  Anything in the middle is just playing around.  

For ART, you need to be pushing the limits of your abilities, and doing it in a way that appeals to others.  You have to think like an ARTIST, and not a Leatherworker.  When you do enough of them, and you do it well enough, you'll have a line of guys waiting to pay $500 for a tooled holster to put their $3K weapon in.  

For Mass Production, this is where you drop all pretense of artistry and focus on throughput and acceptable quality.  If you get the right machines (sewing, clicker, molding press, etc) your throughput will skyrocket, and you can start selling good quality holsters at a competitive price.  BUT THATS NOT ENOUGH.  In order to differentiate yourself from the 10,000 competitors in BRIC countries (Brazil, Russia, India, China) & Mexico, you'll need to add MASS CUSTOMIZATION.  That is, add simple designs and artwork that is easy to do,  looks good, and makes a premium. With a press and an engraving stamp, you can do this for another 15 minutes work.  Example: make a simple brown holster?  meh.  Maybe $80.  Take that same brown holster, airbrush the edges with "fade to black", stamp a "Come & Take It" logo on it, fill in the logo with green paint?  $160.  for about 15 min extra work.  (3 min in press, 30 secs airbrush, 10 min paint, 1 min saddle lac, 30 secs sipping bourbon).  

There are several companies doing this now for lots of different products.  Welders aprons, welders collars, chaps, holsters, sheaths, etc.  If you'll look around, you'll see exactly what I'm saying.  
 

 

[VMTinajero]

2 hours ago, JLSleather said:

I'm still simple (really -- just ask anyone).  I don't pay $100 for a belt.  Somebody can tell me stories about how it's 'real' leather, it's laminated, it's hand stitched, uphill both ways.. and that just isn't going to sway me.   If there's a guy selling grade A Hermann Oak leather  belts, double layer and double stitched, for $70 -- then what will you tell me to suggest that I pay more?

If I pay more for something, it's because either it's something I can't get somewhere else, or it's BETTER.

• Because something is 'handmade' does not make it better.
• Putting a higher price tag on it does not make it better.
• Taking longer to do it does not make it better.
• Adding a video and a blog about it does not make it better.

I could go on, but in the end it's simple. If you hope to charge me more, then tell me how it's BETTER.

Oh, and I might just walk away from someone who started about how many hours they have in it.  Who cares, anyway?  Example:

Guy1 and Guy 2 both use A-grade leather, the same dyes/glue/thread, all the same materials.  The belts look very much alike.  Both guys want $30 per hour.

Guy1 cut his leather with a 7' straight edge, then used a strap cutter to cut the belt strips, then marked out the tip and buckle ends with a stylus, trimmed and punched with tools and a mallet.  This portion of one belt took an hour.

Guy2 ran a back through a strap cutter, making 18 strips.  Then he clicked the ends of the straps.  This portion took an hour.  For 9 belts.

Both belts are the same materials, had the same things done to them.  WHY would I pay more because Guy1 took longer?  I've actually seen videos where guys show how SLOW they can go with their sewing machine.  Seriously.. anybody ever try that at a job interview?  

• 'Why should we pay you $30 per hour?'
• "Well, cuz I'm really, really slow!'
• 

 

I would respectfully disagree with a portion of what you said, not that you aren't right to an extent. To me, it depends what it is you are making & how the other mass-produced items compare. Is your tooling nicer or more historically accurate? Is your stitching better (more stitches per inch or just nicer-looking)?

Or you could look at it as a piece of art- looking at two paintings, both are painted on canvas & both used oil-based inks, but which one do you like better? As I said, don't try to justify yourself because someone will always try to justify why your price isn't worth it to them. Those are customers you do not need, because the aggravation isn't worth the money. 

[JLSleather]

1 minute ago, VMTinajero said:

how the other mass-produced items compare.

that's what I said