How Much Should I Charge for My Handbags?
It’s no secret that luxury designer handbags are wildly overpriced. On the other end of the spectrum, anyone can buy a low-quality purse for cheap at a fast fashion retailer. The middle ground is the sweet spot! Independent designers, bag makers, and small businesses can offer high-quality handbags at a more affordable price than prestige brands.
Unfortunately, I’ve seen a lot of talented designers and makers undercharge for their work. You might be asking: What does a fair price actually look like? How can you make sure you’re charging what you’re worth while also being competitive? In this blog post, we will answer those questions in detail. I also made a video about this topic a while back. Watch the video below, and keep reading to:
Understand all the factors that impact pricing.
Learn how to calculate your prices.
Get a pricing worksheet to make the process easy.
5 Steps to Pricing Handbags
When you’re deciding what to charge for your creations, there are a lot of factors to consider. Let’s break it down into five steps to make the process easier.
Step 1: Understand Your Costs
Before you do anything else, it’s crucial to understand your costs. There are two main types of costs to consider: direct costs and overhead costs.
Direct costs are the tangible expenses directly associated with making a handbag. That includes materials such as leather, fabric, hardware, interfacing, and stabilizer. Any materials that you use to create a bag should be included in your direct costs.
Overhead costs are the indirect expenses that contribute to the overall cost of production but are not directly tied to any single handbag. Examples include rent, utilities, labor, supplies, machine maintenance, and marketing.
Some costs might be a little more ambiguous. For example, things like double-sided tape, thread, edgecoat and basecoat, and rivets are part of constructing a bag, but they can be difficult to measure because you use small amounts at a time. You might choose to factor these into your direct costs or your overhead, depending on your preference and the volume of bags you’re creating.
Step 2: Calculate Direct Costs
Now that you understand the various costs associated with producing each handbag, it’s time to calculate your direct costs. This involves determining the cost of materials used in the bag's construction.
Be sure to account for the quantity of each material used and its corresponding cost per unit. For example, you may puchase a large roll of faux leather, but you only use some of it to create your bag. You will need to determine the cost of the material that you actually use. The same is true for interacting, stabilizer, hardware, and any other materials needed. Then, you will add up the direct costs to get your total.
This is where a spreadsheet can come in handy. You can make your own, or get my Excel Pricing Sheet & Conversion Table to quickly calculate the costs for you. In the video above, I share an example of how I use this worksheet to determine exactly how much I should charge for a bag (timestamp: 5:28).
Step 3:Â Determine Your Pricing Multiplier to Cover Overhead Costs
Once you've determined your direct costs, it's time to factor in overhead costs. Overhead costs include expenses such as labor, machine maintenance, utilities, payroll taxes, marketing, and other operational costs.
Don’t worry — you don’t need to calculate exactly how much of each utility bill, marketing expense, and other overhead cost goes into each individual bag. Instead, you can use a pricing multiplier to estimate your overhead and determine your bag’s price.
A pricing multiplier represents how much you'll mark up the total cost to arrive at the final selling price. A common multiplier in the industry is two, but it can vary depending on factors like location, competition, market demand, and brand reputation. Someone who lives in New York City, for example, might use a pricing multiplier of three to account for higher rent, labor, and other operating costs.
Step 4: Finalize Your Pricing
Once you've calculated your total costs and determined your pricing multiplier, you can finalize the pricing of your handbag. Let’s look at an example. If the direct cost of making a bag is $100 and you use a mulitplier of two, you will be factoring in $200 for overhead. $100 + $200 = $300, which will be the final selling price for your bag.
Need help with this? When you plug your costs and pricing multiplier into the Pricing Worksheet, these numbers will calculated for you.
Step 5: Adjust Prices as Needed
Pricing is not set in stone and may need to be adjusted over time. For example, you might adjust prices based on changes in material costs, labor costs, market trends, and customer feedback. Stay flexible and be willing to reevaluate your pricing strategy as needed.
Get the Pricing Worksheet and Conversion TableÂ
As you can see, pricing handbags requires careful consideration of both direct and overhead costs, as well as market factors. By following these steps, you can confidently set prices that reflect the value of your handcrafted creations.
To get started, you can use my Pricing Worksheet & Conversion Table to assist you with determining how much to charge for a bag you have made. These tools make it easy as all of the math is done for you. Simply enter the total you paid for your materials, the length and width of the product, and the amount of material you used. The conversion table will do the rest! (Note that the worksheet requires Microsoft Excel, which is not included with this purchase.)
As always, don't forgot to join the Simply Classic Inspiration Group to share the bags you've created and connect with other makers!