Are discounts hurting your craft business?

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Some people will tell you that discounts aren’t really good for your craft business, that they devalue your business and your abilities.

Others are of the opinion that sales and promotions work, so why wouldn’t you discount your items?

Have you ever wondered if discounts are hurting your handmade, creative, or craft business?

As a crafter, you have the unique ability to take an idea and raw materials (yarn, fabric, beads, etc.) and turn it into works of art (finished goods or pattern) with your own two hands.

If everyone could do this, no one would be looking to buy handmade items or the patterns to make them.

But, making a living from a craft related business can be tough – whether you’re a maker or a pattern designer:

  • in an internet world full of crafters, it’s difficult to be seen
  • the general public can be difficult to deal with
  • finding the right audience of customers takes a lot of searching
  • sometimes the only way to be seen is by offering promotional discounts via social media, and
  • hoping that others will help you spread the word about the finished items or patterns that you sell

Just about every day when I log into Facebook and check out what’s goin on in the various craft business groups I’ve joined, I see tons of pattern designers offering discounts on their patterns – sometimes they are even offering their latest pattern for free.

Makers on the other hand – don’t seem to offer discounts on their finished items as frequently.

So, should you discount your items and will discounts hurt your craft business?

Are discounts hurting your craft business?

Well, that depends ……… there are pros and cons to using discounts.

In this post, I’m going to talk about:

  • why big box stores offer discounts
  • how big box stores can offer discounts
  • what happens when a handmade, creative, or craft business gives tons of discounts
  • when is it a good idea to offer discounts
  • alternatives to offering discounts to the masses
  • are discounts good or bad for your craft business – a recap

Are you ready to dive into this topic?

Let’s start with why big box stores offer discounts

Even though we are a small handmade, creative, or craft business owner; we can learn a thing of two from the big box stores.

Big retailers offer discounts to:

  • create a sense of urgency (limited time or limited quantity sale)
  • move excess inventory (50% off all Christmas items)
  • make room for new items (40% off all summer clothing)
  • promote special events (back-to-school sale)
  • attract new customers
  • increase sales (if they put items x, y, and z on sale to draw in customers – those customers may also buy items a, b, and c at regular price as an impulse buy)
  • clear out old inventory (clearance sale)

Let’s face it, large retailers have an easy time selling low-priced merchandise in high volume.

How big box stores can offer discounts

Big box stores like Michael’s, Joanne’s, Walmart, etc. offer discounts all the time.

They can do this because they buy mass produced items (made in China) in bulk from wholesalers who also buy in bulk.

These wholesalers buy HUGE shipping containers full of merchandise.

Let’s say the cost to the wholesaler is $3.00 per item.

The wholesaler in turn sells it to the retailer for $9.00 per item (there’s that darned cost times 3 pricing formula!)

The retailer sells it to you for $18.00 (and there’s that darned wholesale x 2 formula!)

So, if a retailer offers a 10% discount ($1.80) they’ve still made $7.20 on that item.

What happens when a handmade, creative, or craft business gives tons of discounts?

As a small craft business, we can’t make our items (or design our patterns) for $3.00, $9.00, and sometimes not even $18.00 – by the time we calculate the cost of materials and the time it takes to make an item.

Selling low-priced merchandise in high volumes doesn’t work well for small handmade, creative, or craft businesses – we simply cannot mass-produce the things we sell.

For us, discounts can have a good or bad impact:

  • discounts can increase sales in the short term – but those sales are less profitable
  • you can be perceived as having a lack of confidence in your abilities
  • that you’re a business that’s always giving discounts – customers might think “I’ll never have to pay full price because they always mark things down”
  • no sense of urgency – “oh, they’re always giving discounts”
  • encourages an attitude of entitlement from customers
  • attracts the bargain shopper

When is it a good idea to offer discounts in your craft business?

Oh that’s a tough question!

I’m sure everyone has a different opinion on this.

I feel that you need to have a good reason why your discounting your product and then you need to make that reason clear in your marketing messages.

I mean, we all know that discounts and promotions do work. And consumers have been trained by the big box stores to expect sales at certain times of the year:

  • Black Friday
  • end of season sales
  • Mother’s Day
  • Valentine’s Day
  • back-to-school

When it comes to offering discounts, I think:

  • it’s important to keep an eye on your net profit or income (yup, there’s that reference to bookkeeping!)
  • you should condition your customers to learn to wait for a sale
  • understand WHY you want to offer a discount
  • plan WHEN to offer a discount

When to offer discounts is different for a maker than a pattern designer – at least in my mind.

Even though we are small handmade, creative, or craft business owners we can learn a thing or two from the big box stores.

As a maker, a good time to offer discounts would be:

  • to sell inventory that you’ve had hanging around for a long time (over a year)
  • when you offer a new item and want to test the market (limited edition, first come/first served)

As a pattern designer, a good time to offer discounts would be:

  • when you launch a new pattern line and want to test the market using a limited time (or limited number) discount to create a sense or urgency
  • to put a previously popular pattern(s) on sale after they haven’t had many (or any) sales for awhile

A couple of unsolicited words of advice for both makers and designers:

  • don’t discount all of your items at once, that could be perceived as a clearance or going out of business sale
  • avoid offering your items for free, people will get used to it

Alternatives to offering discounts to the masses

Focus on building customer loyalty and repeat business.

Instead of offering discounts to anyone and everyone who stumbles across your social media postings, offer:

  • 20% discount on one item of their choice on their birthday (ask for their birthday when they subscribe to your newsletter). On their birthday send them a gift certificate on their birthday, to treat themselves to something in your shop
  • 10% discount on the anniversary of their first order (if asking for their birth date feels too intrusive)
  • Send them something little (aka inexpensive to make) on their birthday or the anniversary of their first order
  • 25% discount or credit on their next order when they have reached either a certain number of purchases or a dollar amount of sales
  • a free gift with an order
  • free shipping if the order is over a certain amount
  • or, offer a special bundle

Sometimes a good alternative to offering discounts to the masses involves actually doing the opposite of discounting your items – by giving something free every time someone buys your product at full price.

While it may sound crazy, doing something like this actually increases the perceived value of your brand/business in the eyes of your customers. You’re adding value by offering something for free, that they didn’t expect.

For example, if you sell a:

  • set of 3 knit or crochet dishcloths/washcloths, thrown in a free scrubby or two
  • pattern for a knit or crochet dishcloth/washcloth, throw in a free pattern for a scrubby

Are discounts good or bad for your craft business? A recap:

Discounts are both good and bad for your handmade, creative, or craft business:

  • offering too many discounts can have a negative impact on your business
  • discounts can make your customers feel good, special, and appreciated
  • can drive sales quickly, if you create that sense of urgency
  • discounts can re-engage past customers
  • can attract new loyal customers
  • or, can attract only the bargain shoppers

You need to know how offering discounts impacts the Net Income (that bottom line number on your Profit & Loss or Income Statement) by:

  • keeping track of sales discounts in your bookkeeping records
  • knowing exactly how many sales you need to make in order to make up for lost profit due to discounted pricing

The bottom line is, you’re the boss …… so you get to decide if using discounts is right for your handmade, creative, or craft business.

Your in yarn & numbers, Nancy

Tell me, how do you use discounts in your handmade, creative, or craft business?

About Nancy Smyth, The YarnyBookkeeper

Hi, I'm Nancy. Yarn addict, career bookkeeper, and handmade business owner. I get the same feeling of joy when working with yummy yarns as I do when working with a column of numbers that all add up correctly. Bookkeeping for your handmade or creative business doesn't need to be scary. I can help you learn to handle your bookkeeping and other behind the scenes STUFF with confidence!

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