Some people will tell you that offering discounts is a terrible idea for your handmade business. That discounts devalue your work, attract bargain hunters, and make customers less willing to pay full price.
Others will tell you that sales and promotions are a great way to attract customers and increase sales.
So, who’s right?
Well, that depends!
Discounts aren’t automatically good or bad for your handmade, creative, or craft business. What matters is why you’re offering them and what they’re actually costing you.
Because making more sales doesn’t necessarily mean making more money.
And that’s where things can get a little tricky.
Why do big-box stores offer discounts?
Even though we’re small handmade business owners, we can learn a thing or two from the big-box stores.
Large retailers use discounts for all sorts of reasons, including:
- Moving excess inventory or seasonal merchandise.
- Making room for new products.
- Attracting new customers.
- Encouraging customers to buy additional items.
- Promoting special events or seasonal sales.
- Creating a sense of urgency with limited-time offers.
But there’s something important to understand about how larger retailers operate. Many have purchasing power, supplier arrangements, and sales volumes that small handmade businesses simply don’t have. They can sometimes sell larger quantities at lower prices and still make the numbers work.
That doesn’t mean every discount is profitable for them, either, and it certainly doesn’t mean their pricing strategies will work for your handmade business.
Those popular pricing shortcuts, like multiplying your costs by three or doubling wholesale prices, don’t magically guarantee a profit. You need to know what your products actually cost and whether the price you’re charging leaves enough money to cover your other business expenses.
What happens when a handmade business offers too many discounts?
What happens when a handmade business offers too many discounts?
As a maker, you can’t simply crank out hundreds of identical products every day. You’re purchasing materials, spending time creating your products, packaging orders, and probably juggling a dozen other business tasks.
Pattern designers have a somewhat different situation. Once a pattern is created, they can sell additional copies without having to physically make another product. But creating, testing, photographing, formatting, marketing, and supporting those patterns still takes time and money.
So while discounts might increase sales, they also reduce the amount of money coming in from each sale. And depending on your costs, that reduction could be bigger than you think.
What does a 20% discount actually cost you?
Let’s say you make a handmade product that normally sells for $50.
For this example, we’ll assume the materials, direct production labor, and other direct product costs total $30 per item.
Here’s what happens when you offer a 20% discount.
| Regular Price | 20% Discount | |
|---|---|---|
| Selling price | $50.00 | $40.00 |
| Direct product costs | $30.00 | $30.00 |
| Amount remaining | $20.00 | $10.00 |
You reduced your selling price by 20%, but you reduced the amount remaining after direct product costs by 50%!
Ouch!
And that remaining $10 isn’t necessarily profit you can put in your pocket. You still have other business expenses to cover.
Now, here’s something else to think about.
At your regular price, selling one item leaves you with $20 after direct product costs.
At the discounted price, you’d have to sell TWO items to have that same $20 remaining.
That’s twice the products to make, twice the direct product costs, and potentially twice the packaging and order-processing work.
And depending on how you’re promoting your sale, there may be even more expenses involved.
Don’t forget about the cost of running the promotion
Sometimes the discount itself isn’t the only thing reducing what you keep. You might also have:
- Advertising or promoted social media posts.
- Payment-processing and marketplace fees.
- Additional packaging and shipping costs.
- Free gifts or other promotional incentives.
A free gift isn’t really free to your business. Someone has to pay for the materials and spend the time making it. And offering free shipping doesn’t mean the shipping company suddenly stops charging you!
All those little costs can add up, which is why it’s important to look at what the promotion actually brings into your business after considering what it costs. You might have a wonderfully busy sale and still discover that you didn’t keep nearly as much money as you expected.
That’s why bookkeeping matters beyond simply knowing how much you sold.
Discounts are just one place where money can slip through the cracks in your handmade business. Pricing decisions, selling fees, and other expenses all affect how much you keep.
If you’d like help figuring out where those leaks might be happening in your own business, take a look at my How to Spot Profit Leaks in Your Handmade Business training.
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, and I don’t think there’s one right answer for every handmade business.
Discounts and promotions certainly can work, especially during times of the year when customers expect to see sales, such as Black Friday, end-of-season clearances, Mother’s Day, Valentine’s Day, or back-to-school promotions.
But just because customers expect discounts doesn’t mean you’re required to offer them. And you certainly don’t want to get into the habit of running a sale just because everyone else is doing it.
When it comes to offering discounts, I think you should:
- Understand WHY you’re offering the discount. Are you clearing out inventory, attracting new customers, or testing a new product?
- Plan WHEN to offer the discount instead of constantly running sales.
- Know your numbers so you understand how the reduced selling price affects what you keep.
- Avoid constantly discounting because you shouldn’t condition your customers to wait for a sale.
Remember, a promotion that works for one handmade business might not make sense for another. It all depends on what you’re selling, your costs, and what you’re trying to accomplish.
When should makers consider offering discounts?
If you sell finished handmade products, discounts might make sense when you’re trying to:
- Sell finished items that have been sitting in inventory for a long time.
- Make room for new products or seasonal collections.
- Introduce a new product with a limited-time offer.
- Move discontinued items or products you don’t plan to make again.
But before you put that older inventory on sale, take a look at what it actually cost you to make. Just because something has been sitting on a shelf for a year doesn’t mean you should automatically slash the price.
You might discover that a different marketing approach makes more sense, especially if discounting would leave you with very little money after covering your costs.
What about pattern designers?
Pattern designers have different considerations because they’re selling a digital product rather than a finished physical item.
A discount might make sense when:
- Launching a new pattern or collection.
- Introducing an older pattern to a new audience.
- Running a limited-time promotion on patterns that haven’t sold recently.
- Offering a special promotion to existing customers.
Since you’re not purchasing additional yarn or fabric every time someone downloads a pattern, your costs per additional sale may be different from those of a finished-product maker.
But don’t forget about platform fees, payment-processing fees, marketing expenses, and the original costs of developing your patterns. Just because you’re selling a digital product doesn’t mean every dollar of the selling price is profit.
Alternatives to offering discounts to the masses
Here’s something else to consider. You don’t necessarily have to discount everything in your shop to make customers feel special or encourage repeat business.
Sometimes a small, targeted promotion makes more sense than offering everyone a percentage off their purchase.
A few ideas include:
- Offering a small discount or credit to returning customers.
- Creating special product bundles.
- Offering free shipping when an order reaches a certain amount.
- Including a small gift with qualifying purchases.
- Giving existing customers access to a new product before everyone else.
Of course, every one of these ideas needs to make financial sense for your business, too.
Let’s say you sell a set of three crocheted dishcloths and decide to include a free scrubby with every order. That’s a nice little extra, and your customers might love it, but you still need to account for the materials and time it takes to make that scrubby.
The same goes for offering a free pattern with the purchase of another pattern. There may not be an additional material cost, but there could still be transaction fees, development costs, or other expenses to consider.
Product bundles are another option, but don’t assume that putting several items together automatically makes the deal profitable. You still need to know what each item costs and whether the bundled selling price leaves enough money to cover your expenses.
The idea is to offer something worthwhile to your customers without quietly eating away at the money your business needs.
Are discounts good or bad for your craft business? A recap
The answer is still the same. Discounts can be good or bad for your handmade, creative, or craft business.
They can help you move excess inventory, attract new customers, encourage repeat purchases, increase sales during slower periods, or introduce new products.
But they can also reduce the amount of money you keep from each sale, encourage customers to wait for the next promotion, and create extra work and expenses without enough financial return.
This is why I keep coming back to bookkeeping. You need to know what your products cost, how much you’re actually selling them for, and what happens to the money after the sale.
Keep track of your discounts and promotional expenses so you can see their impact on your business. And don’t judge a promotion by the number of orders it generated alone. Take a look at the costs, what you had left afterward, and whether it accomplished what you wanted it to do.
You don’t need an accounting degree or a complicated spreadsheet to ask those questions. You just need enough information to make a decision that works for YOUR business.
The bottom line is, you’re the boss. You get to decide whether discounts make sense for your handmade business. Just make sure you’re making that decision with your numbers, not because somebody on social media told you that you should be running a sale.
Tell me, how do you use discounts in your handmade, creative, or craft business?
Do you run seasonal sales, offer special deals to returning customers, or avoid discounts altogether? I’d love to hear what’s working for you!
If you'd rather be working with yarn, fabric, paint, or clay than trying to figure out what the heck is going on with your business money, you're in the right place.
I help makers understand what’s happening with their money—and what those numbers actually mean for their business. Because handmade business bookkeeping goes beyond simply tracking what came in and what went out.
You don’t need to become a bookkeeper or run out and get an accounting degree. You just need to understand enough to make better decisions about your business without all the accountant-speak.
👉 Want help figuring out your bookkeeping (without overcomplicating it)? Join the Free Handmade Business Bookkeeping community.
I am a coach/educator, not your bookkeeper or CPA. This information is for educational purposes, not financial or tax advice.
Full Disclosure - How I use AI
I use AI to create some blog images because it does a much better job of producing maker-specific images than I can usually find after hours of searching.
The ideas, teaching, and writing in my blog posts are mine. I use AI as an editing partner to help me check clarity, rein in my tendency to get too wordy, and occasionally keep me from wandering off on a tangent.
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