What is the cost?!!!
by Ariane Mariane
I meet many students and crafters at workshops and exhibitions who dream about turning their passion into a business. I also often come across many people, at fairs and on the internet, who are astonished at the prices that I ask for my one-of-a-kind fiber art pieces, handmade in France.
Perhaps used to prices of imported Chinese products, these people are not aware of the “hidden” costs that go into a piece and therefore think that crafters and artists charge too much for their work. I would like to dedicate this post to all of you who wonder about how prices are determined, showing some of the important costs that go into a handmade creation in France in 2013. I hope that my thoughts will help both those who want to embark on this crazy adventure, becoming independent with their art work and those potential buyers who might not see the big picture of what we face.
Like many artists, I started my art business with some naivety eight years ago. I had a simple formula that I used to calculate my prices: “I want to earn 15 euros an hour so I just have to multiply my time and add the material costs.”
price = creation time x 15 euros + material
Soon I realized that I also had to take into account the French social security taxes. In Europe you have to pay these taxes as soon as you earn a penny. They go for health insurance, unemployment (you will never get it if you are self-employed but still have to pay it) and retirement (not sure our generation will still have it). These vary between 14% to 40% of the sales, depending in which income structure you fit into (or which you decide to take). If you are “lucky” enough to sell over 19 000 €/ year, then you also have to pay income taxes (12,5 to 54 %) and if your turnover exceeds 32000 euros you have to add VAT (Value Added Tax, 19.6% goes to the State of all products sold, much like Sales Tax in the US) on your prices.
I quickly added the social security taxes to my formula. As I earn very little, I am currently exempt from income taxes and VAT.
Ariane's art vests are reversible and can be worn "upside down", too!
It took me much longer to recognize that there are other "hidden" costs that I also have to include. You may think that I’m talking about supplies and rent for a workshop or the time invested to make the art work. Indeed these are important costs, too, but I was most surprised to see what it costs to sell a work of art! This is what I mean by “hidden” costs. Many of us don’t think about them at first.
Therefore, I made this non-exhaustive summary of different modes of distribution and their costs in France:
Selling Costs in France
Wholesaling to shops:
When crafters first try to wholesale their work to shops they are often surprised about the margins merchants apply. Most of the time this margin exceeds (easily) 50%: in France generally a retailer multiplies by 2.5 to 3 the price of his merchandises. This may seem huge but it’s necessary for them in order to cover their enormous charges: rent, wages, maintenance, cost of electricity, water, taxes, VAT ...). In addition to these charges they have to invest money to buy the merchandises upfront. My parents owned a shop, so I understand their challenges.
Selling on consignment seems more attractive because many shops get by on a smaller margin - about 30% in France. Early on in my career I did a lot of consignment. I never sold much and would often have a bad surprise when getting my items back: in bad condition... I finally understood that s shops which accept consignment often do it as a parallel to a retailing activity. The consignment pieces help attract customers by showcasing original and outstanding work. But the merchant ends up having more of a vested interest in selling the products that were purchased. Often, these pieces were not handmade in France and are therefore much cheaper and offer a higher profit margin. I’m sure that this behavior is more or less unconscious. Shop owners who do consignment love handmade work and their local creators. They would love to support them but it’s impossible with the small margin!
Finally, many designers prefer to sell the work themselves, thinking that they can charge less when selling direct and therefore the sale should be easier. Or, they simply might not be able to find shops willing to invest in their products because they are high priced items. Such is the case with me.
Like many others, I started selling at small venues such as Christmas markets or low-cost of entry exhibitions organized by municipalities: in between 20 to 70 euro. Unfortunately, the chances to sell at these shows is quite slim, especially if you have high-end work. These shows also immobilize you for several days, often under hard conditions (outside even in bad weather, without toilettes ...).
I quickly switched over to “real” fairs which had a targeted public (people who loved handmade work and understood the prices for quality products made locally). These retail shows have a professional set-up, take place indoors, and I can display my work as I wish. These shows cost about ~1000 euros for 3 days, a significant expense. In addition, there are travel expenses, accommodation, prop costs, and marketing (business cards, fliers, etc.).
These costs end up eating about 30% of my sales. For example, if I sell € 3,000, then I spent at least € 1000 of that in fees, marketing, etc. This does not, of course, include those original costs in my formula: materials and production time! Increasingly, there have also been more shows where I don’t sell anything. This is so hard because we spend 10 to 12 hours at the booth, plus another two or three for set-up and tear down. It is exhausting physically and disappointing because the money was wasted on show fees and you invested so much time for nothing.
Of these three choices (wholesaling, doing consignment or doing shows), I would prefer wholesaling my work to upscale boutiques. A 50% margin is quite justified when I consider my financial expense, the time spent at trade shows and my physical fatigue!! The only thing I would miss is the pleasure of meeting my gorgeous customers …
It may seem a lot more interesting to sell on the internet. There are many platforms where you may sell your work and often they just take a small commission. But, managing an online store requires an enormous time investment (I spend over 20 hours/week on my online shop). In addition, there are some skills that you should have or need to acquire: taking good pictures, writing descriptive and tempting texts, and if you want to sell globally, you need to be fluent in English ... Selling online is a great opportunity but it is nearly a full time job. If you want to sell well, you need to list new items regularly and you need to create a buzz on social media sites, newsletters, and blogs ... If I counted my hours I work to do online sales I wouldn’t do it!!! But, it’s still the coziest way to sell!
The reflections above are made to point out the “hidden” costs in a product which absolutely should be added to a price’s formula! I now understand that for every one hour of creation, at least two hours need to be added for all of the “stuff around” (ordering materials, accounting, filling out submissions for fairs and exhibitions, responding to emails, making and editing photos, selling (online or directly), packing orders and shipping them, advertising, writing articles, social networking, building websites and/or blogs, etc ...)
So 1 hour of creation translates to at least 3 hours of work. To calculate a selling price the formula should be like this:
The cost of creating = (hourly rate x 3) + material + social charges + selling costs + VAT + Taxes
On the net you’ll find a less complex formula but much easier to use :
Creation price = ((hourly wage rate x 3) + material) x2
In France we have a “minimum wage”. All people working in France should earn at least (for 2013) - € 7.40 / h all charges ( taxes) paid.
If I calculated my formula using this wage, my prices would be much higher. For example, my art vests take me between 8 and 20 hours to create. My material costs vary but let’s take an average of ~ 40 euros. According me the minimum wage, my art vest would be in between 435 and 968 euros! ($565-$1,258 US Dollars)
((22.2 x 8) 40) x 2 = 435.2
((22.2 x 20) 40) x 2 = 968
These prices seemed so exorbitant to me that I made an adjustment. As you will notice on my online shop, my art vests are in between 240 € and 600€! Calculating my hourly wage on these prices I should finally earn 4.33 € an hour - but that’s correct only if I sell everything I make, which of course, isn’t so.
((600/2 - 40) / 20)) / 3 = 4.33
Final price of artwork = 600€, as in my formula, I multiplied by two to take into consideration all of the “hidden” costs I devised, so 600€ divided by 2. I subtract my average material costs of 40€. The result is divided by the hours it took to make the piece (20). Actual hours worked are the total divided by three.
Less than 4,33 € per hour!!! - I studied architecture for 6 years, worked for 7 years as a textile designer, speak three languages and am multitasking (designer, photographer, secretary, model, seller ....) Without wishing to complain - because I love what I do and would never change – I hope that one day everybody will be conscious that handmade and local creators aren’t overcharging for their work!
Creating in France today is a luxury for those who create and for those who buy! An original, unique creation of high quality, made by hand and most of the time respecting our environment is a rare and prestigious good. Self-employed crafters, artists and designers invent every day and try to make life more beautiful. Respect them and don’t compare their prices to the mass produced products made in distant countries with different costs of living.
For those who want to become a self-employed crafter, designer or artist: know that you'll be working 60 hours or more/week while seldom earning enough for making a living! You’ll do what you love so much for only 1/3 of your time (working a 40-hour job and spending 20 hours in your free time creating would be more profitable )!
But if you're as addicted as me I can only say: do it!
PS. Time spent on this post doesn’t figure in my time calculation of course – I did it in my free time!
PS 2. In the picture of me at the top (with glasses)- a portrait made by Daniel Vintrigner– I look so smart. That’s why I choose it to illustrate my “2 pennies” thoughts - thank you Daniel!
PS 3. A huge thank you to Emma from “Douces Laine” for helping me with the French version (I am German, living in France) and an enormous hug to Rachel Biel from Rayela Art for spending time on correcting my English version.
Another reason why I love my job is the beautiful people I meet always there to help each other! Thank you!
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Original Blog Post in French (Check out all the comments and leave your own!)
(Go buy a vest!)