Lotions & Potions

I have a new endeavor.  I make Lotions &; "Potions".  The lotions are just that, lotions.  The potions are deodorants, bug repellents, sunscreens.  Now, I may be biased, but I LOVE my products.  They are all natural and simple.  There are no alcohols, colors or dyes, and no perfumes.  Any scents come from the product itself, example cocoa butter makes it smell chocolately, or from an essential oil.  My friends claim to love my product as well.  Great!  I have an etsy site that does get some traffic.  And I signed up for my first craft shows.  I was pleased with the people stopping by to check out and purchase my product.  Awesome! But then I got home and did the math.
To spare you ALL the boring details, let's say I make a body butter that cost me $2.50 to make.  I charge $5.  So if I sell 1 jar, I make $2.50 profit.  When the day was done and I subtracted from my profit the cost of the show ($25) and the cost of my donation to the raffle, I made less than $10.  This is not including my time, time to make the products and time to sit in the booth and the cost of driving there, etc.
While these things are bummers, this is not what bothers me most, as I truly believe that most people will like my product if they give it a chance and they will come back for more.

THIS is what bothers me: I went into a relatively new store in the mall last week because they boast "fresh handmade cosmetics".  First off, my olfactory system almost shut down upon entering the store.  The nice girl helping me browse the huge selection was saying "here, smell this, smell this."  Well, honestly I couldn't smell hardly anything because the entire store was just a giant wall of stink. They claim to use lots of organic and natural ingredients, which they do!  But they also use added fragrance (did I mention the smells?), added colors, SLS, alcohols, parabens, stearic acid, just to name a few of the ingredients that turn me off.   And now let's talk price.  A 0.3 ounce lip balm cost almost $7.  SEVEN DOLLARS people.  I charge $2 for 0.15 ounces and there isn't any garbage in my lip balm.

Obviously, I can opt to not shop in this store.  Fine.  But my questions are:
Why do people choose to shop there and pay those prices?
And why do I already feel guilty charging the prices that I do when I know my product is awesome?
(Why don't more people buy my stuff?)

I don't really want to raise my prices.  I want my prices to be set so that people can try them and won't feel like it's a big investment.

I don't know.  Thanks for listening to my ramblings.
Now go check out my etsy site.
http://www.etsy.com/shop/pennyslotionspotions