Retailer Analysis: Wonder Pens

This week, I thought it would be interesting to have a look at a relatively new FP retailer, Wonder Pens in Toronto. They came onto my radar around 6-12 months ago and I’ve been following their blog with interest ever since. If you haven’t read any of their posts, I’d encourage you to have a look; it’s not the usual list of product and store announcements that you get from most other retailers but an insightful and very human look at the business and their travails. Wonder Pens is one of the most interesting small retailers in the market, not just because of the blog but because of their unique approach to the business. 

If you haven’t heard of Wonder Pens before, I doubt you’re alone and there’s a few reasons for this. They are relatively new to the market, launching the digital store in early 2013 and the physical (B&M) store later that year. Also, they don’t offer international shipping and the product range is focussed on beginner to advanced pens, which tends to rule out a lot of the online shoppers. 

The first thing which caught my attention about the business was that they chose to open a B&M store in a time where most physical retailers were closing down or migrating online. I’m not sure if it was a brave decision or a foolish one — perhaps it was both! — but the choice to go in the opposite direction seems to be working out. It took me a while to figure out why it would be working out, but when I did, it shed some light on the dynamics of the marketplace. 

To understand why, it’s worth thinking about why online has been the death of so many retailers, particularly in specialty markets like FPs. Most people say that online succeeds purely because it’s cheaper than the physical stores; this is true but only up to a certain point. It ignores that retailers deserve some of the blame for their demise. 

In the 1990s and 2000s, many retailers had positioned themselves as premium retailers. They would have only had a small number of customers each day, but each would have received personalised, professional service and consequently paid a premium price for it. This was no doubt done out of necessity — retailers don’t have a lot of choice when you’re selling a product that isn’t in high demand but requires a large inventory. It helped that they weren’t facing a lot of competitors; most cities would have had a handful of FP retailers, at best. In some cases, I’m sure there was only a single specialist retailer in an entire region. 

A premium strategy tends to end up attracting a lot of premium buyers, and the retailers consequently start carrying the products that appeal to that segment. That meant dropping the products that might appeal to buyers who were new to the hobby or less able to afford premium prices. It also bred an attitude of snobbishness or even arrogance. I suspect this is why so many people outside the pen community associate fountain pens with the wealthy and, sometimes, have a reflexive disdain for FP users. I also suspect it’s why few people who were in their 20s and 30s during this time have become FP enthusiasts.

The internet disrupted this strategy by offering buyers a more compelling proposition: you could buy at premium retailers and receive personalised service or you could buy online and save hundreds of dollars. For most buyers, buying online was a far superior offering: to return to the model I introduced months ago, it provided them with much greater surplus than the current arrangements. 

But while the internet disrupted their existing strategy, the reason so many B&M stores failed was because they failed to adapt to changing circumstances. I suspect this is because many of them never really understood what it meant to provide value or surplus to their customers. They have been outcompeted on price by large companies like Amazon, but they’ve also been outcompeted by new, specialist entrants like Anderson Pens or Goulet Pens. These retailers understand that it’s still possible to compete if you are offering customers a service that they truly value and are willing to pay for.

But there’s another avenue to competing with the online retailers, one which seems to have been missed by the old B&M stores but also by the new retailers: online only works for buyers who already know that they want something, it cannot actually create an interest in the same way that a physical store can. Wonder Pens works because it can exploit an opportunity that online stores like Amazon cannot: it can build a new market. 

At first, this might seem obvious and I can see some of the retailers rolling their eyes as they read it. I’m sure that they create shop displays to attract the eyes of pedestrians and then it’s only a matter of getting the right pen in someone’s hand before they start down the path of becoming an enthusiast. They’re not turning around newbies, not dismissing them from their stores, but there’s a difference between offering this as part of your business and actually building the business purely around it. In other words, there’s a difference between including something in your repertoire and it being the core of your business and strategy. 

There are three elements that I see as being critical to this strategy: attracting people into the store, having the right products to get them interested, and then sustaining that relationship with them. Right now, it seems that two elements are executed quite effectively and one is not yet as effective; but if the business could master all three, it seems likely that Wonder Pens could become quite a successful business. 

The first element is the most poorly executed, as the main piece of feedback that I’ve had from store visitors is that it’s difficult to find: rather than a street-facing storefront, the shop is partway down an alley and somewhat lacking in signage. There isn’t much about the shop online, either, which makes me wonder about the level of awareness in the local community. And obviously, it’s hard to attract customers into your store and to build a business when they don’t know you exist. That said, word of mouth is a powerful source of new business and I’m sure that Wonder Pens will excel in this as they become more established in the new location. This might be an element that requires more work, however. 

On the other hand, the second element is extremely well executed. The product range is exactly what you would want to see for a shop that is aimed at introducing people to the FP world: lots of entry-level pens, as well as the kinds of pens that you might aspire to once you’ve spent a little while getting comfortable with a Pilot Metro, like a Lamy 2000, or maybe a Pilot Vanishing Point. But there are no premium pens, no expensive displays of Nakayas or Viscontis. Strategically, this is an important choice because it’s saving the staff from having to develop expertise in products that their target customers are not interested in. I suspect that Liz and Jon have a deeper empathy with the customers they see than an FP retailer who carried a much larger line of products. 

The third element is what really sets Wonder Pens apart. I can’t think of any other business that is so proficient at developing a genuinely meaningful relationship with their customers, and I suspect this is partly because of Liz’s own personality. It’s the kind of place where regulars actually seem encouraged to drop in for a chat, and I’d be surprised if they don’t have a coffee machine set up to encourage that even more. The blog seems to serve the same purpose on a larger scale, letting people into the lives of Liz and Jon and the business and generating a deeper feeling of relationship with them. But the most impressive feature here are the events that the store runs, the calligraphy courses, letter-writing club, and vintage pen market, that all seem to be about bringing people into the store and building connections — not only with the owners and their customers, but between customers. More than anything else, this seems to be the part of their business that will be most effective at building a local community of FP enthusiasts, and sustaining the business in the long run. 

It’s this relationship which is at the heart of the enterprise; I suspect that selling pens and stationery is just an excuse for the couple to make meaningful connections with people and this is their true goal. It shows in what they do and I think it’s great that they have been able to build a business around it. Relationship is also why I don’t see other online retailers as being much of a threat to Wonder Pens. Given their range of pens is towards the cheaper end of the spectrum, ordering from Amazon or Goulet is only going to save buyers a few dollars and I think most of their customers are happy to have the relationship even if it costs them a little extra.

This kind of business model does have it’s limits. Some of their customers they bring into the FP community will outgrow them and want to buy the premium or vintage pens that Wonder Pens doesn’t carry. Some of those customers will probably keep buying bits and pieces from WP but they’ll be making their big-ticket purchases through retailers like Anderson Pens, who have the range and expertise those customers desire. But by and large, I suspect that Wonder Pens has the ability to sustain a large and loyal customer base. 

The challenge for the business will be building up to that scale and ensuring that it doesn’t overwhelm them. That requires some thinking about how they will be able to bring more customers into the business and how they will be able to support a larger flow of customers and stock without losing the relationships that the business’ strategy depends on. It’s certainly possible to do but requires preparation and planning well in advance of growth. 

And although it irked me a few months ago, I think that the decision not to ship internationally is actually a good one for the business. I suspect that this is only a temporary thing until they have the systems in place to facilitate it, but it does effectively keep the focus on building the business locally and increasing the market, rather than pitching at the customers of other retailers. The online part of their business should really be developed as a feature that supports this strategy and there’s no point putting time and money into building an international part of the business if it compromises the current, successful approach. 

You can probably tell that I’m a fan of Wonder Pens and their approach. Liz actually told me that she didn’t think they would be an interesting topic for this blog because they aren’t a big business or very economics-y, but it’s clear to me that they’ve picked up on something unique and are undoubtedly interesting. Getting it right in business can sometimes come down to having a lot of passion, for people and products, and I'm very pleased to see this mix working out for Jon and Liz Chan.

 

Note: While preparing this blog post, I emailed Liz with some questions and she was kind enough to respond quite openly. She is just as lovely and nice as you might expect from reading the Wonder Pens blog and I really appreciate her help with this post.