Like a lot of people, when I first really got into FPs as a hobby, I used to happily scour retail websites from around the world to try and find the best deals. But for the last year or two, I’ve bought almost exclusively from a single retailer; it’s actually gotten to the point where I don’t look at other sites when I’m in the mood to buy. And far from meaning that I’m missing out on good deals, I’ve found that you absolutely get a better deal when you pay more. It’s counterintuitive but it’s true. And in today’s post, we’ll explore why this is.
When you read some of the pen forums, you’ll see there are lots of people who are in the same situation I was. They’re the ones willing to import, willing to struggle through emails in broken English with foreign vendors, willing to wait weeks for something to arrive, all in order to get the best deal. To some degree, we’ve all been in that position, where we’ve wanted to get the biggest bang for our buck and it’s why discount retailers like Engeika are so popular.
Understandably, most retailers push back against this behaviour. They try to make the argument that it makes sense to buy from an established, domestic retailer because you can easily return the product if it’s not what you expect. Or you can have access to local warranty support if it’s faulty. If they’re local, you can even pop into the store to try out the different nibs and find the one that’s right for you.
By and large, these arguments fall on deaf ears. If you can save $100 on a $300 pen by buying from someone in Japan, but you have to give up the local warranty and wait a little longer to get it, that’s probably a worthwhile trade. And this is undoubtedly what most buyers are thinking about: what am I really getting by paying a higher price? Is it worth it?
To return to our model of the purchase decision, buyers are thinking about price but they’re also thinking about the value they’re getting from the purchase. Surplus is the difference between these two numbers. As an example, going through a domestic retailer might mean paying $300 for a pen they value at $400, giving them about $100 in surplus. Buying from an overseas discounter means paying less, maybe we get the pen for $250. But it is also less valuable to us, because we’re giving up certain features (like the warranty). If our value for the discount buy is $350, that means our surplus from the discount retailer is $150. Any rational buyer is going to make the decision to buy at the lower price, because the surplus ($150) is greater than the surplus of buying from the local retailer ($100). The retailer’s argument isn’t persuasive.
So if this is the case, how can I argue that paying more is actually a better deal? It’s because this calculation is only looking at a single transaction. Most people who are new to the hobby are thinking this way: they don’t realise that there are some benefits to buying from the same retailer, again and again.
Those benefits increase the value that a buyer gets from dealing with a particular retailer. The more a buyer goes through a particular retailer, the more those benefits increase. For some buyers, those benefits can increase value so much that it’s better to go through a good retailer than a discount one.
A personal example might explain this. I pretty much only buy from La Couronne du Comte and, earlier in the year, I emailed the manager about a pen that I’ve had my eye on for years: the S.T. Dupont Defi. I love how it looks and thought it was probably time to pull the trigger. Dennis replied quickly and told me that it’s a lovely pen but he thought it would be too dry for me. This wasn’t something I had thought about. I did more research, looked at some writing samples, spoke to some owners, and ultimately agreed that he was correct. It might’ve been suited most users but I like wet nibs and this wouldn’t have suited my personal tastes at all.
That email might have taken him a minute or two to write, but it saved me an enormous amount of time and effort in buying an unsuitable pen. If I had looked around for a cheap price, I would have bought the pen and felt confident that I had a great deal – only to find that it wasn’t for me, and would have to be returned.
Dennis lost a sale with that email. I decided not to buy the pen, so he missed out on the revenue and potential profit from selling it to me. That was undoubtedly a cost to him and his business. But it also demonstrated that he knew me, that he understood my preferences, and that our relationship was more important than making a particular sale. It’s hard for me to put a value on that piece of advice; harder still for me to put a value on having a relationship like this with a retailer.
This is one example of how a retailer can create value for a buyer that can’t be captured by a single purchase decision. I’ve heard of many other examples, from retailers and buyers that I spoke to about this post, where retailers were willing to provide particular services to their regular customers that they can’t afford to do for everyone. Things like personalised recommendations, reserving new or limited edition stock (sometimes without prompting), making special orders, and providing more detailed information on a product (like extra photos or writing samples). Every buyer will have particular needs and a relationship with a retailer means they are willing to put additional time and energy into addressing those needs.
These services are not generally available to new or irregular customers for two reasons: first, they depend on a level of knowledge about the buyer that the retailer simply may not have. It takes time to learn what sort of pens a buyer likes and dislikes, as well as the services that they find valuable. Some buyers might find gift-wrapped packages a nice touch while others could be completely indifferent. For the retailer, it’s not worth providing a service that isn’t appreciated.
Second, premium service is costly to the retailer. Holding a new pen or ink in stock for someone means the retailer misses the chance to sell it to someone else. Dip-testing a pen before despatching it, or taking extra photos to help a customer decide, takes up time that could be spent in other ways. These are very real costs and many services aren’t worth providing to every potential customer, particularly if the retailer isn’t sure they’ll actually purchase. Why spend time doing a writing sample comparing two Pilots, if the customer is likely to go and buy from Engeika anyway? So premium service is provided to regular customers, where the retailer can feel confident investing his or her time.
These services are hugely beneficial to buyers but they vary between retailers and between buyers, so they’re almost impossible to factor into a single purchase decision. To return to our earlier example, the buyer found the discount retailer provided $50 more surplus, but how could he incorporate the fact that a good retailer would be able to help him choose the pen/nib that would best suit his preferences? For individual purchases, it’s not at all obvious.
It’s much easier to see from a longer-term perspective. Over the course of a year, a retailer can help a buyer to make better choices, increasing the value that the buyer receives from each of their purchases. The retailer can also make suggestions for other products and help to manage purchase scheduling by holding inventory or providing layaways/laybys. By driving up the value for each purchase, the retailer is able to constantly increase the buyer’s surplus, reaching a point where it exceeds the additional cost of buying from that retailer.
For some buyers, that point will be reached quite early on. It might take time for other buyers, and some will never really that point at all. My feeling is that having a relationship with a retailer is most valuable if you are someone who buys pens (of any value) frequently, someone who buys expensive things infrequently, or someone who expects to pursue the hobby for years to come. For someone who is an infrequent buyer of cheaper pens, a one-off buyer, or not sure if they’ll pursue the hobby, it would make sense to buy from the discounters. In those examples, a personal relationship is probably not valuable to either party.
I find it interesting that most of the more experienced members of the pen community seem to have a regular retailer (or a few regulars) while most of the younger or less experienced prefer going for the deals. It seems to be a lesson that we all learn over time, eventually coming to the realisation that it makes sense to build a relationship, even if it costs a little more in the short run.
I’m certain that retailers need to make more of an effort to educate buyers, to help them understand the long-term benefits of having a good relationship with a retailer. It is a difficult argument to make because you don’t want people to take the relationship element for granted and expect a wealth of premium services, that they may not even appreciate, from every retailer they approach. But retailers stand to benefit if they can make buyers more aware of the benefits that can come from a relationship, that there are rewards to loyalty. It’s a lesson that I’ve learned, and one I hope quickly spreads to the younger and newer members of our hobby.