Brand Analysis: Staedtler

Some readers might recall a post that I published early on in the blog's history, where I categorised all of the fountain pen brands according to how competitive they were. At the time, Staedtler had recently entered the market and I wasn’t terribly impressed by their pens or their business. Six months on, they are more established in the market and today, I thought it was time to take a fresh look at their strategy, their chances of success, and what other entrants could learn from them.

Back in February, I wrote:

While it’s nice to see a manufacturer make a serious move into the FP space, it’s another example of a company that hasn’t taken the time to properly understand the market and what consumers want before making that move. It’s really not enough to develop a new range of pens and assume that design will be the key to sales. […] I expect to see the entire Staedtler range discounted in the near future, and for Staedtler to withdraw from the FP market shortly thereafter. 

I’ll admit that it was a little harsh and the timing was completely wrong. Since then, they have made more of a push with the FP business and managed to land a couple of US stockists (Fountain Pen Hospital and Bittner, who don’t even carry the pens on their website) and a glowing review from the Pen Addict. But apart from that, there seems to be very little discussion of the brand on blogs or the community websites, which suggests that their pens probably aren’t flying off the shelves.

The big appeal of these pens is their design – and I’m a big fan of the design. They are smart and modern, with a mixture of steel and some interesting materials that aren’t common in the FP world. According to Brad’s review, the pens are also really well made and provide an excellent writing experience.

When you look across the range of steel-nibbed, cartridge/converter pens, I think Staedtler have put together a solid product and deserve serious props for that. And they would be incredibly popular if it wasn’t for price. The base level, resin model is US$199. The metal one is $259/€149, wood $279/€150, and the leather option €255 (prices from Fountain Pen Hospital and La Couronne du Comte).

Those prices are a pretty big ask considering Staedtler is relatively new to the market: buyers don’t know if the brand stands for a high-quality product or if the brand is going to stand behind it for years to come. Given there’s no brand premium, the value proposition comes down to the design of the pen and I struggle to understand their thinking here. Do they really think there are many buyers out there who will be willing to drop that kind of money on a wood or leather Staedtler, given they could buy a Lamy 2000, a gold-nibbed piston-filler, for half the price ($140)?

It’s a hard sell, and it’s an even harder sell when you consider that there is already a German brand selling steel-nibbed pens with smart, modern designs in the same materials, for a fraction of the price. Faber-Castell has the Basic in leather (just $45) or they have several pens in wood, most notably the E-motion ($130) that looks strikingly similar. It’s no surprise that retailers like Anderson Pens, Goulet Pens, and JetPens aren’t carrying Staedtler: it takes a lot of capital to hold a product range in stock, and that money is wasted if the product doesn’t actually sell. The prices in Europe are more competitive, but Staedtler is still far outpriced by Faber-Castell: €150 compared to €100 for the E-Motion. It’s the same story in every other market that I can find.

The interesting thing about the established German brands is how they have each carved out a distinctive niche for themselves, each appealing to buyers with different tastes: Montblanc is the premium brand with refined, classic designs. Pelikan is the upmarket brand with reliable, workhorse pens for professionals. Lamy makes pens that are simple and functional, and Faber-Castell makes pens that are smart and modern, if a little basic. Even if you aren’t familiar with each brand’s range, it’s relatively easy to tell them apart.

This kind of differentiation works well for the brands. It allows each to have a kind of limited monopoly, as they are the only brand producing pens for each group of buyers. The brands can become quite specialised in their designs and marketing, which is valuable to consumers, but it also means there isn’t much competition in each segment. A lack of competition removes the pressure for firms to keep their prices down or to invest in innovation, both of which disadvantage consumers. With this kind of market structure, it’s no surprise that the designs coming out of the German brands haven’t changed that much in the last five decades.

Sometimes, firms will actually try to increase their prices, but it’s a risky move. It’s risky partly because consumers might defect to a brand in another niche – if you want a Montblanc 149 but MB raise the price by 10%, the Pelikan M1000 is suddenly going to look a lot more appealing – but mostly because it might attract other brands into your own niche. If Montblanc increase their prices too much, Pelikan might see an opportunity to create a new line of pens with a more classic, refined look – mimicking the MB style – and offer them at a price that enables Pelikan to make a healthy profit while undercutting Montblanc. When consumers are faced with two near-identical products, they are likely to opt for the cheaper one. Montblanc will be forced to reduce prices again or be forced out of the market entirely. So the temptation to increase prices will be tempered by the worry of rivals undercutting them.

This makes Staedtler’s strategy all the more interesting. They have decided to move into Faber-Castell’s niche and make a play for the buyers who like smart, modern FPs. But instead of offering lower prices or a better product for the same price, Staedtler are offering a similar product for a much higher price. To me, it seems like they’ve given FC a dominant strategy, one that will prevail with absolute certainty, and requires absolutely no change on Faber-Castell’s part. It is a strange approach for Staedtler, to say the least.

Of course, price and design isn’t everything. There are other considerations that appeal to buyers and a clever competitor will try to find a way to dominate the incumbent and capture the market, despite charging a higher price or offering an inferior product. A brand with superior advertising, distribution, or reputation can pull this off, or even just one with a better understanding of the market. As far as I can tell, Staedtler doesn’t have an advantage over Faber-Castell in any particular area, certainly nothing that would overcome the very large price difference.

I also wondered if maybe Staedtler are deliberately running at a loss for these product lines. That might strike some of you as crazy, but for a business that’s looking to establish itself for the long term, temporarily running at a loss makes sense. It gives you a chance to build a distribution network, establish a reputation with consumers, give staff some hands-on experience, and ensure that all of the business’ operations are running smoothly before introducing new products or increasing production. This is expensive, it requires capital to be invested and commitment from the management and shareholders, but it can lay the foundations for a successful business.

There are a few reasons why I’m not sure that this is Staedtler’s strategy. First, the full range of Staedtler FPs is quite large – too large for an initial setup. Second, these products have been available for more than a year and we aren’t seeing much in the way of competitive new products. Third, Staedtler is already an established stationery business: they already have a strong brand, a good reputation (albeit mostly for pencils), and a distribution network.

So while I’d like to say that there’s a credible strategy at play here, I just can’t figure out what it is. I always try to assume that decision-makers are behaving rationally and, if something doesn’t make sense to me, that’s probably because I’m missing some information or preferences that the other party has. I want to believe that they have a credible strategy and that this competition isn’t as one-sided as it looks right now. But there’s no evidence to support that and so I’m forced to stick with my prediction back in February, that it’s only a matter of time until they exit the market.