Editing The Pen Addict 447/transcript (section)

== Pricing Discussion ==


'''Brad Dowdy:''' Well, yeah. So, but it's part of the bigger conversation that I want to have today around pricing. Okay. You ready to get into this? Yep. Yeah. So, I have a lot of thoughts I've had in the past week and in relation to price increases. And this came about because of Sailor's approximately 30% price increase on the North American.

'''Myke Hurley:''' 2021 pen of the year. 2021 pen of the year. Pen of the year.

'''Brad Dowdy:''' Monte. Grappa. So, and this isn't like a specific diatribe on Sailor. Like what they did was perfectly fine, right? I had more. I don't have problems with what. I have problems with how and things like that. So, just to recap, you know, Sailor's new directive to, this is, I guess I should clarify, this is Sailor North America. Where this price increase showed up was a 30% price increase on, you know, these new 1911 and Pro Gear models. And so, the question was, hey, this is about 30%. That's a big increase. What's the deal? So, they didn't answer that in their first post. And then came out with a video on Instagram earlier this week saying, you know, it's, well, the pandemics, you know, hurt all businesses and gold prices are gone up, which they have. So, like, perfectly valid. Like, I'm not knocking the price increase.

'''Brad Dowdy:''' Businesses have to do that, right? Like, you know, many companies are going to have price increases for 2021 Pelican, Pilot, Platinum. You know, probably a whole list of companies are going to have price increases this year. But I guess my wish is, which is a pipe dream, is that everyone would take more of a Pelican path to these announcements. So, what Pelican does is once a year, usually at the beginning of the year, the announcement comes from the corporate office, not the distributors. They lay out a chart of the entirety of their product price increases on every product line that they have and the reasoning behind these increases. You know, is it raw materials cost? Is it the cost of doing business in the pandemic? On and on and on. And they throw it out there from the highest level, right? You're not getting this from the distributor. You know, the corporate business is taking that conversation and taking that hit, saying, here's what it is. Here's why. And that's it. Like, cool. We're done now, right? So, like, the surprises are not very fun from a customer perspective. When you see, holy cow, why did this happen? And there's crickets, you know? So, I wish, you know, my dream scenario would be, like, why couldn't Sailor just come out with that? And, well, that's probably not a very Japanese thing to do. We're going to talk about that more. And no one, I mean, no one wants to hear about a price increase, right? As consumers are like, oh, 10 more percent for Pelican. But, you know, that's part of the business. You know, Sailor chose to do it in a new product reveal. Just didn't even mention the price increase. Just gave a new number that was such an outlier. It kind of took me and a lot of people back. And there was no conversation around that. Like, no commentary on a 30% price increase that got dropped out of the blue. Then you have other companies, our good friends at Platinum Myke, who raised the price exorbitantly, remove the retail discount off the MSRP and say, this pin, this is the Sheen from last year. You know, our purple Platinum pin that I was all up in arms about.

'''Brad Dowdy:''' And they removed the 20% discount off MSRP and tell customers that they're not going to discount that pin. Then they don't sell enough of that pin. And then they discount the pin. So, now it's currently 20% off MSRP. Like, what kind of relationship are you building with your customer base when you do that? So, pricing is always fun to talk about. And what I want to focus on today, I think, is kind of the bigger picture of raising prices and how it affects retailers and eventually us as consumers. Because that's where my concern lies. Okay. Right? Like, these are just like, these are my general thoughts. Like, I'm not an expert in this. And every business has to run on how it has to run. And every business is, it's completely acceptable to raise prices as your costs increase. So, if you have any feedback on, like, any of the rest of this conversation or any of this conversation at all, please let me know. Like, I'm no expert at this. So, I just want to lay out kind of an example of what I'm thinking about to kind of get to an endgame question that I have and that I'm thinking about. So, let's just imagine 10 manufacturers raised their prices in 2021, like stationary manufacturers, right? And all those manufacturers raise their prices, say, from like 10% like a Pelican to 30% like Saylor. There's just a whole range of a bunch of companies raising prices. It could be because of the global pandemic. The cost of doing business is now greater, right? Which is valid. The cost of raw materials is valid, right? You know, gold is not an infinite resource. Gold is also tied into global monetary markets, which is a whole other conversation that I have no ability to speak about consistently. But, you know, and a lot of these bigger companies also use distributors. So, like, the distributors are kind of in the middle there, but I'm not sure that, like, the distributor model matters for this discussion. What I think does matter is that the retailers not only have to absorb a few price increases, but a bunch of price increases, right? So, how does, let's just call them Retailer X. It's how Retailer X is now absorbing Saylor's price increase and Pelican's price increase and Pilot's price increase and Platinum's price increase. Well, they don't have to absorb them. Right. So, that's part of the conversation, right? They don't have to. But they're getting hit with these huge group of increases and they have decisions to make then, right? So, maybe, you know, if I'm just using Saylor, for example, not, you know, no commentary on that. But what if they can only order 20 pins now instead of 30, right? So, their capital is tied up in fewer, in lesser inventory, right? And then that extrapolates across the board for every product that they carry or maybe they decide, like you say, to drop them. So, in theory, the profit's the same, right?

'''Myke Hurley:''' Well, I wasn't saying about dropping. My point was they could just increase the price to the consumer, the distributor.

'''Brad Dowdy:''' Yes, which we're already assuming that's baked in. Right. All retailers are going to, are playing from the same playbook. Right. Right. So, because they would, then they will not be allowed to sell the products if they do not play by the playbook. That's a whole nother conversation. So, now Retailer X has 20 units instead of 30. And those 20 units are 30% more than last year's units. And do they lose sales because there's lesser options? Do they sell less because the price is more? And then does that compound across every product line that they sell, right? So, now so many prices are getting raised. So much capital is getting tied up. And then you can't forget that the consumer also has to agree to pay the new price, right? What if you can't, what if you're buying, you're spending the same amount of pens that gets you less pens, spending the same amount of money as a retailer. You're getting now 20 pens instead of 30. But the consumer now has decided, well, that's a bridge too far on the prices. You know, just a couple years ago, there was a Japanese pen super fan, you know, let's call him Brad. And I would, I would happily buy, you know, two or three sailor pens, you know, maybe a platinum pen, you know, one of the limited editions or a new pilot pen. And, you know, I have a pretty good budget. Like, I spend a lot on fountain pens. And that budget might be the same this year for me, but now that budget gets me three pens instead of five pens. And I wonder how this affects retailers because they have maybe less inventory. They maybe have less turnover in inventory. And does this continue to compound as prices continue to rise? I don't know. I think I'm just, I'm saying this out loud because I don't have an answer. But this is what I think about, right? When you get hit with a swath of price increases that are getting passed down from corporate to distributor to retailer to the consumer, in the end, we're the ones making the decisions to buy the product. And now my money doesn't go as far. I mean, and this is the story of the economic world, right? And, you know, ever since we've traded, you know, traded money for products, right? Prices go up. Consumers have a decision to make. But we also got to remember, we're in a luxury market here. We're in a non-essential luxury market here, right? So the manufacturers that have raised all these prices, guess what? They're not the only ones who had a tough time during the pandemic. What about the consumers? Consumers, you know, weren't popping bottles during the pandemic, you know? So the manufacturers, okay, sure, your price, your cost of business went up during the pandemic. But the spending power of the consumer also went down.

'''Myke Hurley:''' Well, that's, I mean, I want to be realistic with you. That's dependent. That's not, that's not universally true. Like, there is definitely a lot of people that their spending power changed. But realistically, a lot of people who have stable work have more disposable income right now. I agree. Because they're not spending money on outdoor luxuries.

'''Brad Dowdy:''' I agree. And that's why in 2020, we saw pen retail do okay.

'''Myke Hurley:''' Mm-hmm.

'''Brad Dowdy:''' Right? This is a luxury good that people could-

'''Myke Hurley:''' I bet it did better than okay for some people. Yeah. Because, I mean, like, you know, like, for me, getting into new hobbies, people got into new hobbies. They wanted things to do, and retail therapy was a way to do that. And any business that was already well-established for online sale had the opportunity to do well. And I expect quite a lot of pen retailers did do pretty well.

'''Brad Dowdy:''' I agree. 100% agree. But I'm also looking, you know, three to five years down the line. Yes. And that's the conversation I want to have today because prices are increasing today. The cost of doing business improves in two years. The cost of gold drops 20%. Are we going to get a decrease in prices? Are retailers going to come out and say, hey, we're dropping the price 10% this year? Get you some of that.