Pilot UK’s Pricing21 January 2016
We’ve long grumbled in the UK about the prices of Pilot pens, casting covetous glances across the Atlantic whenever anyone speaks of the great value of Pilot’s fountain pens, or feverishly calculating shipping, customs charges and waiting times of Japanese imports. Things have come to a head recently with the sudden disappearance of some of Pilot’s best pens from UK stores: the Coleto, Juice and Kakuno, in particular apparently because they either don’t pass safety standards for sale in the UK or Pilot haven’t even tried.
In an effort to bring some objectivity to proceedings I looked up online prices in the UK and USA (looking at the most popular retailers and picking the cheapest price). We have to pay VAT(at 20%) in the UK and neither Pilot nor retailers can do anything about that so I took it off before I compared prices.
Fountain pen prices are between 40% and 58% higher in the UK compared to the USA. Iroshizuku ink is 20% higher. This is without VAT: to actually buy these pens, we need to pay an extra 20% on top of this.
I had a look at the cost of importing from Japan via Amazon and this is much cheaper, even if you get stung for customs charges.
For example, the Custom 74 costs £110 in the USA, £185 in the UK (including £30 VAT) and £76 from Japan (including £19 customs charges).
You can see the spreadsheet with all these calculations here. This spreadsheet also has a price comparison for another Japanese brand, Platinum. Platinum prices are lower in the UK than in the USA and in some cases lower than importing from Japan.
This shows that Pilot UK must be setting extremely high wholesale prices.
Pilot can of course decide how much they want to sell their pens to retailers for and no-one is forcing anyone in the UK to buy them. If a Pilot Custom 74 is worth £185 to you then that’s what it’s worth. Despite that, Pilot’s attitude to the UK, as demonstrated by their wholesale pricing, is an issue that should be highlighted.
Once you’re aware of the discrepancy in pricing, you can’t escape the feeling that you are being ripped off if you buy a Pilot pen from a UK retailer. You’re not being ripped off by the retailer, you are being ripped off by Pilot who are forcing retailers, if they are to make a profit, to sell you a pen (the Vanishing Point) that is worth £59 in Japan but seemingly £124 (not including VAT) in the UK. For the exact same pen.
Worse is the situation UK retailers find themselves in as a consequence. I don’t mind paying a little extra to buy from the UK. I don’t mind, too much, paying VAT and I don’t mind paying a little more to support UK vendors. I get the pen a little quicker and I have the backup of good customer service if I need it. There’s no way I can justify spending twice as much, though. Then there are pens I’d like that aren’t even available from a UK retailer. This is a completely unfair position in which to put these businesses.
I’ve got several Pilot pens (with some reviews of them coming up here soon, ironically) but unless they change their pricing policy I won’t be buying any more. Instead, I’ll continue to support retailers by spending my money on other brands.
I contacted Pilot who replied and promised a response before publication date. I didn’t get that response. I’ll publish it here if it ever arrives.
Pilot did reply but the email went to my Spam folder and I didn’t see it. Many apologies to Pilot. You can read their full reply here.
This is a great article. This drives me nuts and you’re right – it puts retailers in a really unfair position. It’s the same case here in The Netherlands, with 21% VAT on top of the insane pricing. I don’t understand why it is this way. I love Pilot otherwise, but this really sucks. Also, it’s hard to love some of the pens that everyone else loves when they got theirs for $300 USD and I see it for 600 euros.
I think you’ve highlighted an important issue with this post but I really disagree with jumping to the conclusion that consumers are being ripped off. In making that claim, you’re effectively claiming there’s no other explanation for high prices except that Pilot wants to exploit their customers and make some excess profit in the UK. I’m not sure it’s wise to make that argument.
A distributor incurs two types of cost. The first is their input cost (buying the product from the manufacturer) and the second is the costs of everything else they do to distribute the product: they have employees, sales support (advertising, promotional displays, etc), repair/servicing costs, freight, etc.
Even if we assume that distribution costs are the same for distributors in Japan, the UK, and the US, prices in the UK will ultimately be higher because the market is much, much smaller. Those distribution costs are spread out across all of the products sold. If you have $1mn in costs but sell a million products, the markup for distribution is only $1/product. But if sales in a smaller market (like the UK) are only 100,000 then the markup for distribution is $10/product. A small market means higher markups for distributors. The same basic idea means that retailers have higher markups as well.
There are a lot of other cost factors at play as well. If the currency is more volatile in one country than another, the more volatile country will end up with higher prices. If taxes are higher, or business or labour regulations more onerous, those countries will end up with higher prices as well.
To conclude that Pilot UK is ripping off consumers is to say that their costs are no higher than the US but their profits are. I am not aware of any public data which supports this claim — and if you have any private data which leads you to this conclusion, I think you should say so. Ideally, you would share it. If no such data exists, we cannot conclude that either explanation is true — and it is grossly unfair to assume one or the other is correct.
You know that I like you and have a lot of respect for you but I cannot agree with you on this particular matter.
Hi Jonathon. Thanks for such a detailed and thoughtful (and thought provoking) reply. I do not have any data I haven’t disclosed and I accept that my statement is quite strong. However…
I contacted Pilot UK almost a fortnight ago, sharing the spreadsheet with them and asking them for a comment before today. I had an immediate reply promising a statement but it didn’t appear. So they have had the chance to explain the prices but have chosen not to do so. Secondly, even though I accept that costs in the UK are often higher (and indeed I’ve written about that here), I took off VAT before making a comparison (thereby removing one of the taxes, at least) and Platinum manage to distribute their pens without the same kind of markup. We’re not talking a little bit extra but almost half as much again compared to the USA and almost twice as much as importing from Japan.
I’ve said you can’t help but feel you’re being ripped off, and that is exactly how it feels. If Pilot have data that shows this isn’t the case, they should share it and if there are good reasons, I’ll look forward to changing my mind. I think the ball is now firmly in their court.
You’re absolutely right, you said ‘feeling’ ripped off and that’s quite different to how I’ve interpreted it.
If you look at the Platinum data, I think it’s hard to avoid the conclusion that there’s no clear signal about what’s happening. Are they ripping off US consumers on the #3776 Century but ripping off UK consumers on the #3776 Nice Pur? Are Pilot UK choosing to not rip off consumers with the Justus but to do so with everything else? That doesn’t seem to make much sense, and surely suggest there are other factors in play.
I’m happy to admit that I don’t quite know what structure Pilot or Platinum are using to distribute their costs — it might be per pen, per product, per category (e.g. FPs, RBs, etc) or something completely different. And they’re generally not transparent about this, even in public companies, which complicates our assessment.
From my (quite limited) knowledge of the UK market, it seems like most brands have higher prices in the UK than they do in other markets. If the reason for this is simple profiteering then we should see one brand (e.g. Twsbi) deciding to go for a low-price strategy and capturing massive volume. The fact that is not happening suggests there may be some barrier preventing them from doing so, and I can’t help but think that barrier is a high cost structure caused by the small market size.
Yes there is a lot we don’t know. At least, if nothing else, this post has sparked a debate. If the debate results in it being clear that Pilot are being as reasonable as they could be then I’ll actually be very pleased, because they make great pens and I’d happy to pay a fair price for them from a UK shop.
Most of the time UK prices of imported goods are similar to other countries once you take off shipping costs and VAT. Apple, for example, make this very clear on their UK website by showing how much of a price includes VAT (e.g. an iPad Pro, which I really shouldn’t be looking at because I want to buy one every time I do, costs £670 or $800, which doesn’t seem fair, but with VAT removed and at current exchange rate, works out at £567 in the UK and £563 in the USA). Going back to pens, TWSBI’s prices are identical in the USA and the UK once VAT is removed. Everyone in the UK knows about Pilot: Frixions and G2s are everywhere, so their volume must be much higher than TWSBI or Platinum. If two lower volume companies can manage comparable prices then it raises questions about Pilot. As you say, though, it doesn’t automatically follow that it’s Pilot being greedy. If it’s not greed, they maybe ought to find out how TWSBI and Platinum manage it.
Actually, though, I don’t think it’s greed, I think it’s not caring about the fountain pen market here. Maybe they’ve made a decision that it’s not worth their time. More speculation on my part, sorry!
I think you’re essentially asking about the pros/cons of a regional price strategy vs a global price strategy, and the price difference really isn’t the best metric to evaluate the strategies. If a global price strategy mean that prices rise further in the UK, then it’s not really desirable — even if they rise even more in the US and there’s less disparity between the two regional prices. Perhaps most relevant to my present circumstances, a global strategy generally means that prices in wealthy countries decline slightly while prices in poorer countries increase substantially.
It’s also worth noting that you don’t really get global pricing on its own, its a realignment of the entire distribution function. Instead of Pilot UK deciding which products are worth carrying in that market, you get the same as everyone else — that’s valuable in that you get access to things you otherwise did not, but also means there won’t be any products specially developed for local people and their unique needs. It also means that repairs/servicing operations are likely to be moved to a few global hubs rather than each region having its own operation.
It also means that sales reps end up with bigger territories and so they aren’t able to serve individual retailers as well. That might sound irrelevant but it means your local store will have less training/expertise in the products, and less assistance in choosing an inventory that best matches their local customer base. It undermines the local shop and gives an advantage to the bigger, international retailers.
Ultimately, the decision about whether to go regional or global is a fairly complex one with a lot of varied pros/cons for a brand. As an economist, I can see that the trend in costs will push towards a global strategy and think this will be largely beneficial. But I don’t pretend that it’s a free lunch, where we get all the benefits without any costs. The trade-offs here are significant.
Actually just to add to my comment: I personally believe that the current system of regional distributors, each with their own price, is not likely to survive. The growth in the FP market and diminishing barriers to international trade is pushing distributors of the one brand to compete with each other, and high-cost distributors will eventually lose out to their higher-cost brothers. This scenario may not eventuate for some time, but when it does the brands will be forced to reconsider their entire approach to distribution — and, like Montblanc, may look to adopt one standard baseline international price (with local variations to reflect freight, local sales taxes, etc.)
I completely agree with you about this!
Great post Ian. The higher prices alongside the lack of availability is something I have found extremely frustrating as I really enjoy using Pilot pens. I have tried to get information from Pilot directly but I haven’t got anything apart from the standard PR approved responses.
Yeah, I always think of the adage “Welcome to rip off Britain”. And I don’t think it is deliberate scalping, it’s just like so many things we pay so much more for.
The big one for me is games consoles. When a new one is released and the price is revealed as $599 in the US and £599 in the UK and all us Brit gamers groan!
I’m from Poland. And I totally get what you’re talking about. We still don’t have many of their products and few days ago Pilot Pen US on Twitter responded, that the polish Pilot Pen retailers should be able to bring me some pens that are not available in my country. And guess what, they didn’t. That’s really sad. They are nice, but when they told me, that I can buy Pop’lol instead of (unavailable) Juicy pens, I was just sad, because, well, that’s not the same.
Prices? If I’m comparing with JetPens, G-TEC-C Maica costs this same, the difference is huge on Pilot MR fountain pens. 15$ in US, 23$ in Poland. That’s 30%, right!
If you think you are getting Ripped Off in UK. Look at the prices on Amazon France for the same item.
I often find it is cheaper for me to buy from either Amazon USA or Amazon UK than to buy from Amazon France for pens and a whole load of other things. The difference is sometimes as much as the price being double on Amazon France compared to Amazon UK!
But I agree with your post, the prices that Pilot ask outside of USA need some explaining. I look forward to an official reply from them… and not as a comment on your post.
Pilot did actually send a response to Ian Hedley on this matter on 13th January circa 2 days after he contacted us and a minimum of a week in advance of him publishing his article.. He appears to not have read our response or chosen to ignore it. I have subsequently resent on the original email, that is dated and time stamped. I would be very happy to send you the full reply, but it is quite long so if you have an email address, probably better for me send it directly to you.
You can agreed or disagree with our comments and we respect that, but it is not true to say that we have evaded a reply.
Unfortunately your email went to my spam folder. I’ve published it in full here and I’ve amended the article to acknowledge your reply.
It was an honest mistake but an embarrassing one, and I apologise.
[…] Balanced, respectful, analysis and discussion. More of this very combination, which commenced with Ian Hedley’s initial query into Pilot’s pricing of pens in the UK: The Pilot Pricing Puzzle The Pilot Pricing Puzzle — […]