Pilot’s Reply Regarding Pricing in the UK25 January 2016
Below is the reply I received from Pilot. Unfortunately, and embarrassingly, the reply was sent before the original article but went straight to my Spam folder so I didn’t see it. I’m responsible for this, and I apologise to Pilot and to those of you who drew conclusions about Pilot as a consequence.
I haven’t had time to fully digest the reply yet but thought it only fair to Pilot to get it out as soon as I became aware of it. I would like to state, though, that the reason I singled out Pilot was because their prices are disproportionately high. Platinum don’t have the same markup and many big tech companies, likewise, manage to have more comparable pricing.
Anyway, here is the reply and I welcome your thoughts in the comments.
My thoughts about this reply are here
Dear Mr Hedley,
Pilot Pricing and product availability in the UK.
With regard to your recent email titled as above. Please find feedback below.
Why are some popular products unavailable in the UK.
By popular, we need to understand what that means. What may appear popular to a single or few resellers as a niche opportunity does not necessarily make commercial sense for Pilot UK to launch generally across the market place. As a business we review market potential for product launches. If we deem there to be a commercially viable market for that product we look to launch. This then becomes subject to a number of criterion. Has Japan authorised the product for launch in our market. This usually boils down to whether they have the production capacity in the factories to support a broad based launch to satisfy the likely market demand for that product and or that by introducing that product, it may negatively impact volumes of existing products within the market that would then make the volumes on the existing product unviable or cause excess production capacity in the factories. At the end of the day it has to be commercially viable for the corporation across a broad business analysis. I think it is fair to say that global businesses do sell different ranges in different markets and that no market across any category ever sells every model / design format of product that the corporation produces. In the UK we have a pretty extensive range that we have to manage through our distribution network. Range extensions have to meet agreed and rational business criterion.
Regarding the products that you specifically mention. (Juice / Coleto and Kakuno) I can confirm that these as of today have never been officially launched in the UK market. The only way that they have found their way into the UK market is through direct importation from Japan by a few individual companies. (This is in essence an infringement on Pilot Corporation of Europe’s exclusive trademark license that is supported by European law. ) This is why we have requested that the individual resellers who are “Illegally importing” these products in UK refrain from doing so. This is not necessarily to their liking. You might ask why we are being so pedantic about this issue. The Juice product is actually an excellent example.
While Pilot sells and distributes the Juice product in Japan, the name “Juice” in Europe has been registered by another manufacturer and as such it is illegal for the product to be sold in the EU by Pilot as it infringes on the registration of another manufacturer. By allowing this product to be imported into the UK by an independent reseller, Pilot is liable for legal challenge and damages from the owner of the registration. The importing reseller would probably not be aware of the registration issue and is a clear reason why Pilot has to control the importation of non-authorised product as the company is best placed to understand these types of issues and challenges. We are in fact currently reviewing the possibility of introducing this product sometime this year; albeit it will be marketed under a different name should the criterion above be met.
Regarding your question on satisfying the required regulations. These products have not been submitted for testing against UK regulations as we have not looked to launch them in the UK. The process is reasonably expensive and time consuming having to be done via an independent and officially registered laboratory. We only put the product forward for these tests as part of our pre-launch process once we crossed a number of other hurdles, some of which have been detailed above. We have no reason to anticipate that they would not pass the British Standard as all our products are manufactured to high level of safety. (although from time to time we do have to modify certain products in order to pass the strict UK legislation, this usually means an additional process in the manufacturing process such as pinning the end cap.)
Every market across the world has different legislation in terms of how they deem a product to be legally salable in that market. In the Uk the regulation is more stringent than for most other markets and indeed more so than European legislation. (The UK legislation is: BS-7272/REACH/CE ) This means that for every product we sell in the Uk we have to submit product for testing. Commercially this is not viable for us to do for every product that Pilot manufacturers around the world unless we plan to launch in the UK. Therefore we cannot allow a 3rd party to import as we are not sure that the product would pass the UK standard. That’s not to say it is unsafe, but just not meeting the UK standard. I am sure you can appreciate that if an accident occurs with a Pilot product, irrespective of whether we brought it officially into the UK or not, the potential PR damage for our brand equity would be considerable. Potentially we would have a legal case against the “illegal importer” for loss of earning due to defamation of brand image. This could run into Millions. It is unlikely that any 3rd party importer would be in a position to support these damages payments, but Pilot would still be stuck with the brand damage. It is critical therefor that we actively police the importation of “parallel items” we have not submitted for testing against and passing of the relevant legislation.
Finally on this point I think that it is worth pointing out though that the BS7272 is one of if not the most stringent standards in terms of safety anywhere in the world.
Perhaps if you have contact with a reseller who has been selling the products you have specifically mentioned above you could ask them if they have provided the product to independent laboratory’s for testing to see if they pass the relevant BS7272 and or if they have checked that Pilot has the registration of the particular brand name in European and or the UK market. I suspect that this is not something that they have considered, but that it integral part of doing business for a global business such as ours.
In your mail you have asked for the rational as to why UK pricing is more expensive than that for the same product in the USA. Your question in reality is questioning why European pricing is more expensive than that in the USA. This is a broad and complex issue that I will endeavour to explain below.
At the outset I would like to point out that both markets are vastly different in nature.
1] The USA benefits in the main from a common single language. In Europe as a business we have to cope with numerous languages. A case in point is in terms of website. We currently have to mirror out company website in circa 20 different languages, in addition, we have to manage all our social media activity on the same sorts of numbers. This means that we have to staff our organisation across Europe with significantly more marketing teams, not to mention local administration staff. The sad truth is that the cost of running a business in UK / Europe is a significantly higher as a % of sales than for the USA where they benefit from economies of scale.
Aligned to this is reseller expectations in terms of margin earned at resale. There is a significantly higher margin requirement / expectation from resellers in the UK than the USA. This is born out when we have discussions on this topic with our colleagues in the USA. (Fundamentally then a not insignificant % of the consumer price is reseller margin as opposed to that being earned by Pilot in UK) It is not for me to say what that is, but it is a significant %. (Your readers would be surprised at what our selling price is to reseller versus what they ultimately are charged at point of purchase.) They would argue that they have a high fixed cost themselves that they have to cover. Where internet players operate, this is arguably much lower and why they tend to be much more competitive on price than traditional bricks and mortar resellers. The bench mark is however from the traditional bricks and mortar resellers.)
2] a] Europe is a very fragmented market on a number of fronts, while the USA is a much more consolidated market. In Europe we have multiple distributions centres serviced from a Central distribution centre. These regional distribution centres are necessary to cope with complexities around different customer requirements and expectations in different markets. The USA is able to benefit from significantly lower logistical / distribution costs.
b] The USA by and large has far smaller number of customers that tend to be much bigger. In the Uk we have hundreds of smaller customers and hence orders and multiple delivery costs that are much less economical than delivering large orders to fewer customers. This is from both freight as well as from an administrative perspective.
3] Freight and logistical cost. We ship the majority of our good from our factories in the Japan. USA also ships from USA, but a significantly smaller percentage of their inventory versus Europe. There is a cost differential in shipping from Japan to Europe (2/3rds of the way across the globe) versus Japan to USA (Across the Pacific which is roughly half the distance)
4] Exchange rate considerations. As a business we have to consider fluctuations in the global rates of exchange. In the past number of years, even what you would traditionally have considered stable currencies have fluctuated wildly. Case in point being the £ to $ where even in the past month we have seen the $ appreciate significantly against the £ and this is anticipated to continue. Your analysis in respect of the differential pricing will have closed somewhat in the past two weeks. The £ to $ is currently £1= $1.45, a month ago circa £1=$1.55. It is not feasible for us to flex our pricing on monthly basis. Indeed customers while happy to accept a reduction on the basis of exchange gain, you may be surprised to hear vigorously reject price increase when the reverse is true. We have to try to find a position that does not expose our business to significant losses as a result of exchange movements in the wrong direction.
With regard to the above, this is not unique to Pilot. I am sure that if you review our key global competitors you will see that there is a pricing differential along the same lines as Pilot. Indeed I believe that it is a common issue across multiples industries. I have read many articles and indeed from personal experience when traveling have seen significant price differentials USA versus UK. Key examples include Clothing brands where you can commonly find brands in $ below what you would pay in £ back in the UK. It also is very widely written about and visible when you look at technology products. ( I think there has been some fairly famous recent high profile examples with regard to launches of Play Station and Xbox where the USA prices were significantly below UK pricing. The same for CD’s and Computer games.)
In closing, I hope that I have managed to cover all the points that you have raise. I cannot help but wonder however, why you have singled out Pilot for this article, I think it would present a much more balanced article and avoid the risk of unfairly denigrating the trademark if you were to review in addition other major brands and ones that Pilot would see as traditional competitors as well as taking into consideration the similarity generally on USA / UK pricing across multiple industries.
(Sorry in advance for the looong response)
Well, well, well. This is truly an interesting email conversation. Here, in Canada, we often run into the same issues: Product not available, or price is twice the US price. Fortunately – for some of us – the US border is just a few kms south.
This said, I’m a Quality Manager, working in the Medical Field, so laws, standards, regulations… I know what Mr Knibbs is talking about. This is a real labyrinth, not to say a mess, Europe doesn’t talk to US, which doesn’t care about Canada or Japan. South America doesn’t want to cope with US laws so they created their own, different from Europe or Middle East, etc.
After a quick look, BS7212 states : “BS 7272 Part 1 Writing and marking instruments – Specification for caps to reduce the risk of asphyxiation and BS 7272 part 2 Writing and marking instruments – Specification for end closures to reduce the risk of asphyxiation, set safety requirements for writing and marking instruments which in normal or foreseeable circumstances are likely to be used by children up to the age of 14 years.
When children use pens with end closures and mouth the end of the pen, they could inhale an end closure or pen cap. As a result, the inhaled part might become lodged below the larynx and so block the trachea. The provision of these requirements minimises the hazard from caps and end closures by reducing the likelihood of inhalation and delays asphyxiation pending medical intervention.”. Note that the ISO11540 has been issued based on BS7272.
So the accident stuff is – sadly – not a joke. Even if you can get a super cheap pen from, let say, China, or India, via ebay, Amazon, or any online retailer. Our truly loved g*vernment screwed it up.
If Pilot Japan can ship to UK a Pilot pen from, let say Amazon… Is Pilot illegally importing its own stock? Who will be responsible if a child swallow the pen and/or drink a bottle of ink? Which branch of Pilot? The UK one ? The Japan one? I’m afraid our truly loved g*vernment screwed it up again somewhere.
I’m not defending Pilot here.
I really think somewhere they are as nailed as we are, as customers. My Canadian reality is not so far from yours, and I often read complaints from not US people about prices, availability, odd export/import restrictions…
I, too, began to go with online retailers, knowing that at the same time I’m killing brick and mortar retailers. But a dollar is a hard earned dollar (guess it goes the same with pound 😉 ).
I really feel bad for the reality you are describing.
Regarding the prices… I think some arguments are questionable. Too often companies pretend the US market is so large that they can have lower their price. The real reason is that because the US market is large, they voluntary offer low prices to attract more customers. And the end of the day, they just get more money. Sad but true. Every company does the same.
Well. I guess I have to calm down a little bit now. Have a nice day.
I know little about economics but if reseller markup is such a large proportion of the price why (in a free market) is there so little price variation? Would somebody get the fountain pen economist on this? I smell horses…….
Oh and saying ‘It’s not fair, you’re picking on me’ struck me as rather defensive.
Interesting and not a totally unexpected reply.
But there’s nothing to stop them marketing the same product under a different trade mark name in different markets… Marathon Bars, or Snickers, Canon cameras etc are all examples of this. And the ‘illegal import in breach of copyrights’ argument has been tried by other companies and I still think it is a fudge.
It still doesn’t explain why the same item can be 2 or 3 times the price on Amazon USA, UK, France…
No Pilot UK I’m not convinced by your arguments. Whilst they might hold water in some areas I think you are avoiding the issues.
So we will vote with our feet buy from who ever or change brands for more realistic pricing in our local markets… Your loss Pilot UK
Well done to Mr Knibbs for taking the time to write such a detailed and comprehensive reply. It’s been very educational. It’s nice to see a manufacturer taking the time to engage with pen fandom.
Ian, would be interested to hear your thoughts on this once you’ve had a chance to go through it.
The truth is somewhere out there… last things first.. large brands are taken as representative of their industry in terms of practices … the article was about understanding the why around prices / products.. one assumes that all internationally sold writing instrument brands face the same issues… one big gap was whether these brands are doing anything collectively to resolve these apparent imbalances? Think not.
Selling to Walmart and their brethren in the US solves a logistics and profit problem and wishing for the same across all markets is an infantile position…. becoming so beholden to a distribution network is petrification of strategy.
One aspect is worrisome. .. your article being answered in such detail seems to acknowledge the fact than pen enthusiasts are important to these brands… but offers no suggestion of how or whether Pilot wants improve or build the relationship with people who, of their own accord are enthusiastic buyers of the brand?
It meanders around the one point of “look how tough it is for us” ..
I think it was a disappointing reply from Pilot… I expected better.
Wow, I was not expecting such a detailed and personalized response from a company as large as Pilot. It was very informative. Thanks to Mr. Knibbs for giving such a fascinating description of the logistics, and to you for sharing it with us.
Also, I am confused by some of the other comments. Price variation won’t happen likely because resellers will all mark up the product by the same amount. If they mark it too low, they likely won’t move enough units to make a profit. And they will also look around at other resellers of similar products (probably even talk to them) and put their price in the same ballpark so they can compete. It isn’t like pens are a brand new market where you may see more price fluctuation as everyone scrambles to figure out what people are willing to pay for an item. I also don’t understand why the potential worry about lawsuits is “fudge.” It would actually be great to hear the reasoning behind this stance. I’m not trying to be snide; if there is a logical argument for why the copyright thing is not an issue, I really want to know. It’s just that right now, the only argument seems to be “I just don’t believe them.” In terms of why I think it makes sense: companies, especially large ones, generally seem risk-adverse and I imagine they really don’t want to risk expensive lawsuits. Moreover, marketing the same product under a different name is not something a company does by just snapping their fingers. A marketing and development team will still need to research and work on what new name is appropriate; time and resources still need to be devoted to that. Ergo, the company would only do so if they thought it would be profitable. Pilot even specifically said they were looking into doing that with the Juice. Finally, we are talking about companies, not activists. I am not sure how brands are supposed to band together collectively when they are actively competing with each other. Moreover, even if they band together, how are they supposed to affect things like freight costs and currency fluctuation?
All of that being said, I do find it curious why Platinum is able to have lower prices. I wonder if it has anything to do with company size and range of product. It would be amazing if you ever have the chance to show Pilot cross-company price comparisons and see how Pilot responds. And I am very curious to know your thoughts about this letter whenever you have the chance to get around to it.
Interesting response, thank you.
Ok, Case closed! From the response the reason behind higher prices is higher distribution costs due to the fragmented nature of the European market and higher expected margins by resellers than their American counterparts (I would imagine not due to greediness, but due to lower volumes). It makes sense to me. No conspiracy here.
I’m not suggesting a conspiracy at all, just wondering why Pilot prices are so much higher when Platinum and Sailor prices aren’t.
I’m surprised no-one else has picked up the sweet irony of Pilot UK’s MD’s surname – Knibbs (with a silent K obviously).
I’m a lover of Pilot products, across the price range. I get the costs of doing business in Europe; I get the trademark issues and I get the rigorous testing requirements. I’m also loyal to the few UK online retailers I buy from – ones we all probably use. With all that said, Mark Knibbs why single out Pilot? Why denigrate Pilot? Well, he probably doesn’t have to buy his Pilot products, does he?
My compliments to Messrs. Hedley and Knibbs for a thoughtful and complete discussion of this issue. I am particularly impressed by the attention to detail of Mr. Knibbs response, and the willingness on his part, and on Pilot’s part, to engage with the pen community regarding a legitimate question.