How can Moleskine, a company that makes notebooks and stationery products, push for an IPO at “a valuation between 22 and 29.1 times the company’s earnings last year”?
The answer, as reported by Quartz, is a recognizable brand and great profit margins:
“Moleskine’s operating margin, its profit as a percentage of revenue, was 41.7% last year. That compares favorably—indeed, very favorably—to the luxury brands the company considers to be peers, like luggage-maker Tumi (19.7%), fashion firm Prada (27.2%), and beauty-product boutique L’Occitane (16.7%). It’s not hard to see why. The raw goods of Moleskine’s paper products, which represent 93% of the company’s revenue, are cheap compared to most luxury wares, so there’s more room to mark up the price.”
Moleskine differentiates its market position from stationery companies by offering the caché of using the same style of notebook that the Hemingway and Picasso crowd took out in Parisian cafés in order to sketch and write. With another hat tip to Quartz, this graph comes from Moleskine’s IPO prospectus (pdf):
In short, Moleskine is not selling a notebook, it’s selling customers on the identity of being the type of person who uses a moleskine – someone whose cultured globetrotting is reminiscent of Hemingway.
It’s tempting to see this as a replicable business model. Step 1, identify a mundane product. Step 2, attach your product to a lifestyle or identity. Step 3, sell the product to the people who want that identity at a stiff markup.
Unfortunately, everyone already does this. From spinner wheels in hip-hop to expensive pens for executives, trying to brand a product as part of a lifestyle is incredibly common. Moleskine simply got its brand down in a way that very few companies do. Trying to copy what Moleskine did in stationery is like trying to copy what Prada has done with clothes.
So, either tip your hat in Moleskine’s direction or harangue their customers for buying expensive notebooks. Or both.