As is widely known, there is an old Chinese curse that translates to “May you live in interesting times” or words to that effect. Given the events that have transpired over the last 90 to 180 days or so, most observers are likely to agree that we are, in fact, living in interesting times.

How will these interesting times impact the pipe market? Will things bump along as usual or will we see some shifts? I wonder.

The financial markets are a mess. Not only has vast wealth disappeared almost overnight, but so also have the means and methods to replace that wealth or generate new wealth. My broker insists that this wealth never really existed in the first place. People have been living beyond their means and the piper is at the door with a bill and the Sheriff.

When investment titans like Lehman Brothers find themselves insolvent, and when “the lender of last resort runs out of money” as the Washington Post’s Steven Pearlstein wrote today, it is time for the rest of us to think seriously about what’s going on and respond with common sense, discipline, and vigor.

Some people characterize the impact of current events as forcing a bunch of super-rich people to downsize from living in eight houses to living in just four or five, or – to translate to the pipe world – buying just $50,000 worth of pipes per year as opposed to spending double or triple that. Yes, there are people who spend like that. Let’s hope they’re correct, but I doubt it. Financial markets, employment levels, and consumer confidence are inextricably and tightly networked. If things ever return to what passes for normal it will only be because our notions of normal will be re-calibrated downward. At least this is likely to be true for most of us.

People are currently very focused on the housing bubble, ignoring the signals that most categories have indeed been “bubblified” for awhile. You can’t tell me that there hasn’t been a pipe bubble. It’s plain to see when there are more than a few pipes out there that are priced higher than a mortgage payment on a McMansion. When I share information with friends of mine about the pipe world and pipe economics, people think I’m 1) crazy,
2) making things up, or 3) associating with yacht-owners.

In my mind, what current events signal cannot help but translate to at least a slowing - if not a reverse - of the growth in the upscaling of everything. Those people and enterprises who have positioned themselves in the super-premium space in their category cannot help but find fewer disposable dollars available for capture.

In the coming months and years, people will re-evaluate value propositions, and those whose value propositions are based on “by buying this item you can separate yourself from the hoi polloi who cannot afford this item” may find themselves without buyers. Those who create value - this includes many well-known American artisans - may not thrive, but they are likelier to weather this financial storm intact, if not better off because their less-savvy competitors will be doing something else.

There are signals that savvy pipe insiders have seen this coming. For example, recent updates at Smokingpipes.com are noticeably downscaled as of late. There hasn’t been the typical parades of high-grades but rather far more offerings of Stanwells, Savinellis, etc. The Richmond Show is coming in a couple of weeks and we may see more high grades in weekly updates as a result. I’ll be watching. We are, after all, just barely into the high season of pipe-buying.

Mike Glukler’s announcement that he is selling or closing Briar Blues is likely to impact the pipe collector’s world as well. To call Mike a trusted seller would be an understatement. He provided a first-rate venue for the secondary market where consigning sellers kept more of their money than by using alternative sales channels. As a result of his reputation and service, Mike made it possible for 1) collectors to periodically refresh their collection and
2) estate buyers to buy pipes that might be out of reach if they were new. This channel may disappear. How will this affect secondary markets?

Prior to the announcement, even Briar Blues looked to me as if fewer pipes were selling. The ranks of “Forgotten Pipes” seemed to swell and the artisan brands included in those ranks were creeping upscale. Mike reports that he is getting out due to increasing workload and changing professional responsibilities, but he also reported at Smokers Forums some months ago that he made very little money with Briar Blues, a message that astonished me given the volume he did and the prices pieces seemed to sell for. It makes me wonder “Who else might want to work so hard for little or nothing?”

Undoubtedly new resale channels will open but few people are willing to work hard for little or no return. Collectors may wind up keeping a smaller share of the sales price and buyers are not likely to pay more; they are likely to pay less because they are likely to have less to pay with.

So what advice do I have for artisans, sellers, and buyers? To artisans: “Get real.” Just because some people will part with four or five figures for a pipe doesn’t mean that most pipe buyers are still able (or inclined) to do so. Do what I do: work harder, price aggressively and over-deliver. Don’t hang onto inventory on principle. If something doesn’t sell relatively quickly, unload it safely and discreetly. Cash flow now is worth more than cash flow later. Assume that markets are smarter than you are. Don’t assume that discounting destroys value for everyone else. That is a naive and simplistic view of the marketplace.

To buyers: focus on the overall value that the hobby brings you. Pipes are not investments; they’re expenses. If you think you can be in the hobby for free, then you need to “Get Real” too. There’s so much value in this hobby – making friends, sharing interests, enjoying browsing, trying new tobaccos, etc. Our hardware (pipes) are just one small aspect of what we pay for. If you like high grades or medium grades, then that is likely to be what you buy. If you like money more than pipes, that’s great, make friends in the investment sector and go enjoy that hobby. We all have our niche.

To sellers: you need a new business model. If you think you are entitled to a keystone profit (mark up by 100%) on a super high-grade pipe, you might need to rethink this. Most other categories adopted other models quite a long time ago. Sure, there are plenty of businesses that still try this and most of them fail because a more sophisticated player comes along and eats their lunch. It is possible to thrive in “bad times” by understanding that different strategies are required. More successful models position customers as inventory to be managed and pipes as a means to keep that “customer inventory” loyal and engaged.

The country’s best small city pipe show is coming soon and, personally, I’m looking forward to Richmond. It will be here in just a couple of weeks. I’m hoping that the atmosphere will be better than ever - and it’s usually pretty great. Like most attendees, I will be bringing my wallet with me. I won’t have as much to spend as in some prior years, but I will be adding to my collection as will others, I’m sure. I have redoubled my personal commitment to purchase only those pipes that I feel I can’t live without. I suspect others are thinking likewise. The Danes and Germans really surprised me in Chicago by readjusting their pricing and selling strategies for the American market. They sold better than ever as a result. A number of American sellers were left flat-footed. Will that happen again in Richmond?

I’ve seen current events coming for awhile. Some people just hate it when I write blogs like this one. I hear back in so many words that I’m all doom and gloom. The smarter of my friends have simply uttered “I hope you’re wrong.” I’ve agreed. I’ve hoped I was wrong, too. It appears that I was righter than I wanted to be.