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Banned from buying from LEGO S@H
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Comments
So what do I offer as part of a deal? The biggest thing is that I can provide them notice, well in advance, of what I'd like extra production of. Rather than sucking up supply right in the middle of the holiday season without notice, if I can order it during the summer, they can plan production during the fall to supply both my order as well as S@H, LEGO stores, and their large customers like Walmart, without having a shortage or supply problem.
I actually don't want to play the retail arbitrage game, selling current sets that are out of stock for lots of money. I do it from time to time when I find an obvious deal (Minecraft was obvious), but I'm mostly in the retired set business.
Any person can go buy stuff at retail and sell online the next week, but most people don't have the capital to buy hundreds of large sets and space to store them for 1-2 years.
I'm happy to stick to the retired sets, provide advance notice of orders, and leave the retail supply chain alone, in return for a ITD account.
Let me guess - it's all the evil resellers loading up on current production TIEs and X-wings at TLG brand store RRP prices that caused the problem, right? right?!?!?
LEGO is currently doing a sub-optimal job of managing production and distribution. they can scapegoat others all they want, but in the end it isn't going to fix their supply problems
I recall Jabba's Palace was nearly impossible to find the last two weeks of December and my local store had it in stock maybe 1 or 2 days, with a limit of 1 per customer, couldn't keep it in stock.
My local Toys R Us looked like it had been hit by a tornado in the LEGO isle, even the marked up stuff was all gone in December.
That is part of why TLG sales were up 30% last year over 2011, they are selling everything they can make, but that is their fault for not having spare production capacity, not the fault of resellers buying up everything in sight.
Heck, even Amazon was out of Police Stations and Fire Trucks, and when they can't even keep up with those, you know you have a problem.
---------
So yea, I agree with you. :)
I'd also go out on a limb to say that orders from big resellers skew the data that LEGO utilizes from S@H for planning and marketing purposes throughout the whole company. To their algorithm, a large volume of orders from a particular location appears as high demand where there may be none. Also, LEGO is deprived of the data on who the end consumers actually are, which could thwart their efforts to expand via retail stores, for example.
The sheriff and all his men got him surrounded. I wonder if LFT is gonna come out with pistols blazing.
Trautman: Look John, you've done some damage here, they don't want anymore trouble.
LFT: They drew first blood, not me.
I also know what it is like to not get a product during a sale. I collect "American Girl". I have for years. When they have a clearance sale online, I can't even get my items in the cart and they are sold out and gone. It's a bummer...but that is life. They have a once a year outlet sale to get rid of retiring items. People sleep out all night for it. There are stories of women dumping the whole bin of items in their bag to wipe out the competition for that item. I think that is awful. Do I loose sleep over it? Nope....I probably purchased from them on Ebay. I guess what I am trying to say is I do not need these people banned from AG. They might be sick, out of work, ect. I don't know what makes one do what they do and life is too short to worry about it all. I think LFT is the same way. I don't think he wiped out shelves or did anything crazy. He is a nice guy. I have dealt with him a few times. I still also will say with a strong family history of business....this is a bad decision.
The LEGO CEE team is dedicated to community engagement. The team is admittedly small and at times I feel they aren't empowered enough to affect change, but they do seek to understand and represent our interests. There are a number of programs in place to support LUGs and AFOL events. Do I feel that they would be justified in doing more? Yes, but what they do is far from peanuts.
Its a weird feeling from a company that manufactures toys and on the whole enjoys a fairly good reputation for working with customers.
I again salute LFT for being so rational here and having a reasoned discourse with people asking questions and making some fairly controversial statements.
Its a rarity on the internet for this to not devolve instantly into flame wars.
It is ridiculous to believe that LFT's buying left nothing for anyone else or any reseller for that matter. Minecraft was an anomaly. This happens in the toy industry from time to time. Cabbage Patch Kids, Tickle Me Elmo...Furby. This just means the toy company failed to meet demand. I also find it hard to believe that parents were so badly burned by Lego that they moved on the Megabloks or other clone brands. They might say that in anger, but the only reason why they bought Kreo and Megabloks is because Lego doesn't have the licenses for Transformers and G.I. Joe, Halo and Star Trek. I was able to find Jabbas Palace everywhere around me...even during the "craze" that just hit last month.
Banning resellers. What a joke indeed.
Case in point right now in E-bay is a Kingdoms Blacksmith raid set that someone is listing for over $300. The set was $12-$15 new and has not been off the market for a year yet. This is OK as there are others that are selling this same set for $15-$40, and plenty of them at that price. The person who is listing it at the crazy price will prolly sit on that set for a long while or they will find a fool with money due to be parted.
I feel this same way with the Mr. Gold. I want one but I dont want one $600 worth. I on the other hand have no problem taking advantage of some one who is willing to part with $600 or more for a minifig that I paid $2.99 for. Is this wrong? Some may think so but if some one is willing to pay the price I'm willing to sell. I can ask what ever I want for what ever I have but that does not mean I am going to sell said item. This was a big problem that Russia had in the early 90's when their economy became capitolist. People didnt understand how the system worked and business' closed because no one would buy anything because the prices were too inflated. Once they figured out how it worked things got better and now they are doing all right.
So all and all so long as some one is willing to pay the price then people will continue to sell above retail. For people like LFT who have the sets that people want they will have to offer the set at the right price or no one will buy. If that price is 2x or 3x RRP then it is not the reseller you should get upset with but the person willing to pay said price.
I'm still not sure what to make of all this but I do think that TLG has at least one business reason (in addition to some of the other reasons mentioned in this thread) to want to ban LFT and other similar resellers. In the direct-sale-to-customer model (that is, B&M LEGO stores and S@H), the TLG plainly has a reason to want to prefer selling to end users as opposed to resellers simply because the end users provide (via email, VIP, address, and credit card tracking, to name a few) lots of valuable information about buyer preferences, buying habits, etc. This is a goldmine of information that the TLG can then use to its advantage (they can sell this info, use it for target marketing, and use it for brand messaging to help shape what it wants the buyers' perception of the LEGO brand to be). Resellers, in the direct-sale-to-customer model, would rob the TLG of this invaluable information and messaging opportunity. This is not to suggest that the TLG handled this perfectly but I don't think its action here is purely capricious, as some in this forum seemed to suggest.
Just as Pitfall69 said, he has never not been able to buy a set. I have never not been able to buy a set either, although some you have to get as soon as you see them. I had two or three chances to buy the zombies, but I did not and now I would have no chance of getting one of those were it not for the service the LFT and other resellers provide. You either pay the higher price after the set retires or you take the steps necessary to acquire the set when it is at retail and if it is a hot seller, then that may mean paying full retail or even full TRU price. In the case of something like Minecraft you just have to be in the right place at the right time.
They are saying that selling to high volume resellers is not the intent of their Brand Retail channel, and instead they have an established program for that activity.
Was it poor form to cancel the final order without notification? Yes.
Was it poor form to be slow in explaining the decision? Yes.
Is the ban unfair? I'm not sure. Many posts here assert it is wrong or unfair, but I haven't seen any arguments that convince me that is the case. TLG certainly is within their legal right to refuse resellers. I understand that LFT "played by the rules" after the initial contact, but there wasn't a contract in place where TLG guaranteed to continue selling to him if the rules were met.
What would be wrong was if the ban were misapplied to someone that wasn't a reseller. But the three known cases of banned people all admit to having been high volume resellers.
Unless they have a sale.
Or a promo.
TLG may wish there was no such thing as eBay/amazon, but those sites are not going away. The urge to profit from reselling won't be going away, either.
TLG seems to worry about things which they can never control, like what people do with their products after they buy them. That's over-reaching on their part, isn't it? Can't they see that? And their attempts to "do something about" resellers seem misguided and heavy-handed, completely at odds with their usual courteous service.
But why do buyers go to ebay/amazon for Lego items in the first place? I'll give you 3 reasons and only the first could be blamed on resellers. 1. Because they can't find the item at retail. 2. Because some of them don't have the time or inclination to shop around and finally ...3. because TLG does a sorry job of advertising their own website. TLG doesn't seem to realize something as simple and as obvious as #3, so I doubt they'd be helped by any market data, even if that data could somehow be un-tainted by reseller purchases.
The rules of ITD that a rep from Lego discribed to me were this.
$10K initial purchase.
70% of their product lines must be represented.
Must make future orders of over $1000
Must have a storefront (website optional)
Must ship directly to store, not to the owner's home or PO box.
and the store cannot be a Lego only store as to create direct competition to Lego Brand stores.
They needed copies of your tax forms as well as your business license and the initial purchase moneys to get you started.
Profits were projected to be around 30% which is not great but not bad. I was looking into some other brands of toys and some had margins around 10% for their products unless I made $50K or more initial purchase and a promised monthly re-order amount. TLG did not require a promised monthly purchase, only that the replenishment order was not to be less than $1000 per order. The types of toys I was looking at to build my business model for were more along the lines of creative toys that challenge a child's imagination, teach the child something while at the same time being fun. There was a toy store like that in my local mall when I was a kid and it was my favorite place to go. It even beat out TRU. I dont know what happened to them but they are not there any more (most of the mall is about dead now anyway)
That is fine, but useless for any serious volume business. It has nothing to do with what people like myself do as a business.
Of course, TLG has no obligation to support what I do as a business, but they can't stop me either. :) No, those are terrible... As a small mom and pop shop, you generally want to be paying about 50% of RRP for what you buy. Not everything is going to sell at full price, there is overhead to consider, sales will have to happen, etc.
It also isn't 30% off RRP, because you have to pay for shipping, so it is closer to 20% off most items, and you can't buy store exclusives, or hard-to-find sets, and a bunch of other stuff. Those stores largely don't exist anymore for the same reason local hardware stores don't exist anymore. Walmart and Home Depot ran them all out of business.
I too recall such stores in the 80s when I was a kid, but they are all gone now. (or mostly gone).
Why on Earth I'd ever consider opening up one today is beyond me, that would be a tough business to be in with the Internet. What I'd have to charge in my store would make it uncompetitive with online, which is part of the problem.
I could carry much more interesting toys than TRU and Walmart do, but Amazon would also carry them all and for a lower price, so what happens is something called "showrooming". People come in to see everything in person, then order it from Amazon on their smartphones.
Then they wonder why, a year later, the store is gone.
I've done it myself, I get it, but it will be the death of B&M unless they figure out something new.
@LegoFanTexas thanks for taking my question the right way. An interesting response. I can see the model you're wanting to achieve but it's going to take a seismic shift in TLG policy for it to happen.
Secondly if it was allowed others would quickly follow and there would be huge stocks of retired sets. Would this not keep prices lower for longer? Not a problem if you can wait longer than everyone else but that could be an huge amount of money to have tied up in stock.
@LegoFanTexas are you really surprised that the ITD doesnt allow you to buy store exclusives and hard to find items. Surely thats the point of them. Thats two great reasons why they are right to ban resellers. Not only are they deliberately circumventing the rules they put in for businesses but the fact they have store exclusives shows TLGs desire to drive sales to their retail channels, which online resellers detract from.
As for the rest whether someone that hangs out on brickset is able to get any set they want is hardly the point. We're neither normal nor the core market TLG are concerned about. We know the next release wave six months in advance, we're aware of actual release within our country within 24hrs etc etc. We're not a mum , dad, grandparent trying to get a set whose experience may determine if they try to get another in the future.
We're also not a major retailer wondering why some insignificant reselling operation can stock a wider range of premium products.
1. It is already happening, thousands of people are stocking sets here and there, yet the prices rise regardless. No matter how much we "stock", it is but a drop in the bucket compared to mainstream sales.
2. For the direct sales, limit it to the larger sellers, place reasonable order requirements to keep everyone with $10,000 to spend from "trying their hand". At least $100K, perhaps up to $1M, should be required to play. That will keep the numbers down, perhaps 50-100 people in the US would be up for that, just based on what I've seen, and depending on what the dollar buy in is. I have no idea what the worldwide number is, a few hundred people perhaps.
3. My business plan in such a case wouldn't be selling on Bricklink/eBay/Amazon, I'd start a "retired LEGO website" that specialized in carrying almost everything and anything LEGO. The "go-to" place for all your retired LEGO needs. I've thought about doing this anyway, but due to TLG's attitude and a few other issues, I've decided against it.
There is a difference between "appearing" to do something, and "actually" doing something.
TLG is trying to control something that is beyond their control, so instead of accepting that, they are expending energy on appearances rather than effectiveness.
From everything I have read here it appears that you want TLG to do EXACTLY what works for you and you only (or perhaps 50-100 people in the US).
Why would they set up an agreement that benefits only you?
I often agree with some of your points but you seem to be a little blind to the fact that it is crazy to ever think they would set up this system.
They would be fuelling the reseller (exact oposite of what they want), lining your pockets and angering their customers?!?
Unless I am missing something...
June to December 2013 - TLG sell x FireBrigades for $150
June to December 2013 - TLG make a special run of 1000 FB's for LFT
January 2014 - FireBrigade goes EOL so TLG makes $0
January 2014 - LFT sells FB's for $300, makes $150,000
Alternative:
June to December 2013 - TLG sell FireBrigade for $150 and announces that it will retire in January 2014 - TLG sell all their available FireBrigades, make exactly the same amount of profit as previous solution but don't risk dealing with LFT and don't risk angering public or fueling the resellers.
It seems that the problems Lego has are to do with the former (Lloyd, Minecraft, limiting AFOL and showcase purchases). I really find it hard to believe that Lego care about the latter. Or do we think that they'd rather it was the case that retired LEGO sets were not available at all, anywhere. I've been been standing around in LEGO stores filling PaB and heard people asking for sets I know to be retired. "You can try ebay" is a common reply. Would "No, LEGO have made sure there are none available anywhere anymore" be better?
In terms of @princedraven's example, I presume @LegoFanTexas idea is that by working with resellers of retired sets, LEGO can make sure they make the right number of sets - if LFT thinks he can sell 1000 sets after retirement, what he's saying is make another 1000 sets, making LEGO more profit. They could do this by announcing retirement dates, but they would be missing a key bit of information - how many sets do retired-resellers think they can sell? They run the risk then, that those resellers buy sets that would otherwise be bought by "normal" buyers.
My presumption is that perfect for Lego would be to make exactly the number that all "normal" buyers plus all retired resellers wanted to buy at or close to RRP. They don't want resellers buying sets that would be otherwise bought by "normal" buyers prior to retirement, nor do they want to have to discount 50% to get rid of over production. But also perfect for LEGO would be that large retailers never discount (LBR would sell more), but that's just not going to happen.
LEGO's current approach seems to be to wish to keep resellers out of the loop entirely. My view is that this is likely to fail, leaving them with "normal" buyers who can't buy particularly approaching retirement, and even if it succeeded they would sell fewer sets prior to retirement and have the situation where retired sets were unobtainable.
My feeling is that LEGO feel they need to do something either to make them feel better, or have a story to tell complainers or retailers, and this is something. They are of course free to do so. It's not obvious what it's meant to achieve other than letting them say "we are taking action".
Which would then end up with Lego toys on shelves of well known stores for $300-400. Do you think customers would be happy with that (when sat next to $30 Megabl@x)? Do you think it would damage customer perception of Lego products ("300!! what a ripoff!!"? Do you think TLG would approve?
The only way to stop them flipping a current set is to only ship stock once it has retired. But if they let resellers know the formal retirement dates, then resellers will also use that to their advantage, to clear out other stores of their sales items. The dates would also get leaked, damaging sales of current items.
So even if they would allow a reseller to order say 100 of a particular set six months in advance of retirement date, this would screw up other stores sales.
I appreciate that the practicalities are very difficult, and maybe this is where I end up agreeing with you: Maybe it's impossible but surely LEGO would like to make exactly the the right number of each set to mean that everyone who wants one can have one whilst in production and enough to resellers so that everyone who turns out to want one after retirement can do so for a "reasonable" price.
I'd like to think that there could be some equilibrium where this happens. Where resellers are taking more risk, where LEGO makes more money, and where nobody wanting a set needs to complain. I don't claim it's easy.
LEGO's efforts in this space (which seem to be designed to stop reselling) suggest that they have no interest in trying to find this equilibrium. Maybe it's because they know there will be enough 1 or 2 set resellers, or because they are currently at manufacturing capacity, or maybe its because they don't care and need to be able to say they've done something. But I don't think it's in LEGOs interest to stop all reselling. And if they don't want to stop all reselling they should work on a model which gets the 'right' reselling working. It might be difficult, it might take a few iterations. It might turn out to be impossible after all.
I'm not a reseller (although I do have a lot of unopened sets which I tell my wife I could sell) but I do find myself less well disposed to LEGO based on their actions in recent months.
They know resellers will go on getting stock from sales at other retailers, but they know they can stop abuse of their own promotions by banning the ones that have placed hundreds of orders in the past only during promo periods.
Angering the public? In either situation, if the public wanted them they'd have bought them and those who didn't are out of luck without "resellers". Lego will simply discontinue some sets earlier if demand isn't as high minus that of "resellers". Once Lego discontinues it, it's gone as are any rational person's thoughts of acquiring it for MSRP. That goes for Lego or anything else.
All the current talk of being against resellers (we only know LFT's story because he told us, but LEGO have given us enough anti-reseller comments on AFOL days and showcase rewards) suggests they are anti all resellers. That they cannot stop reselling (legally or practically) doesn't change this perception.
I think "abuse" of promos is actually quite an interesting point and maybe gets to their heart of their rationale (which I think suggests a very tactical rather than strategic approach). Most people wouldn't consider it abuse if you're inside the rules, but the economics of promotions/loyalty points rely on buyers being less than optimal in their behaviour (in all areas from Nectar Points to not changing your energy supplier to bookmaking to bank current accounts). But is this increased efficiency of comsumers is maybe a function of the digital age? Not obvious that the best way to address it is to kick off the efficient buyers.
You state that "if the public wanted them they'd have bought them", but in all reality we know that doesn't happen. I haven't got Arkham yet, but if they announced that they were to retire it I sure as hell would buy it then...
I take your point about marking down, but lets face it, they just did it for B-Wing, and again I say if they had announced they were making no more and then reduced them by 20% they would have cleared all stock.
As an aside, if your business is as you suggests, congrats, LFT! I have no doubt that it took hard work and deligence to build up your business. You are living the dream of many AFOLs!
Sometimes you can push and push an offer, but remain within the rules (if there are any). However, when it comes to the company putting a stop to it, if they can then they are likely to target the main abusers that they have identified first. Banning someone that puts through 100s of orders on May 4th and very little at any other time of year, for example, is a clear way to stop someone that targets their promotions only. Lego doesn't know whether the items ordered will be resold now or later. They do know they are clearly not for personal use. They could of course put a limit of one per item on promos, or enforce a limit of one promo per address. Or should the limit be two for personal use? Or five? Or just ban the people that you know will abuse it.
It's all very well thinking that they will only be after the big guns, and that minor reselling is okay, but it very much seems like they've banned people who've admitted to being resellers... I have sold the minifigures from 2 copies of Helm's deep and one other set. I have resold. What if the flag is (inappropriately I would think) applied to my account. It doesn't seem that there's much scope to discuss from what we've heard so far.
And from what I have seen, LFT's ban sticks because lego think he should be banned. If a genuine non-reseller AFOL is banned and phones them to check why they have been banned, then hopefully CS would realise the ban has been misplaced and get it overturned.
@princedraven - that suggests it's a continuum and there's an obvious bad reseller end. It's surely more subtle. I've always got the impression that LFT buys most sets in order to diversify, rather than hundreds of one set. I'd suggest that people queuing for hours for the store to open to buy 5 B-Wings for 50% off are just as likely to be "bad" resellers, but Lego clearly doesn't want to discourage them.
Whilst @CCC argues that it's easier to just say "You're a reseller" and ban them rather than trying to pick the right number of sets 5,10,15,.... I'd say any kind of binary switch like that will go wrong at some point, and its use will change over time.
I did once buy 5 of a single set: Scientist and his Monster. Not from Lego, but I would have for the same price. I sold them to Bricksetters (:-) and my son for cost, but I might well have looked like an evil reseller to Lego.
I'm not sure it is just "we think you are a reseller", but "you are without doubt a reseller". So many resellers will get away with it but the bigger ones will get caught out. They clearly cannot catch every reseller, since someone could easily buy a single set and sell it.
I know it is not the toy business, but this has been done in the furniture industry. My uncle used to run a large furniture company. His company would save the moulds of ending items. If they had a certain amount of requests or saw sales of that style growing, then they would bring out the old stuff and reap the benefits. If items did not come back within a certain time period, then they chucked the moulds and materials to make space for new end of line items.
Just a thought as all these other things seem far too complicated and don't seem to solve anything.
I'd argue that
1. We're (almost) all resellers in some form. So let's hope LEGO only want to stop the biggest resellers.
2. Lego shouldn't want to stop resellers completely.
3. Who needs 5 copies of a B-Wing at 50% off except to resell.