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Predictions on Discontinuing Sets and their Secondary Market Value
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Comments
They announce retirements to promote sales - to whoever might be interested. It is not an invitation to resellers to stock up.
Nonetheless, there is nothing in the current marketing, yearly reports or profits that indicates Lego has any focus on the secondary market. Their focus is selling the latest Spider-Man, Batman, Star Wars, Minecraft or Friends set to the newest six year-old that is getting into Lego. There are product lines geared to adults, but I posit that those sell at a much smaller rate (but at probably comparable margin) than the sets for 'civilians'.
(See - Nexo Knights, Ninjago, Chima, Friends and TLM.)
First, Lego doesn't typically announce set retirements. (Tumbler, Town Hall, etc.) I would also make the educated assertion that the 'retiring soon' that often appears on the [email protected] website is a marketing ploy to push primary market sales for remaining inventory.
The rather unusual marketing behind the arguably over-produced Exo-Suit demonstrates to me that the primary focus is not fuelling the secondary market.
Second, there is no basis to assume that the supply would suddenly exceed demand without a secondary market. You could argue that the secondary market creates excess supply. One could make a similar assumption that no secondary market would create disproportionate DEMAND, where every set would sell out immediately.
The product moves off of shelves because millions of parents, grandparents and other consumers find value in the product. Lego enjoys exceptionally high goodwill in the marketplace - as a building toy - not as an investment vehicle.
I have yet to see anyone demonstrate where Lego benefits or garners any profit from the secondary market. (It's because they don't.)
It may feel like the secondary market is important, but the truth is the primary sales are the ocean, and the secondary market is a cup of tea.
They declare stuff as being retired to get rid of any remaining stock. They just want to get rid of what's left, and they don't care where it goes. They're certainly not doing it to give a heads-up to resellers.
It's more than that. The secondary market is an irritation to TLG because they're control freaks. They like to control every aspect of the brand and their image. But then, they're entitled to - it's their brand.
TLG goes out and does their market research, plans accordingly and then resellers will collectively decide something different, that a set's worth stock-piling, and the plans go out the window because their primary customers have been inconvenienced. Suddenly, a nice little Christmas becomes an expensive option, only available on eBay - and who do you think gets it in the neck? Or when there are sets with vastly inflated prices, like the Falcon, in the press, most people turn round and think it's ridiculous - and quite possibly think the products are more expensive than they are. It's not good, and from TLG's point of view, they've lost control of the the thing they covet the most - the image of their brand.
TLG can't do much to stop resellers, but they do what they can - the most obvious of which is blocking bulk orders.
I know it's not quite the same thing, but it's also pretty hard to become a distributor. As I said, they like to keep control of anything to do with the brand - for pity's sake, they even have Walmart and TRU jumping though hoops.
I don't know; ask the reselllers - but quite a few have tried, been rejected, and even banned.
Notably on new products, and exclusives. Toys 'R' Us would be happy to sell you literally every piece of Lego in their store if asked.
Consumers benefit because there is a new and exciting set to replace it. And perhaps they can get the left-overs of an over-produced set on sale.
Four different consumers may buy a set if it is reduced or on sale. Or someone parting out a set for Bricklink. Either way, that is a primary market sale. And shame on you for making me agree with @TigerMoth. (Kidding!)
Inasmuch as they try to anticipate demand, that is the type of production unknowns they adjust to every season.
Yeah, LEGO is perplexing in how they treat their most loyal and high spending customers. Most companies would LOVE to have that kind of ardent fans but LEGO seems insistent on alienating them at nearly every turn.
Where is my UCS Torah?
Yes, I'd hate to be banned just because I'm a big fan of the product.
For me, the Classic Batman set is an expensive set that's all about the minifigs. While I personally like the set, it's definitely a throwback set for AFOLs (1960s). I expect it to be gone by late spring of 2017...at the latest.
The first one was to create an army, though obviously not enough, will need at least 100 to 200 sets to make a decent army.
The second one is because I wanted all the door panels, of course the free classic spaceman figure wouldn't hurt either.
The Year of the Sheep was given free last year during a local promotion with certain amount of purchase at the official Lego shops here, so yes, I did buy lots of sets to get a total of 19 of them! Swapped 2 of them for the Year of the Monkey set so left 17.
met a guy there who made sexy time with sheeps now and then!
Now that's just silly.
There "might" be a few more varieties in my collection. My wife is just happy I have all I want of the ones currently out. "How many Iron Mans (Men?) do you need?!?"
"I don't need the Iron Men (Mans?). They need me."
Personally I think their attitude stinks. They seem happy to use resellers when it assists them but when they start becoming a bit inconvenient they crap on them from a great height. Personally I think there's a difference between buying a new set creating a shortage (Minecraft as a good example) as opposed to buying a soon to be retired set and selling it on. However harbouring the later (which ultimately is good for Lego) will create the former.
I'd actually be curious as to what percentage of sales go to who but frankly we'll never know.
My point is that the average Lego consumer out-numbers the 'reseller' in an exponential fashion. Resellers give themselves way too much credit for their impact on the general market.
There really is no way to differentiate between purchasers, but it is silly to think someone is stockpiling Rapunzel Towers with the expectation of selling them years from now. Atleast to an extent that it would impact total current sales figures in a meaningful way.
(If it did - then that would support longer production of the set.)
If the AFOL collector market was more than a drop in their industry-leading sales figures, Lego wouldn't have exclusives. They would be exclusive to every store that sells Lego. (Which is not at all exclusive.)
But walk into the average small toy shop and look at the shelves. It's unlikely that any of them will ever be reduced, and they'll all be sold at full price. Resellers don't normally buy sets at full price.
Walk into TRU, or look on Amazon. Most of the time, most of the sets are full price. Do you think either of them are interested in holding stock that doesn't sell? No, do you think they're going to pay to keep them warm when there's no chance of them selling? No. They're there because they get sold - again at full price and not to resellers. We may not buy them, but somebody does.
Resellers are canny enough to know they almost never have to buy anything at full price, yet most of the time the shops are selling at it. Obviously it's not to resellers - unless you think all resellers are really, really stupid.
And then, when a reseller buys a set at a discount, just how much do you think he contributes to TLG's bottom line? Not as much as the parents who buy exactly the same sets, not by a long way. When something is offered at a reduced price, the reduction all comes out of the profit - although some of it will be the manufacturer's and some the retailer's (the retailer doesn't take all the hit either - that's negotiated to promote the product).
And, when it comes to purchasers, what do you think the ratio of resellers to non-resellers is? Pick a country. How many children are there? Do you that think that, say, 10% might have a few LEGO sets that have been bought by mothers, fathers, grandparents, aunts, uncles and other assorted relatives, friends and the children themselves. How many tens or hundreds of million purchases is that? You've said that a reseller spends a hundred times a what a non-reseller does. If the reseller contribution is to be any more than a drop in the ocean, how many tens or hundreds of thousands or resellers would that need? Do you seriously think there's more than a few percent of that figure?
This is the standard situation where some of the numbers are so large that we cannot envisage them. Then, we mistakenly compare them with those that are more manageable and don't see the gulf between them.
Well, let's look at some numbers, shall we? There are ~74,200,000 children in the USA. Let's take the number you suggested, that 10% of them have some LEGO sets (let's say, that they each contribute $100 each to TLG this year (profit, not the value of sets)). I would say that, even buying sets at a discount, a reseller would make TLG over $200 a year, because they buy a lot more sets than most kids get. That would mean that it would only take 3.7 million resellers to match the regular market of kids. but let's say that there aren't that many resellers- say there are a quarter of that, or a tenth. That is still way more than a drop in the sea.
Do you disagree with any of the numbers above?
Then you go through the number of resellers, starting with 3.7 million, then 900,000 and end up with 370,000 resellers contributing 9% of the profit. I think you'd be lucky to find 37,000 resellers generating 1% of the profit - which IS a drop in the ocean. And note that we are talking about serious resellers, not people making pocket money, because we're need those who are making a sensible contribution to TLG's profits.
It's blurred a little because the resellers profits, even when selling at vaguely reasonable prices is much higher. Resellers are generally transferring much of TLG's profit to themselves, and then adding some.
Manufacturers tend to make reasonable profits - they can't do much better because somebody else would come along and undercut them. TLG do much better than average simply because they add on a premium, pure profit, and is what makes the major contribution to their bottom line. That's stripped away when you have canny buyers like resellers, and a 30% discount hits the profit much harder than that.
Apart from which, if resellers are so beneficial, why don't TLG encourage them? They also tend to stay quiet on most issues, but they openly criticise resellers.
Let's take a look at that number of resellers, though. 37,000, I feel is far too few- it seems like every town has someone that will clear out shelves of certain sets.
Perhaps TLG doesn't agree with resellers, or doesn't like the image. And LEGO doesn't discourage resellers, as I have said before- they discourage the quick-flip-on-a-hot-toy scalpers.