Predictions on Discontinuing Sets and their Secondary Market Value

Pitfall69

@SumoLego don't ever bring a knife to a gunfight ;)

SumoLego

@Pitfall69 - I'm prepared!



@TigerMoth - ummm... I'm after the 37% discount Chima Speedorz at K-Mart... yeah, that's it.

SumoLego

Yodalicious said:

SumoLego said:

(And why would Angry Birds or Nexo-Knights exist?)

I ask myself why Angry Birds exists every day. 

You fell for my trap!  You must re-sell Lego.  

Bumblepants

SumoLego said:

@Pitfall69 - I'm prepared!


@TigerMoth - ummm... I'm after the 37% discount Chima Speedorz at K-Mart... yeah, that's it.

My local Carrefour has their remaining Speedorz sets all in security wraps and full price. I chortled.

Yodalicious

SumoLego said:

Yodalicious said:

SumoLego said:

(And why would Angry Birds or Nexo-Knights exist?)

I ask myself why Angry Birds exists every day. 

You fell for my trap!  You must re-sell Lego.  

I re-trade Lego. Does that count?

SumoLego

Well, no.  Then that would make me an evil reseller.  

Gavin83

SumoLego said:

^ Um, Lego sold $5.2 BILLION in product.  

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.)

I totally agree, the average Lego consumer will outnumber the average reseller in numbers. That's obvious. However when you consider each reseller is worth many regular consumers it starts to add up.

Lets take the number that's being banded about, 37,000 Worldwide. Let's assume on average they spend $10k each on Lego a year. That's $370m a year in sales. I can't be bothered to do the exact math but that's about 6-7% of their total sales. If they lost that is that enough to cause serious issues for the business? Of course not but like any business which is focused on profit if you told them they'd lose that many sales they'd sit up and listen. Of course you could question my $10k figure but like most of the debate on this its all guesswork. I know I spend more than that per year and my store is tiny compared to most on Bricklink.

I did mention this is my other post but no one really brought it up, but ignoring resellers for a second you have to consider general AFOLs as well. I spend a lot of money on my own personal collection as I'm sure many do on here. There is no way I'd spend even a fraction of the amount I do if I wasn't aware I could make my money back. I just couldn't bring myself to spend $300 on a set that takes 10 hours to build if I knew as soon as I took it out the box it was worth $10. 

Even ignoring the pure financial aspect for a second I think resellers have also done a lot to secure the image that Lego has as a premium product. Being viewed as a premium product is a good thing, it makes people want to buy it (as can be seen from any consumable product) and allows the company to charge more. 

Also so as I said in my other post I don't think Lego are bothered by those people buying older sets to sell on after retirement, they're probably quite happy with this arrangement. It's the people that buy new sets that then creates shortage articles in the press they're concerned about.

This is of course all theory and I'm not suggesting for one second that without resellers Lego wouldn't exist. However I do think resellers have made a bigger difference than some on here are suggesting. 

SumoLego

Even at a very generous 5%, that's still a tiny part of the market.  Lego doesn't ignore any part of their consumer makeup, but they have to prioritize their resources.

Thus, why there are many, many popular-theme sets that AFOLs remain confused as to why they exist, and other traditional themes that have been on ice for many years.

The level of complaints about Angry Birds, Friends and repetitious City-themed sets in this Forum has little bearing on how those sell in the general market

Frankly, we should be happy there is room in the market for lower-volume themes like Architecture and Creator Expert.

TigerMoth

Gavin83 said:

Lets take the number that's being banded about, 37,000 Worldwide.

But it's wasn't. That figure was for just the US, based originally on the number of US children and purchases by friends an relatives.

And having handed you a bonus, I doubt there are that many worldwide either.

I can't be bothered to do the exact math but that's about 6-7% of their total sales.

You can't just do that calculation.

For one thing, it's not sales that are important to a company, but profits. Resellers are smart buyers and try to buy at least cost - and least profit to TLG. There's a limit to how low a price can go, based on the cost of production and distribution, and because it pays for resellers to wait for the absolute minimum, those profits are often going to be wafer thin.

On top of that many sales to resellers wouldn't be lost. If there's one thing that's agreed TLG mentions when it comes to resellers it's the flippers. They remove products from the shelves of retailers at prime times, inflate the price and then sell them on - products that would still be sold to end-users anyway.

I did mention this is my other post but no one really brought it up, but ignoring resellers for a second you have to consider general AFOLs as well. I spend a lot of money on my own personal collection as I'm sure many do on here.

You spend absolutely nothing in the grand scheme of things. Collectively, we don't spend much more. And, again, we often do it in a way that minimises TLG's profit. The difference between an AFOL and a reseller it that we're likely to promote the product and increase "normal" sales. You may think you buy a lot of sets, and therefore "multiply-up" your importance, but the sheer number of children is orders of magnitude higher.

Even ignoring the pure financial aspect for a second I think resellers have also done a lot to secure the image that Lego has as a premium product.

How? Resellers generally don't promote the product. They satisfy demand for a product that has already been promoted by TLG and retailers.

Resellers also damage the brand. When the shelves of all the retailers are empty of that must-have Christmas set, who do you think gets it in the neck? Who gets criticised for not meeting demand? Who gets the flak for the ridiculous prices that have to be paid on eBay? How many parents determine that they're going to persuade little Johnny to turn his interests elsewhere because they don't want the same hassle the next year?

And when, as regularly happens, the price of something like the Falcon makes it into the press, how many look at it as being totally ridiculous, and to how many does it reinforce the impression that LEGO products are too expensive for them. Oh, yes, a few will see an investment opportunity - and then get burned because they don't know what they're doing. That, too, will be TLG's fault.

Also so as I said in my other post I don't think Lego are bothered by those people buying older sets to sell on after retirement, they're probably quite happy with this arrangement.

There's no reason for them to be happy about it; there are no positive effects for them, although there are a few negatives. If you want to consider clearing of stock a benefit, they can easily do that by offering their primary customers, children, a small discount, because that discount if likely be more than offset by increased future purchases.

SumoLego

^ More importantly, gorillas are not monkeys, but both are primates.

Bonobos!

desultor

Hi folks, any news or rumors of the new Death Star? Release date, price, piece count, level of detail?

Bricklover18

Apparently the price is $500, but I think that might just be a rumor I'm not sure. 

nhyone

I doubt TLG differentiates between scalpers and resellers, as both have the same result from its POV.

Resellers may be small in numbers (much smaller than the general Lego-buying population), but they have the capacity to disrupt sales -- because they are focused, either on certain sets or in a short time-frame (such as during sales).

TigerMoth

SumoLego said:

^ More importantly, gorillas are not monkeys, but both are primates.

Bonobos!

Are you equating resellers to gorillas? Or monkeys?

Aanchir

A thing I haven't seen brought up (might have missed it though) is that ideally, every set a reseller buys is one they expect to sell on to end users at more than the cost they paid for it. That alone is strong evidence that the purchasing power of end users outstrips the purchasing power of resellers by a wide margin. If resellers did not exist, do you think their customers would just stop buying LEGO? Of course not — they'd just be forced to buy it on the primary market. And I have a hard time imagining these consumers would buy less LEGO at primary market prices than at secondary market prices. Whatever money a customer spends on a discontinued set in the aftermarket is money they could be spending on a current set in the primary market.

Overall, there's no doubt LEGO cares about resellers. But I think the notion that they must either love or hate them is overly simplistic. Sometimes resellers benefit LEGO. Other times they hurt LEGO. But many of the measures LEGO takes that resellers dislike are less about harming resellers and more about minimizing the harm resellers pose to them.

And likewise, the things LEGO does that people claim show a clear loyalty to resellers are more about promoting the brand to end users — whether resellers benefit from sets like the Bat-Pod matters little to LEGO compared to how much buzz LEGO generates from the mere existence of those sets.

Cancelling promotions because resellers might benefit from them would be silly, because resellers who would profit from those promotions, whether helpful or hurtful in the grand scheme of things, are just a drop in the bucket compared to the number of potential customers LEGO expects to reach with those promotions.

dougts

TigerMoth said:

For one thing, it's not sales that are important to a company, but profits. Resellers are smart buyers and try to buy at least cost - and least profit to TLG. There's a limit to how low a price can go, based on the cost of production and distribution, and because it pays for resellers to wait for the absolute minimum, those profits are often going to be wafer thin.

one small quibble here.  the vast majority of sales that resellers are taking advantage of are NOT offered in LEGO stores or LEGO.com. Rather these sales prices are offerred from 3rd party retailers like Amazon, Wal-Mart, etc.  Thus, the profit to LEGO on these items is the same whether Amazon sells a set for full RRP or 40% off.  Resellers being saavy shoppers hurts these other retailers profits, but not LEGO's profits.

dougts

TigerMoth said:

There's no reason for them to be happy about it; there are no positive effects for them, although there are a few negatives.

As pointed out previously, there is at least ONE positive effect:  high aftermarket values of LEGO products certainly promotes the idea that LEGO is a premium product that is worth the price, that it is a high quality product, and that it retains it's value. Those things matter for a company trying to position itself as a premium product (which they clearly are), and they also matter to many average consumers, who ware willing to spend more for quality premium products than they would be for throwaway junk items, even if its a partially subconscious act.

dougts

Aanchir said:

Cancelling promotions because resellers might benefit from them would be silly, because resellers who would profit from those promotions, whether helpful or hurtful in the grand scheme of things, are just a drop in the bucket compared to the number of potential customers LEGO expects to reach with those promotions.

this is a great point.  I remember when LEGO discontinued the discounts on exclusives here in the US.  At the time, they made a lot of noise about how it was a policy that was being enacted to cut down on reselling and its harmful effects. Truth be told, I think it more likely they realized that they had no reason to offer discounts - they could sell the products at full price. The "evil resellers" made a convenient scapegoat for them to justify and deflect ire to normal customers about their new policy.

CCC

SumoLego said:

^ Look, we all know you cleaned them out of Fusion sets.  (For resale value.)

We didn't get fusion over here.

CCC

starwars4ever said:

^ He probably cleaned them out of all Chima sets while he was at it. (Also for resale and to replicate the giant 10,000 piece promo set) ;)

Well the most copies of one set I ever bought was a Chima set, and a speedorz too. I bought 40 of the Gorzan vines set for £1 each, then another 45 at £1.25 when they came up cheap again. Of course, it wasn't an investment to sell the sets. There were some very useful parts in those sets, and the minifigs were easy to sell off for more than I paid for the set.

TigerMoth

dougts said:

one small quibble here.  the vast majority of sales that resellers are taking advantage of are NOT offered in LEGO stores or LEGO.com. Rather these sales prices are offerred from 3rd party retailers like Amazon, Wal-Mart, etc.  Thus, the profit to LEGO on these items is the same whether Amazon sells a set for full RRP or 40% off.  Resellers being saavy shoppers hurts these other retailers profits, but not LEGO's profits.

I've already mentioned that.

The larger retailers don't take the hit on their own when they give discounts, although an independent toy shop probably would. They simply couldn't afford to because their profit margins are often thinner than the discounts offered. Most are also sufficiently well-established that any march they'd gain on their rivals wouldn't be worth it either.

When there's an offer, the manufacturer also bears some of the cost. You won't find out the details of such arrangements because it's far too sensitive.

Manufacturers don't simply sell to retailers who then sell to customers.

As pointed out previously, there is at least ONE positive effect:  high aftermarket values of LEGO products certainly promotes the idea that LEGO is a premium product that is worth the price, that it is a high quality product, and that it retains it's value.

There are two sides to that coin - it promotes the idea that it's overpriced in the first place. Also, for something that somebody might collect, it raises the prospect that such an interest is going to get very expensive. Somebody can look at one modular and then the previous one, but it isn't too long before they start questioning whether that particular line might be better avoided.

Truth be told, I think it more likely they realized that they had no reason to offer discounts - they could sell the products at full price.

So why don't they do the same in Europe? The significant difference is that the many
countries make buying on the secondary market more problematic, with different languages and different legal systems should something go wrong. That, in turn, applies a brake to the secondary market which mean any issues TLG has with resellers are more limited, and don't feel it necessary to change anything. If it was simply down to the realisation that they could sell everything at full price, then we'd suffer the same consequences - or products would be shipped to America to take advantage of the policy out there.

monkeyhanger

The Supermarkets and shops like Argos in the UK frequently discount or offer 3 for 2s - is Lego becoming like sofas and "real wood" furniture in that no one ever pays the quoted RRP, perpetual discounts on an over-inflated RRP make everyone feel like they're getting a bargain?

catwrangler

It reminds me of the situation with supermarkets and books - I'd guess that a lot of people rarely, if ever, pay full price for a paperback...

CCC

monkeyhanger said:

The Supermarkets and shops like Argos in the UK frequently discount or offer 3 for 2s - is Lego becoming like sofas and "real wood" furniture in that no one ever pays the quoted RRP, perpetual discounts on an over-inflated RRP make everyone feel like they're getting a bargain?

There are definitely two types of sets - exclusives and non-exclusives. Anyone that buys a lot of Lego won't pay full price for the latter and will get promos with the former. But as for regular parents, they'll pay full price for non-exclusives.

ryjay

Ugh....too much reading..... :)

The significance of the secondary market has nothing to do with volume.

TheLoneTensor

monkeyhanger said:

is Lego becoming like sofas and "real wood" furniture in that no one ever pays the quoted RRP, perpetual discounts on an over-inflated RRP make everyone feel like they're getting a bargain?

We all know Lego is expensive, but at least it's not Sofa King expensive.

CCC

It took our advertising standards eight years to get that joke ...

TigerMoth

CCC said:

It took our advertising standards eight years to get that joke ...

The original complaint was to the police, not the ASA, and was of no consequence to the latter until it was used in a newspaper advertisement. Even then the locals didn't notice for a while, probably because they'd seen it on the company vehicles for so long.

tamamahm

dougts said:

Aanchir said:

Cancelling promotions because resellers might benefit from them would be silly, because resellers who would profit from those promotions, whether helpful or hurtful in the grand scheme of things, are just a drop in the bucket compared to the number of potential customers LEGO expects to reach with those promotions.

this is a great point.  I remember when LEGO discontinued the discounts on exclusives here in the US.  At the time, they made a lot of noise about how it was a policy that was being enacted to cut down on reselling and its harmful effects. Truth be told, I think it more likely they realized that they had no reason to offer discounts - they could sell the products at full price. The "evil resellers" made a convenient scapegoat for them to justify and deflect ire to normal customers about their new policy.

Strongly agree. Lego started removing discounts every which way around the same time. Exclusive discounts disappeared, Barnes and Noble coupons disappeared, Lego 10% coupons disappeared, etc. This was all at a time that we were coming out of the recession, and Lego products no longer needed help moving off the shelves. Consider that at the midst of the recession, I walked into the Lego store  after Christmas, and bought a number of Atlantis sets for 50% off. They were discounted that much because they needed to move. Once products did not need such discounts to move, Lego was quite systematic in removing them. This part was not about the resellers. 

SumoLego

CCC said:

SumoLego said:

^ Look, we all know you cleaned them out of Fusion sets.  (For resale value.)

We didn't get fusion over here.

Consider yourself lucky.

(I had no idea that was a failed North American product line.)

Recce

SumoLego said:

@Pitfall69 - I'm prepared!


@TigerMoth - ummm... I'm after the 37% discount Chima Speedorz at K-Mart... yeah, that's it.

Even though there were a quite a few clearance sales done by TRU over here to clear the Speedorz sets at U$7 each, I'm still seeing stores selling it at the full price of U$20. 

pharmjod

@TheLoneTensor I actually laughed out loud on that one. Classic joke but one I wasn't expecting. Thanks for that!

wagnerml2

I've seen a few Nightwing #30606 polys floating around in the US.  I didn't think the DVD had been released yet.  Was making a trade to pick a few up but hadn't heard any speculation as to whether this would be available other places than the DVD.  Anyone know?

oldtodd33

I don't really want to waste time looking to find if it's been mentioned but when did Pet Shop pop up again as in stock at Lego S@H?

flord

End of July?

Yodalicious

wagnerml2 said:

I've seen a few Nightwing #30606 polys floating around in the US.  I didn't think the DVD had been released yet.  Was making a trade to pick a few up but hadn't heard any speculation as to whether this would be available other places than the DVD.  Anyone know?

Not sure if it'll be available any other way as the others weren't, but the DVD has been out for a few weeks now. My Targets are overflowing with them.

Pitfall69

I have had the Blu-ray for a month now. I don't think there is any other way you can get Nightwing, other than buying the Blu-ray; he is packaged inside the box.

wagnerml2

Thanks, guys.  I was going by the index here which said it was not yet availalbe.

nhyone

Aanchir said:

A thing I haven't seen brought up (might have missed it though) is that ideally, every set a reseller buys is one they expect to sell on to end users at more than the cost they paid for it. That alone is strong evidence that the purchasing power of end users outstrips the purchasing power of resellers by a wide margin.

I've brought this up in another thread:

There are now bigger and more detailed sets. There are more and more sets over, say US$120 (pick your own number), which are aimed at AFOLs. Sets like the US$350 GBHQ exist because TLG knows AFOLs are willing to pay for it (as evidenced by secondary market prices).

Cancelling promotions because resellers might benefit from them would be silly, because resellers who would profit from those promotions, whether helpful or hurtful in the grand scheme of things, are just a drop in the bucket compared to the number of potential customers LEGO expects to reach with those promotions.

I know no one will change their view (this is the Internet, after all :-)), but here's what I think:

- everyone has become conditioned to wait for promos. No promo, not much sale. During promos, the supply chain is heavily stressed.

- resellers pound on the promos. Whereas a buyer may buy just 1-2 of each set, a reseller will buy as many as he can get away with. See the difference?

- resellers in other countries are able to arbitrage and undercut their local distributors.


Even if you disagree, the landscape has changed. There is no more cheap entry point. From previous postings, a good entry point is 50% off MSRP. Selling at 100% MSRP is around break-even. Selling at 150% is almost guaranteed and doubles your money.

If you now have to buy at 90% MSRP, how much do you need to sell to double your money? And is it actually viable, considering the competition with new bigger and more detailed sets in the future?

TheLoneTensor

nhyone said:

- resellers pound on the promos. Whereas a buyer may buy just 1-2 of each set, a reseller will buy as many as he can get away with. See the difference?

I lay absolutely no blame on anyone for taking advantage of playing within the rules.  If you can buy X and get Y with every X you buy, and can buy as many X's as you like, that's just the way it is.

That being said, if this is a problem to be solved, and I feel it is, it's relatively easy to enforce purchase limits - ridiculously easy online (Amazon does it the best), and just a bit harder in store.

It's quite easy to enforce quantities (Amazon does it the best of anyone).

SumoLego

^ And here I am, buying P's and Q's.

Pitfall69

SumoLego said:

^ And here I am, buying P's and Q's.

At the A&P

SumoLego

^ That makes me SOL.  TTYL, SWAK!

(Okay, this needs to stop.)

https://youtu.be/eQUqG15NyXI

Dontcopythatfloppy

I remember when this thread was about predicting which sets would sell well on the aftermarket. Good times, good times.

SumoLego

I would speculate that Ecto-1 ought to be a good investment, but it seems to be having a fairly long life.

3stackshs

I found about 12 #75048 @ RRP.....  Think I should grab some?

monstblitz

dougts said:

TigerMoth said:

There's no reason for them to be happy about it; there are no positive effects for them, although there are a few negatives.

As pointed out previously, there is at least ONE positive effect:  high aftermarket values of LEGO products certainly promotes the idea that LEGO is a premium product that is worth the price, that it is a high quality product, and that it retains it's value. Those things matter for a company trying to position itself as a premium product (which they clearly are), and they also matter to many average consumers, who ware willing to spend more for quality premium products than they would be for throwaway junk items, even if its a partially subconscious act.

Good point here.  More and more parents buying Lego for children are aware of the value Lego has and the fact that it is a toy that can appreciate in value.  Very little consideration given in these arguments to the buyers who fall into multiple or all categories - buying toys for children, collectors, and resellers. 

I've given up on the argument that resellers are critically important to Lego or their bottom line.  I do not think they are.  But I absolutely believe that Lego having a strong secondary market is a positive for the brand, and more important than people on this forum give it credit for. 

wrangler6915

3stackshs said:

I found about 12 #75048 @ RRP.....  Think I should grab some?

Yes.  I'll buy two from you

TigerMoth

monstblitz said:

More and more parents buying Lego for children are aware of the value Lego has and the fact that it is a toy that can appreciate in value.

As a toy, it doesn't. Any real value it has there is in its indestructibility, but the appreciating value of sets is something that generally goes out the window once it has been used as a toy by most children. There are exceptions, and it can be refurbished, but it's a totally different scenario.

CCC

TigerMoth said:

Any real value it has there is in its indestructibility

It is not just the indestructibility of the bricks, but also the infinite possibilities that can be created even if parts are lost. Of course, sets will have better value than bulk unsorted bricks, but there is still value in the bricks as bricks. Whereas if you lose key parts of other toys, they can be essentially worthless. The same with Meccano, K'nex and other similar toys, they can just be added to an existing bucket of parts, whereas if you have a toy train missing its wheels or a motor, then often it is too much hassle to repair and so the value is much lower.