I thought this would be an interesting topic for discussion: will speculation in the LEGO market (which sets will retire when; what sets to buy for "investment" reasons) reach a tipping point where it crashes?
That because a few sets have jumped in price on the aftermarket, that we assume newly retired sets will increase in value in a similar fashion. EG: Cafe Corner being highly sought after at $400+, so we stock up on Fire Brigades, hoping for a similar jump in price upon retirement.
I am an active buyer of LEGO sets, and my blog even focuses primarily on the retail experience of buying LEGO, not on building. (
http://BrickUpdate.com) So I am not complaining about this topic, I am 100% a part of it on some levels, though I buy WAY more LEGO than I ever sell.
In the 1970's, my family had a stamp and coin business, and we spent weekends at conventions buying and selling. In the 1980's, we had a baseball card business, and spent weekends at conventions buying and selling. In the 1990's, I got into the toy collector market as it exploded, primarily focused on action figures (eg: Spawn toys.) For these markets, the bottom fell out at some point, for different reasons.
LEGO has always been a constant in my life, and a product that rises above trends. But... you can buy classic LEGO sets from the 70s, 80s and 90s for about the same price as they would have been retail at the time. (including boxes and instructions) These sets have been retired for decades, though I realize that they do contain mostly common colors and parts.
But...
As we speculate about a 2010 set that will retire, assuming it will jump in value 100% or more in the near-term, is that a sustainable trend? Is this tulip mania? Will the floor fall out?
Would be curious of other's thoughts based on their experience in the LEGO market, and perhaps in other collector markets as well.
Thanks!
-Dan
Comments
The thing with LEGO in general is that it's a really versatile product with a broad appeal. Even in their 'boom' periods, action figures, stamps, coins, etc. were pretty niche markets, whereas LEGO has proven over the years that it has staying power and a wide and varied consumer-base.
Just my two cents.
However, keep in mind those items did not have much of a "normal" market beyond collectors. Baseball Cards are fun things for kids to stick in their bicycle wheels to make noise, to look at and trade, but otherwise have no value. Lego can be taken apart and used to build other things, so a set with unique parts has value beyond just what the set is designed to build. I think your last point makes the point, those sets were nothing special, there was nothing about them from year to year that made them matter.
Honestly, is a police station from 10 years ago any different from a police station today?
I think the difference is the licensed sets, and the larger sets. How many 2,000+ part kits did Lego make in the 70s, 80s, & 90s? None, as far as I know...
There was nothing collectiable about anything made in the 80s, for the most part. Cafe Corner is unique, UCS Falcon is unique, Taj Mahal is unique, Eiffel Tower is unique, etc...
The 2010 Police Station will not be worth $500 in 10 years, because there is nothing special about it, in 10 years 2 more police stations of some sort will be released.
However, I feel pretty comfortable betting on another police station of some kind after the current one goes, don't you think? :)
Another way to look at it is to not bank on big increases, if a set is discontinued pretty much any lego collector and even parents are happy to pay RRP for the set - then that seems like a bargain, where as we're all buying sets for 30-50% below RRP. I think there's little chance of not getting RRP after they've been discontinued. And you can get that money back within 6 months probably. Of course, there's a chance that a year later you'd get a 100% return, but you've had to take up space and money in the meantime, so that's a personal choice. Well, this is all what I'm hoping. Sell one quickly to get my confidence and hopefully hold on to one for longer for a bigger profit as I get more confident that this will all pan out well.
I do think as lego keep creating iconic sets the desire for older ones might decrease, as a year or two ago there just weren't as many 1000+ sets, and now we're confident they're gonna keep coming out with bigger and better sets.
Though as we all keep saying, the worse that can happen is you end up with a lot of lego, instead of a few bits of paper or coins. Definitely a different market. :)
I think the Fire Brigade will be a great test of this. GG doesn't get what Cafe Corner does, and my bet is that FB won't get what GG gets. Simple supply and demand. There are a lot more people hoarding FBs I'm sure than ever did so with GGs. That said, I think people will still get a pretty decent return on investment with the FB, just not as great as GG.
Even when the bubble bursts, however, as someone else mentioned, I don't think anyone is really at risk of losing money on their investment. Legos have held their value pretty well over the years. In my mind it's hard to think of another investment with the potential for 100%+ returns with very minimal downside. Show me a stock with that investment profile, and I'm all in!
There will also likely be a second wave say 10-15 years from now when all those kids whose parents wouldn't buy them the "ridiculously expensive Lego sets" like GG, FB, or the Death Star grow up and have jobs/money and want to buy them. Not sure how many people are willing to hold onto a stockpile of FBs for that long though!
I think UCS Falcon might be there, at around 40 cents a part. Could it go higher? Maybe a bit, but I don't think we'll see $3K on it any time soon.
Green Grocer has been pretty stable for awhile, the issue also is that if Lego comes out with a 4th modular set in March, and keeps FB out for a while longer, that is 4 modular sets on the market. That will take care of most people's desires. If FB and GE retired soon, it drags up GG due to the lack of sets for sale directly from Lego.
You're right about one thing, so many people are hording FB, it may be a year before we see the price double, and our talking about it doesn't help.
Due to that reason, I'm no longer buying any more FBs, rather I'm looking for sets that no one is talking about that I can buy for 40%+ off retail list price...
Isn't it like Bionicle, something that no one but little kids liked?
Compared to when RTL and LUGNET first hit the scene in the late 1990s, today there is an exponential increase in the number of AFOLs, and that number is rising rapidly every year. Perhaps that increase is helping to fuel the market forces that raise price so much on recent LEGO sets.
But I agree that like the sports card and other "crazes", that there is always that potential for a market collapse, or at least "adjustment".
But some areas, such as the true classic eras of quality items... such as baseball cards from the 1950s, and high grade coinage from the 19th and early 20th century, some parts of many hobbies really do hold their value.
It never ceases to amaze me that folks will collect the latest sets of Collector Minifigs by the dozen, and yet some truly rare parts, such as the 271 Traffic Police accessories (only ever sold in Denmark, Norway and Netherlands) of 1958-65 go for relatively reasonable prices...
http://www.bricklink.com/catalogItem.asp?S=271-2
I guess as long as the kids who had LEGO grew up and had children of their own and then "rediscovered" LEGO as an adult... as long as that population continues to grow... then perhaps the modern LEGO exhuberance can be sustained....
But then again... I am reminded of the once very valuable Princess Diana Beanie Baby... and its' current value on EBAY....
I would think that if you want to make money you will have to sell to AFOL's (kids dont have the cash to pay over the odds), therefore looking for sets that no one (on an AFOL website) is talking about doesn't seem that wise. AFOL's in general seem to know what they like and talk about what they like. If they dont talk about Hero Factory now, I really seriously do not think they will be paying over the odds in the future for it.
Of course I have never bought to make a profit and have no intention of doing so, so my opinion is probably not that valuable.
You can walk up to my 70 year old mother and ask "What is the name of Han Solo's ship?", and she'll tell you "Millenium Falcon".
She doesn't know the Force from a Lightsaber, she wouldn't know a Star Destroyer from a Mon Calamari Cruiser. But she knows THAT ship... and I think that explains the current price of it.
It helps that the model looks JUST like the ship in the movie. The current smaller model does not. It is close, in many ways, and wrong in so many others... The big one, is just right...
The current Death Star might have the same power, everyone knows what a Death Star is, how could you not? A planet destroying battle station with Darth Vader on it? (everyone knows who he is as well) The only issue is that everyone and their brother are saving sets, so it may be awhile before it pops...
Thoughts?
You make a good point, thank you...
A overwhelming factor here is time.
Speculators who don't care about Lego will be very disappointed that the DS will return in 2012. Are they willing to wait until 2014 or 2015 when DS hits $750? Probably not. That's a long time to hold an investment.
Those of us who love Lego, just shelve it, continue to build and have fun. And when it's time to sell, it's time to sell. That could be 10-15 years. Generally, we don't care (unless it's a financial solvency issue).
Lego as an investment is not a Get Rich Quick situation, it's Make A Little Money To Help Your Habit situation. It will always be that way.
I don't think there is a bubble for LEGO in general. I think the demand is real. I think some sets are being bought out just as speculative purchases. Some, and only some, of those sets are the bubbles to pop in the future. Not general LEGO.
If you're hoarding those blockbuster sets that you think are going to be in high demand later, how low would the future price need to be for you to regret buying them in the first place? Would you have regrets at MSRP? What about 10% below MSRP? 20%?
For LEGO... which really hit big in the 1970s and 80s - that means that my generation are now adults with real incomes, who can relive their childhood dreams. So what this means is that there should be a long-term interest in the collector end of things with AFOLS for years to come.
Thanks everyone for all your comments on this thread - love this discussion.
@LegoFanTexas My gut is that even though more people are buying Death Star, not "everyone and their brother" can afford a $400 LEGO set for "investment" purposes. And fewer can afford 7 sets for investment. :)
-Dan
Not to say that there still isn't a multi-year runway for people to buy and sell sets they acquired at MSRP or below, but as for buying sets that have already appreciated 100%+ in value, well, those speculators are braver than I. It might not be tomorrow, but I'm willing to bet you'll be able to pick up a UCS Falcon well below $1,000 in a few years time. Time will tell though.
I think that is what killed baseball cards, people were just trading them back and forth, without actually doing anything to them.
I have several sealed sets in the closet that I plan to break open and play with. I've already opened several retired sets, the oldest being 8002, now that was a hard and fun build, looks amazing when done.
Bought it new and sealed off eBay, opened it up and built it, worth every penny. :)
Other sets I've broken open as retired:
6211
10175
8039
10186
10174
7679
I'm sure there have been others. So as long as people like me take retired sets that cost more than retail price, break them open, and play with them, I think we're ok.
@HuskerDont Worst case scenario is you can't sell any of it because no one wants it. Unlikely, but that is the worst case :p Not too bad of a worst case though, if you like LEGO.
@BrickDancer If you're truly a reseller then, as others have mentioned elsewhere, you need to keep in mind that your assets (the LEGO and the space to store them) are not making any money until you sell. So the sooner you sell the better. This is weighed against how much you can make off of it. If your Cafe Corner can make 100% profit after a year but keeps rising to 200% profit after two years you might think waiting to sell is a good idea. But if Market Street comes along after a year and it then can be sold at 150% profit a year after that, you're better off selling your Cafe Corner early to reinvest into Market Street. Of course, correctly predicting how well sets will do is the challenge. But if all else is equal, the sooner you sell the better.
And they will never kill the golden goose of the SW license. It works for both parties and you can see that Lucasfilm is willing to license its images to just about anything (look at all the SW junk out there). Even if the license gets more expensive, Lego will just pass along the price to consumers, since apparently there is no cap on how ridiculous prices can be on the SW theme. Though given the plethora of SW Advent Calendars sitting on the shelves, there does seem to be a tipping point (or Lego vastly overestimated demand).
Star Wars is fighting hard to be the main focus of every 5-year-old boy.
Hmm, just realised that the USA and UK boxes are slightly different - the UK one doesn't have the string of fairy lights below the title (I don't think)
lego addiction can become self funding with what many others on here do, buy way below retail and later on re-sell at the original retail price. with interest rates sub 1%, a healthy return is anything above that. my colleagues still take the p... that i invested 5 figures into "plastic". my xmas sales have now outperformed our "metal" holdings in 2011.
those who have access to markets in other currencies than where they live can make a quick tickle already with certain sets - uk death star is £275 whereas it is €420 in germany, you could make c.20% profit instantly reselling these at the moment.
firebrigade was £99 which worked out at €112, quite a discount on the german price of €149. i'll be getting rid of mine when they hit €200
what amazes me is lego doesnt do a new UCS falcon and profit themselves. they can clearly hike the price from where they launched 10179 and it'll still sell.
Anything that can be had endlessly loses value, and people will just tell themselves, "someday", but that day never comes.
So now people who would say "someday" to 10188 now buy it because of 10179, not in spite of it.
Retiring sets serves Lego, or they would not do it.
"Retailers have cut down on toys overall — imports of toys in August and September, important months for building holiday inventory, dropped by 9.8 percent compared with last year, according to an analysis of Census Bureau data by Panjiva.
Yet not every product is being cut. Shipments of Legos into the United States in August, September, October and November rose about 155 percent from the same period last year, while those of Hot Wheels rose 43 percent and Barbie merchandise rose 17 percent, according to an analysis of Customs data by Panjiva."
What's the fun/value in collecting if five years from now they are just going to make the exact same set available again?
Lego should recognize and appreciate the active secondary market that is available to those that want to purchase a set they missed out on. I know they will redo sets (especially SW), but at least they always tweak them a little so they aren't exactly the same, or include a new/different minifig.
Not to say that TLG hasn't made missteps. I think they totally blew it on the collectible minifigs. They bring out way too many, way too often. They are effectively pricing kids out of the market. There aren't too many kids out there that could feasibly hope to collect all the minifigs in all the series in a single year given the cost. They should bring out one, maybe two, series a year with fewer figs (12?) and they could milk this for years. Instead kids (and adults) are just going to give up attempting to collect them all which was the whole point, and we are going to be on our fifteenth iteration of a snowboarder soon.
Same with the games. Whoa there! Slow down a little! Bring out one or two games every six months, and focus more on playability or fun of the games. Most of the ones we have are mediocre at best as far as entertainment value and quite frankly there are just too many flooding the shelves for me to spend the time looking at reviews to see which ones people might actually enjoy playing.
Again, the games could be milked for years if they were more prudent in bringing them out and their quality of play. Instead I imagine there are people like me who were really excited about the concept, but are now more in the "meh, whatever" category. I'm the same way with the minifigs. I used to buy multiples of the series, but now I just get one complete set, and if they keep up the pace, I am likely to just forget about them all together or just pick up the one or two figs that really catch my interest.
My main concern is that Lego is in the mode of a restaurant franchise that expands too quickly. They get overconfident with their success, expand too rapidly, quality/service/strategy falters as they flood the market with product, and people just move on to the next thing. Don't get me wrong, I think Lego is a fantastic product and TLG is a great company, but I doubt this uber-popularity will last unencumbered for the next decade.
Playmobil is an interesting example too, I have always liked their stuff, and gotten into it at different times in my life. But besides it not being as universal as LEGO, the community seems different, and the secondary market, much smaller.
Anyhow - thanks for the comments!
-Dan
Of course, for AFOLS and other collectors, there is no acceptable alternate (other than other LEGO products), so LEGO still gets all my money... lol
Brent