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Demand outstripping supply (at least in North America)
CCC
Member Posts: 20,526
Why there is little in the the way of discounts ...
http://www.reuters.com/article/us-lego-results-idUSKCN11C15I
It doesn't tell us much we don't already know.
http://www.reuters.com/article/us-lego-results-idUSKCN11C15I
It doesn't tell us much we don't already know.
8
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Comments
(Other than to avoid bad press and the uninformed 'Is Lego in decline?!?' articles.)
And I'm sure that there was plenty of inventory in Q1.
From the pro-Trump camp: Mexicans obviously don't work hard enough to fulfill America's demands.
From the anti-Trump camp: The new wall is stopping sets coming north.
:-)
Here are some observations: Sub-$30 sets sell. People will buy them as gifts without thinking about cost. Anything over $50 people complain about the price of Lego. I've never heard a single parent say "Wow, that Lego set sure is cheap for what you get..." 20% off sells $50+ Lego sets. $100 Lego sets at RRP gather dust. This is pretty much true with exception to the Holiday shopping season.
Most non-exclusive sets are on constant discount at Amazon once they've been out for a while. This shouldn't happen if demand is greater than supply.
It's worth noting that even if LEGO produces enough bricks or boxes in general, that doesn't mean they can produce and distribute enough of specific sets that are in demand. I mean, I remember a LOT of complaints about particular products being in short supply last year, like the Jurassic World range or the Ant-Man set. And this year we've heard plenty of reports of the Disney minifigures being in short supply in certain places, or of sets like the Disney Castle selling out at brick-and-mortar LEGO stores in a matter of hours. Even if LEGO was able to produce enough of other sets, all those sets they CAN'T supply enough of still amount to unfulfilled demand.
And that's just talking consumer demand. What about retailer demand? Sure, if one store is sold out of certain sets then the consumer can go someplace else that isn't. But that still means that there are stores having trouble supplying enough of the sets consumers want. And while in some cases that might be due to them not having the foresight to order enough, I have heard stories from store managers who have tried to restock certain items and been unable to on account of short supply.
I don't see any reason to think these supply issues are just a PR stunt, because LEGO is putting huge amounts of money into new production facilities, thereby taking a hit on their own profits. I guarantee they're not doing that just for the sake of PR. Not trusting their words is one thing, but in this case their actions speak volumes.
The lack of discounts is because they aren't needed. Demand exceeding supply appears to be a fiction. It's likely they're trying to spread the buying peak, and whilst little white lies seem to have appeared in the autumn for several years now, this seems to be on a different scale.
Still the only Auchan in Luxembourg, although there's 2 more currently under construction (with mall attached) at the Cloche d'Or/Gasperich and in Differdange.
When did you live in Luxembourg?
It was a few years ago now, from 2002 - 2005... I was working at the European Commission in the Batiment Jean Monnet and loved it there. Luxemburg, that is, not the EC... ;-)
Anyway, sorry to have derailed this thread somewhat... I'll PM you to continue this conversation! :-)
PM'd you :)
On a personal note, I have to admit I'm a bit sick of LEGO at this point. Some of it is due to my financial situation but even before that. This year I looked over all of the LEGO sets coming out and decided on about 6-7 sets.. out of how many out there? I get that variety is the spice of life and all of that, but one only has so much cash and-as important-space in the world to put a bunch of toys into. A LOT of LEGO product out there, but the amount I want to buy is a pittance to that number, I'm guessing others in the US feel the same way.
Are all of these issues major issues? No, they are all little things, but those little things can add up.
What is interesting about the saturation point in the US is I think lego often times competes against its self by offering too much.
One thing to note is that North American sales did not decline, they just didn't grow as fast as expected. If I'm interpreting the article correctly, they would have to increase sales by MORE than 25% (growth in 2015) to have "increased" sales. 25% is still a phenomenal number.
Then we can finally unload brick separators for $1000 each!
That is also talking in bean-counter terms - money. If, as seems likely, the average price per set has increased, that also means the number sold has decreased. That's more in keeping with the anecdotal observations that shelves are still well stocked.
John Goodwin also said this:
In the US, we acknowledge that we have not provided the initiatives and support needed to keep the same high level of growth. As a result, we have worked closely with our customers and dialed up our initiatives in the American market, in order to regain momentum.
If supply was a problem, there's no point in "dialing up our initiatives" - there still wouldn't be the sets to sell. And initiatives? You mean like those that seem to have been disappearing over the last few years?
The impression here has been that prices in the US have been increasing disproportionately to the rest of the world and that discounts - the "initiatives" - aren't so common. The rest of the world turns around, smugly, and says that it's just bringing them into line with what everybody else has to pay, but that's largely irrelevant. The point is that American AFOLs, unsurprisingly, aren't happy about it.
This forum doesn't represent the typical buyers of LEGO products who typically know nothing about their international pricing - they simply haven't needed to because personal imports wouldn't been any cheaper. The question is then whether it's just American AFOLs who aren't happy about those lost "initiatives", with their knowledge of international pricing, or just Americans in general?
I'd guess it was the latter and that the changes in policy are starting to be felt and that Americans are revolting - on a small scale, perhaps, but enough to make a dent and to justify "dialing up our initiatives".
The wording of the press release is clever, as is often the case, hinting at things rather than saying them, and that usually means somebody's hiding something.
The idea that prices on typical LEGO sets in the United States have been increasing doesn't really hold up under scrutiny. It may be the perception that prices have risen, but that's been the perception for years and hasn't caused growth to stall — not even in years when the economy and the US toy market were much weaker than they are now. So if that perception of increasing prices is hurting LEGO sales, why wasn't it a problem until this year? Particularly when the prices of sets from top-selling themes like Star Wars, City, Ninjago, and Friends have scarcely changed between the first half of this year and the same period last year?
It sounds like you want to believe that the things personally bothering you about LEGO (a perceived rise in price) are at the root of this issue, but the explanation given in the Reuters article — a reduction in marketing and promotion — makes FAR more sense.
Hello, molehill.
<Insert rude comment of choice>
I think TLG can move at glacial speeds, but that's going too far even for them. They will (or should) be constantly looking at the figures and reacting to them. Their marketing strategy isn't based on a six-month cycle; their reporting interval is. It is that which drives the "blockiness" of the news, not what's actually happening.
There's more in what they don't say than what they do.
You're very hot on quoting price per piece. It's not particularly useful for this sort of thing because there are two many other factors, many of which are subjective. The difference between spending $190 and $210 is a lot more than just $20 if you're passing through psychological thresholds (I have no idea where they'd be in the US). It's not helped that TLG like fixed price points, and when you get to more expensive sets, the steps themselves are actually very large.
However, when you look on at international basis, the attitude to the American market has changed. It used to be worthwhile for Europeans to consider personal imports from the US. In reality it was fairly marginal because people tended to ignore things like import duty. Now, it's simply a non-starter; it's not just down to exchange rates. With that changed attitude, growth is flagging? Hmm.
The problem with being top-dog is the pressure to stay there - the only way to go is down! The little percentage points don't matter for the outsider, but they do the company itself. It's a bit silly really. I wonder how much the renewed mutterings about a Mattel / Hasbro merger has spooked TLG. They would be cast into the abyss forever! A very profitable abyss, perhaps, but that's hardly the point, is it? Or is it? When you're raking in billions, all that's left is that top slot. There's not a lot they can either, apart from to diversify - and diversification has never seemed to work very well for them.
TLG are running out of road in the US. They have close to 90% of the construction toy market - they can't exactly get a lot more of it. Growth simply has to stall sooner or later. It's no big deal, or it had better not be, but tinkering is likely to see sales go both up and down. With little growth, those not-so-good years become more a lot more noticeable.
But even ignoring piece count and weight, the average price for a Spring 2016 Friends set is only a dollar and a half more than what it was for the same period last year. The average price for a Spring 2016 City set is a dollar and a half LESS than for the same period last year. The average price for a Spring 2016 non-D2C Star Wars set is over a dollar less than for the same period last year if you count the constraction sets, and nearly a dollar and a half less if you don't. This is without any kind of adjustments for inflation (which would be negligible when just comparing sets released a year apart), this is strictly in terms of the sticker prices.
In the grand scheme of things, prices inevitably do rise. But there has been no meaningful increase in prices for normal retail sets between last year and this year. Those are the facts, plain as day. So why, if LEGO was able to maintain stable growth in the Americas through years and years of steadily rising sticker prices, would their growth only stall the year their prices DON'T rise? Unless you think rising prices were the cause of year-to-year sales growth, then you have to accept that they simply weren't the determining factor in this matter.
As for discounts and offers, which you also brought up, those may have been a more meaningful factor. And those fall under the larger umbrella of "marketing initiatives". As in, the kind the LEGO Group readily admits they reduced this year and attributes the stalled growth to. So the only genuine factor in the stalled growth that you uncovered by reading between the lines is what was already written there in black and white.
I take this as what most press releases or spokeperson utterances are - a steaming pile of self-serving nonsense.
I'm sure everything will be fine if they post another industry-leading sale/profit figure. And it's not like Mattel, Hasbro, Nintendo and Nerf packed it in for 2016.
Indeed, although there's often mileage in the bits that don't add up. As you said yourself earlier, they're spinning, which begs the question the question of why they're doing so.
Quite probably. However, they could also be just a little too blasé about it all.
I'm sure someone will disagree with me shortly however...
What they all try doing is spinning half-truths and hope people make the wrong assumptions. Later, they can turn round and say "but we didn't say that" - and they didn't.
If you're not first, you're last. If you're not growning, you're dying...
And in any case, I don't see how it makes sense to say US prices that effectively haven't gone up at all from last year are "increasing disproportionately to the rest of the world". You seem dead-set on blaming rising prices (whether actual or relative to other countries) for stagnant sales numbers, but still you haven't explained why LEGO could maintain sales growth in the United States for over a decade of steadily rising sticker prices, only for that growth to stop in a year of no meaningful increases in sticker price.
The sets may be bigger, have more pieces and be a better value brick wise but not price wise.
As an adult, fairly or not, I've got a sort of clumsy internal measure of what, say, £17.99 should get me, and if a set doesn't look like it has that much building or satisfaction in it, I'll be reluctant to buy, even if it's better value in piece count (or new piece) terms than a slightly cheaper set would've been a few years ago. It's also worth remembering that even those of us with smaller Lego budgets by Brickset standards are bound to be spending more than the average Lego buyer, and a few pounds/dollars/whatever may well make a big difference to them.
There you go - impression; perception.
@Aanchir - You can get out your tables of data and prove what you like, but it's largely irrelevant if the customers believe something different - because it's their opinions that matter.
I don't need to. You only think I do because you're trying to apply logic to the situation. When it comes to people, logic is trumped by opinions, impressions and perception.