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Lego to cut 1,400 staff
DadsAFOL
Member Posts: 617
Sad to hear this news this morning. Lego does a lot for the fan community so I hope those programs don't get cut.
http://www.reuters.com/article/us-lego-results/lego-to-cut-1400-staff-as-decade-long-sales-boom-ends-idUSKCN1BG0WK
http://www.reuters.com/article/us-lego-results/lego-to-cut-1400-staff-as-decade-long-sales-boom-ends-idUSKCN1BG0WK
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The announcement is also at the front page of Brickset, with some good discussion going on in the comment section: https://brickset.com/article/30409/lego-group-s-profits-take-a-plunge
Someone suggested that it would be a good idea to trim some of the AFOL programs. Too many LUGs accepted that are located close to each other and don't do that much, and too many review sets sent out to low quality YouTube channels were some of the reasons given. I don't think LEGO will cut AFOL support completely, as it is beneficial to them as well, but a little pruning and tightening probably would be a good idea to focus on the relationships and events that are the most impactful and mutually beneficial.
I get that companies focus success on growth, but there is also the profitability on the current sales. This is not anything like the financial collapse/bankruptcy issues of the late '90's.
They just passed Hasbro as the largest global toy manufacturer and are now capitalizing on licensing royalties (films, merchandise, theme parts, video games).
I get the sense a little of this is PR to soften the blow of reducing their workforce in Billund. Only a few years ago, all of the HR department for North America was relocated to Mexico. Many people in Connecticut lost their long-standing jobs as a result of their restructuring.
It also doesn't help that this financial analysis is based on only partial information disclosure - as LEGO is a private company and is not compelled to provide financials.
Well I haven't bought any LEGO this year, and I was trying to work out why that was. I think in the main it's due to uninspiring Star Wars sets (although that's not TLG's fault, it's the ST and spin-off film source material). I would agree though that TLBM wasn't anywhere near as good at TLM. Of course I'm not TLG's target market...
I think a major concern is now saturation. I get now bored when I see this depicted in LEGO, that depicted in LEGO, such and such depicted in LEGO, ... When they were one offs, they were interesting. Now it seems LEGO appears everywhere and becomes a bit boring.
Plus saturation for kids. Strange to say, but I think my kids have enough LEGO. They haven't had many sets at all this year. Much of it (especially smaller sets) is uninspiring compared to previous years. And for bulk parts, they have plenty from previous years bought during the boom.
And pricing of course. I rarely buy anything at RRP. If I don't get a discount, I tend to pass.
TLG has been screwing some things up, we all knew that. They have to restructure and to some extent simplify everything. Lower profit is a good excuse to justify eliminating a whole bunch of employees. Those positions aren’t the essential ones, they’re the “upswing” positions that were supposed to help with further growth and expansion. They were there simply because profit was pouring in and TLG were doing what they could to make the most of it.
I could take this opportunity to focus on TLG’s high prices and decreasing quality (color consistency, hello!). But here it is IMO:
1. Over the last 12-24 months they’ve went from short supply and not meeting demand to over production. They had the most ideal of situations, which they could have maintained by just easing production up. How many new factories have they recently opened???
2. The result of that over production is most retail outlets (need to) consistently sell at 20-30% off. Instead of trying to compete, [email protected] seems to have even less sales and promotions, which means they’re progressively losing more of their share of direct sales.
3. Rehashing old sets is a big one. Prior to 2015 Lego sets for the most part just weren’t redone. So the value of your stuff used, new, MISB, whatever, was something significant to consider, when and if you every felt like messing with the secondary market. But TLG pretty much killed the prospect of “investing in Lego” by proving over and over that they will go after the easy money by reproducing retired sets. This directly reduced the value of whatever we already own, and also shows us that anything we might purchase in the future will no longer have the same type of increased value due to exclusivity (instead will suffer from over production, see #1). So long term gains have been sacrificed, but apparently there weren’t even any short term gains! Major mistake here that would take a long time to correct.
4. Market cannibalization – more sets does not equal more profit. I can’t tell you how many times in the forum I’ve read how people have stopped buying everything, just so they can afford the UCS MF. The same is true for those of us just trying to budget for Ninjago City, Old Fishing Store, Assembly Square and Saturn V, etc.
$60
2017: #60160
2012: #4429
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2017: #31069
2012: #79003
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2012: #4440
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2012: #9468
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2011: #10218
Put another way, let's say LEGO only produce set/theme A, and not B, and they would sell 100 units of that. By adding set/theme B, they sell 40 units of that, but set/theme A now only sells 80. Are they better off selling 100 of A or 80 of A and 40 of B?
From an R&D, inventory, supply chain, storage, and logistics standpoint you are going to be more efficient going deeper on fewer total SKUs than you are in going shallow on many more of them.
Their market is saturated. Too much stuff, most of it is uninspired too. I understand the need/desire to have sets at all price points on the shelf at all times, but do we really need 100 new <$20 sets per year, which are quite often just a slight variant of the previous' year's version.
Ones such as DC Girls and The Angry Birds Movie should never have been chased by Lego.
Idea has ones such as Doctor Who that could have been utilised so much better, and others such as Big Bang Theory where again was it really worth the time, effort and money chasing the license?
And some like the Simpsons and Adventure Time have just too late for TLG to make the most of them, though I think some smaller Simpsons sets could have still done really well.
To be honest, I've seen a lot of comments on Brickset and Facebook with the OPPOSITE complaint: that there are too many high-priced sets and not enough low-priced ones. Plus, which of this year's $20 sets are you so certain LEGO would be better off without? Because while I agree that, say, City Police sets can be extremely repetitive, they're also some of the most popular sets year after year. LEGO doesn't revisit those sets for lack of better ideas, they revisit them because they're what kids and retailers want.
I suspect though that most problems stem from a bloated company that internally appears to be incredibly dysfunctional with wrong people in key roles.
I heard Mega Bloks (now Mega Construx) actively pursues ex-LEGO employees. ;)
On a more serious note, yes, that is absolutely awful...
1) It used to be that We could look forward to a new theme or two every year, so if there was not something out, there would be. Now so much is Star Wars, Super Hero, Ninjago, Minecraft. The lack of variation is a huge issue in this household.
From this entire year, he has request the latest large Minecraft set and one Ninjago set. BB-8, I have not shown him, but that is one he will want. That is it. On the flip, I will be buying Friends ski related sets. That is really the only line we will be buying more than one set from.
2) The large sets are amazing. I pen the last year, I had more large sets now on my personal want list than ever before.... carousel, fishing hut, Saturn, Parisian, holiday train station, Ninjago City, Disney Castle. I only have so much room, so at some point I have to stop, but at the same time the super Large sets and the CMFs are the main thing I am buying.
3) There has been a price increase
4)I feel in the product ranges targeted at kids, the most innovative lines continue to be Friends, Elves, and with the Jungle theme, City. I am not sure what others feel, but when your best innovation is coming from internal lines, but licensing is a huge part of what you offer, there is an issue.
5) With Lego being so big the past few years, it is not a surprise to see it slide back. That level, is just not possible to maintain indefinitely.
But with that said, I do admittedly notice that the bulk of the sets in 2017 are repetitive-seeming. Possibly because the stuff in 2017 has Ninjago, Star Wars, Superheros, City, Minecraft, and Racers, which, to an AFOL, seem kind of like constant repeats (though I expect the kids still like them!). By contrast, 2012 had The Hobbit, Monster Fighters, and Dino (in addition to the repetitive Superheros, Star Wars, Ninjago, and City), which were a little more "fresh" or different. At least to an AFOL like me.
Could that have something to do with people's annoyance? IE, that the Star Wars, Superhero and maybe Ninjago themes have gone on long enough that AFOLs feel that they've been exhausted, and are no longer interesting?
DaveE
It was once important for me to have all of the big sets as well as all those within an attractive theme of interest. Now, I simply don't know which way to turn and my wallet has been kept tightly closed as a result. Yes, I'll get the next Modular come New Year and of course the Falcon and Winter Village release, but even with that £1,000 spend, this year they've possibly only had a fifth of what they've had from me in previous years.
I no longer have (or NEED) all of the UCS or Exclusive sets that got me started a decade ago, not just because their perceived value for money to me has plummeted, nor just because there's too much variety and keep up with, but also for the case of LEGO's apparent greed to dominate every corner of every market on Planet Earth. It's everywhere. I havent just slowed a little, but almost altogether because as a completist I can no longer be satisfied. It's got to the point where the amount of money the hobby demands from me is having negative impact on my family's life, my kids lives.
They've over-milked the cow in my mind.
2016 50
2015 71
2014 92
2013 95
2012 98 (first full year out of DA)
They replied saying that if I did well in school I could join the company when I got older.
Sad to hear sales are declining, but it is hard to grow anything forever without some turbulence.
probably doesn't help with counterfeit companies making money either.
This is just my opnion.
You can have greater sales and lose money or less sales and make money, all depending on how you do things. The Groups cash is up... they are making money
I think people lose sight that financial analysts always focus on growth, growth, growth - but overlook how many widgets are actually being sold. There has been 'only' six percent growth this year after twenty five percent growth in 2015.
I am highly suspect of the essence of this story - as there is no mention of the $1.9 Billion in profit that the family (and company) retained on the revenue.
TLG's perspective is probably the same as the analysts.
Laying off 1400 now helps put them in a better financial state to deal with the future changes in market.
A few days ago I saw some sets in Target that I had no idea were even coming. That's how far out of the loop I am now. I pretty much knew then that my hobby was no longer that. Lego has become little more than a passing interest now. Too much of a good thing killed it for me I guess. Maybe it was the "The Lego Movie Effect"... Idk. Too much. Too expensive. Too many. Too often. Too tired of it to keep up.
I will still buy the occasional set here and there, like the upcoming Winter Village set and the Ideas Voltron most likely. My purchases and involvement are a mere fraction of what it once was though. I would have never guessed that having MORE to choose from would ultimately be the reason for me wanting LESS of all of it, but here I am.
(Some of the criticism and worry in this thread is completely unrelated to earnings and the workforce structure.)
Cutting costs early will help them remain the #1 toymaker. However, their market does seem a over-saturated. Lots of good sets being pumped out, but everyone has finite amount of space and that is the number one concern of LEGO collectors (excluding $$$).
And I definitely doubt there'll be Retail Store closures. That's part of the operation that prints money.
The major job cuts will damage the brand, which trades on its family and fun image, which is a real shame.
Seems they really had been hiring for continued double-digit growth which now didn't materialize.
As we don't know which departments are getting downsized or what the impact will be to the future product pipeline, it's difficult to predict how this will impact us AFOL's. There's the possibility AFOL programs get cut or we see less D2C sets, but that's not guaranteed.
A potential positive: with the factories having to focus less on growing production volumes, they'll be able to pay more attention to things like colour accuracy? But again that will depend on where exactly the cuts are being made.
But yes, as somebody who gets a warm fuzzy feeling from everything Lego, I would have preferred reading about a hiring freeze and natural attrition instead. I of course don't have access to their H2 2017 or 2018 forecasts.
Of the 900+ sets we own in the family, almost two thirds were purchased in the last four years. The other third was purchased over the course of almost four decades!
I agree with the notion that over-saturation plays a big part. Speaking for myself, I just don't get the same "thrill" by the announcement of new sets any more like I used to. Same with our older daughter. By now she has so many Friends sets that she isn't interested in new ones any longer. There is just too much of it available, and too many new sets each year. Trying to be a completionist has been out of the question for quite some time, but even for the casual buyer too many sets on offer isn't a plus.
That and many for my and our kids' taste unnecessary themes that were introduced in recent times (Brickheadz, Super Hero Girls, TLBM, Angry Birds etc.) plus way too many new Superhero and Star Wars sets. Too much quantity, not enough quality (uninspired sets, rehashes, quality isssues like with colour consistency etc.)
Last but not least the massive price increases, i.e. you get far less for your money than you used to. Not necessarily on the largest and D2C sets, but there as well. Sets with price per part ratios of 5 to 10 cents used to be the norm, now it is between 10 and 20 cents, with quite a few sets even over 20 cents per part. That's just ridiculous, even considering certain licences. One reason why I hardly ever buy a set at RRP anymore, unless it is tied to some interesting promotion.
I have learned to wait for a good deal, which eventually can be had for almost any set. If many others do the same, it is clear that growth won't be endless.
I'm just surprised Lego is taking this drastic measure after only one quarter with a drop and it's only a drop of 3% at that.
Unfortunately for any company the biggest factor that contributes to cost is always staff...and of course is the easiest to cut and thus the first to go.
Let's just hope Lego doesn't hand out bonuses to management for a job well done after these job's are cut.
But that seems to happen to a lot of AFOLs. They start out active, but then start to lose interest after a few years. In fact, that seemed to be the demise of a lot of LUGs in the US, where the "core" member (who managed the website or organized train shows, etc) ended up falling out of the hobby for one reason or another.
So how do you tell the difference between your own mellowing-out and a change in direction from LEGO? Especially when LEGO's changing all the time? Did LEGO make a misstep, or were you destined to start getting bored with the hobby of your own accord? Or maybe some of both?
Here's another interesting tidbit. I used to want to collect everything, but after calming down, I've stopped. I'm content not to own everything, and I've sort of accepted that. But then again, I'm also interested in building MOCs as well, and doing things in the community. So I've got energy for the hobby along other avenues apart from collecting. But if people are driven primarily by being collectors and completing their collections, then vast product expansions from LEGO really do threaten those hobbyists.
I wonder if there's any sort of correlation between AFOLs who feel exhausted buying LEGO with those who are more primarily collectors versus MOC builders?
DaveE
I have a large parts collection that I hope to use for future MOCs. But I never have time to actually build MOCs, so even collecting parts has slowed down quite a bit
For various reasons, I think a lot of people do it this way, but that does mean that whatever hits the choosing/buying of sets, be it too high a cost or too much choice for choosing to be enjoyable, has the potential to cool people's interest. I'm still enthusiastic, and I'm hoping that as the home situation gets less complicated I'll spend more time MOCing, but it's possible that if I were buying more sets, more often, I'd be feeling burnt out on it too...
I think TLG released way too many sets on a per year basis, too difficult to catch up especially for collectors that wanted to complete a theme. I used to want to complete the ideas theme, but already missed the last 3 or so releases.
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