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What is LEGO's Strategy on Regional Pricing? Availability?
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Plus there is the "what can we get away with factor". Price some sets in a range reasonably, others higher. Some people will want everything once they are sucked in by the better priced sets.
I believe they also have a much higher competition in Germany with Playmobil and they need to keep a same price level with that market competitor.
/my two cents.
(Anyway I'll probably treat myself to a small LotR/Lone Ranger/summer Friends set, which seem more reasonably priced - and aren't out here yet!)
Hungarian RRPs are about 10% higher than German ones, most of the difference stemming from our lot higher VAT (27% vs. 19%). Still, LEGO pricing seems to be quite off from realities seeing that LEGO is immensely popular here but purchase power is quite low. Retailers carry LEGO sets at about RRP (Tesco usually even a bit higher), but online there is a huge price competition among webshops and most sets you can continually get for 10-20% off without any sale. The margins of these shops must be quite low. This also means that there is a huge 20-40% gap between the pricing of the cheaper webshops and Tesco. What costs 28000 HUF there you can buy online any time for 20000-23000 HUF. Or take Fire Brigade or any other modulars. What is 48990 Ft at [email protected] is about 42000 Ft at the bigger webshops at list price and can be had for 38-39000 Ft at the smaller more price competitive ones, or on a 10% sale at a bigger one. And they are not selling fast even at those 20% off prices.
I believe they also have a much higher competition in Germany with Playmobil and they need to keep a same price level with that market competitor.
/my two cents.
Can't be this. First of all, NL is not a small country, plus half of Belgium speaks Dutch too. LEGO has almost no translation costs: there is no text on the instructions. Boxes are multilingual, and probably the same all over Europe.
I know nothing about the logistics system behind [email protected], but no way they have seperate warehouses, distribution centres, etc. for every country.
My guess is simply that they price sets differently because they think they can get away with more in some countries than others.
Good thing is, you can easily hit back: both amazon.de and amazon.co.uk deliver for free to NL, and there is no way amazon.de will be more expensive than the German [email protected] For most sets it will be cheaper.
Okay there are some exclusives and promos you can't get that way, I give you that.
PS. LotR Pirate Ship is 99.99 EUR pre-order on amazon.de now, for example, with free shipping to NL.
My wife is Australian, born and raised near Brisbane. I've been multiple times as have the kids.
The cost to live there, to do business there, is simply higher than in America, often by twice the price.
Consider that all those wonderful social services you have, aren't free. You're paying for them in your LEGO sets and everything else.
Lego.com will only sell direct to Australians and Kiwis at full recommended retail price. Once a product is in the local shops, RRP includes shipping [and local sales taxes (AUS 10%, NZ 15%)].
When buying from Lego.com, they charge shipping on top of rrp, and do not reduce the sales tax component, which clearly they are not forwarding to the local tax collectors. In addition, you risk Customs levying taxes (i.e. GST) on top of the rrp for imported goods.
At the moment, at least, Lego.com waive shipping on larger orders.
So if the Simpsons House is $200 USD, it will likely be $360NZ; I can wait for it to be in the local shops and pay that - or even wait for a 20%off sale, and pay just $288.
OR I can order from Lego.com, risk $80 extra postage; risk an EXTRA $54 import duties (on the $360), and pay a full $494.
That, dear Lego (And I hope you are reading this), is an absolute rip-off.
If you're buying from [email protected] Australia, then you shouldn't have import duties, those should only apply buying from [email protected] US.
BTW, one reason LEGO is cheaper in the US than anywhere else is that we have no import duties of any kind on toys. Canada likes to complain about the higher prices there, but it isn't just their GST, there are also import duties for TLG to pay.
Not so in the US.
Canada's free healthcare.... Isn't free.
The RRP for each country, correct me if I'm wrong, is also set by LEGO after taking into account the destination market, including but not limited to shipping and governance considerations. Why all sets in a market are not priced to the same proportion, though, confounds me. As for import duties, I always thought those only occurred when buying from another country's website. Isn't there an AUS [email protected]?
Individuals pay no GST (Sales Tax) on imported goods under $1000, but I'm not sure that applies in the above scenario. GST is included in the RRP, which is the same in store locally or on [email protected], so if Lego is not paying GST on [email protected] orders then they are pocketing it. (We can not order form other [email protected] sites)
We talk about Australian wages etc. and that those are added costs, but from my limited understanding ITD's only get around 20%-30% discount on RRP which I believe is the same as similar stores in the US, if that's true then the wage argument becomes a little weaker. (Not sure what the larger chain department stores pay for their Lego though).
If we look at price on a set by set basis, I guarantee that TLG is making more profit from the ones that are double or greater the US price in Australia. Over all though it may balance out as there are a small number of sets that are the same price and others that are only 20%-30% more.
That all said
A couple of changes in the last year is that a lot of the larger sets have come out with a smaller price difference, and the US's ban on discounting exclusives. These have made what we potentially pay for these sets "seem" a lot more reasonable.
By shopping around and waiting for the right time, we have been able to get these sets at the following price.
#10234 Sydney Opera House $284.99 (US$256.35)
#10937 Arkham Asylum $199.99 (US$179.90)
#10225 R2-D2 $199.99 (US$179.90)
#10228 Haunted House $189 (US$170)
#10240 Red Five X-wing $195.20 (US$175.58)
#10232 Palace Cinema $139.99 (US$125.92)
#10233 Horizon Express $116.10 (US$104.43)
#10226 Sopwith Camel $99 (US$89.10)
These are all at least 20% off AU RRP, but I will add that some of these prices have only been available for a very short time and with the need to add coupon codes or receive Gift vouchers as part of the discount. Generally though 20% off is easy to get.
So yes, RRP prices are tax-inclusive. I believe Australia is the same.
Lego.Com list the NZ RRP Price for the forthcoming Simpsons House at $400. That is double the US Price. Our Exchange rate hovers around 80c, so $200US =$250NZ.
The argument from LegoFanTexas is that there is high postage to Australia; holds some merit. Maybe $40 is fair.
My point is that I can either wait for it to arrive in the shops, and pay $400 (already grossly over-priced based on the exchange rate), maybe $320 on special;
Else I can order it direct from Lego.com for $400; maybe pay an extra $80 postage (why not ~$40), which at least is currently waived on larger orders, but still risk getting dinged for $60 import duties.
If our local shops charge $400 and pass around $60 on to the government in sales tax, why does not Lego.com, when they charge the same $400?
btw, here in New Zealand we have no lbr's.
The entire argument that Australia / New Zealand / Canada pay more because we have higher living costs, and benefit from social welfare is a complete red-herring. We pay for those through high taxes (including GST).
The debate is not about taxes. It's about exchange rates and postage.
cheers
TLG has to pay a 5% import tax in New Zealand. That isn't GST, that is a direct payment to customs. Then they have to pay GST on the sale price of the item, which comes out of their pocket, which is 15%.
So 20%, right off the bat, goes to the government.
20% of $400 is $80, so TLG is really only getting $320.
Now, consider that TLG had to setup a legal entity in New Zealand, someone local has to handle things on that end, there is overhead to sell to that country with a small population. There are costs of doing business there. They aren't just shipping each item by itself, they have a local partner, a warehouse, inbound shipping costs, etc.
So lets say another 10% for local overhead, brokerage fees, a local agent to do paperwork, etc. Another $40.
So now $280 is going to TLG.
While not quite equal to the $200/$250 exchange rate right now, they also build in some buffer because those exchange rates can change, yet they don't just move RRPs around all the time.
-------
When TLG ships those same sets to the US, the costs are not zero, but pretty close. The US has no import taxes on toys. Sales tax is added to the price of the item, it isn't included. So in Texas (since each state is slightly different), that $200 set actually costs about $216 out the door.
Is it a bit cheaper here? Yes, but we also have 320 million people and we buy more toys than anyone. So there are huge volume savings to be had shipping huge quantities of toys here. Shipping to Australia and New Zealand costs more and far less is shipped at any one time, so the cost per item is higher.
Well, the tax system is currently "Under review" and that is one part that will be looked at. The problem is that it cost's the government more to collect on amounts <$1000 then what they would actually collect in GST, but a few noisy well connected B&M retailers are lobbying the government hard.
I wouldn't be surprised if the threshold gets lowered and the consumer has to pay an additional fee for processing the GST on any amounts over that threshold.
These last two items, are rolled up and included in the local rrp. Lego should not charge $340 GST-exclusive here, and then charge $400 on their website, when that difference of local tax is almost certainly not passed on to the local government, and indeed I am likely to be re-charged as an add-on extra, given $400 is the threshold for import duties here.
As for the exchange rate, and setting up distribution channels etc, you are quite right, and there is some justification.
Having a buffer in the exchange rate is justifiable; however that should then only be based on a reasonable mid-term average. We have been sitting at around 80c (+/- 5c) for several years.
Relying on historic factors such as setting up setup a legal entity in New Zealand, etc, is largely irrelevant. Lego has been freely available under import policy for 30 or more years. These are not significant costs re-charged every year or every shipment.
As for Warehousing and other day-to-day overheads, these occur everywhere, including almost certainly every state in America. Bear in mind Lego is not manufactured in America, so you too receive Lego as imports just the same as us.
Finally, volumetrically, yes of course it is cheaper to import en masse for 320M people, as opposed to 25M in Australia and 4M in NZ.
However this does not affect the cost of Production at all; only the cost of shipping and its associated economies of scale.
Cars, computers, video games, etc... everything is expensive down there.
A nicely equipped midsize Ford SUV starts at about $26K in the US, it is over $40K in Australia. Nicely equipped? $40K in the US and $75K in Australia.
This is one of the reasons I don't live in Australia. I could, my wife and my kids are dual citizens, I could get my citizenship in about 2 years living there.
But it costs too bloody much, for everything. My brother in law lives in Brisbane, his house costs about what mine does. He has 3 bedrooms, I have 5 (and almost triple the sqm). He pays 27 cents per kwh for power, I pay 11 cents per kwh.
It just costs more to live there. It isn't the exchange rate, it is the cost to ship stuff there and the cost to do business there.
Ford SUVs, LEGO, and computer chips are not built in Australia and all have crazy markups. Why do you refuse to see that the common thread is the cost to do business in your country?
From what I'm reading, the concern centers around TLG possibly building the cost of AU business into the RRP and then charging those same factors again when ordering online. If $400 is indeed the heavily burdened, landed cost at an AU LBR, then I can certainly understand wanting a lower online cost IF you get charged tax, shipping, overhead and duties all over again by [email protected]
It's not an issue here in the US since tax is always tacked onto RRP whether online or B&M. Shipping, though, is usually still in play.
When would I expect to pay that if I was in AUS? If I was ordering (or able to order) from US [email protected] Then it would be understandable (if annoying).
Can anyone in AUS confirm if ordering from AUS [email protected] that they are charged shipping and/or import/GST taxes?
If so, did you complain to [email protected] about it?
How much did you spend?
Lets get some numbers from people who have placed real orders, rather than guessing.
To LegoFanTexas, you are right in what you say about relative cost of living being more in Australia and NZ than America. However for most other online products, if you go straight to source, you will pay the source currency x Exchange Rate, then add postage. That would be quite fair.
Cheers all.
To Basta - I understand NZ Government are also looking at lowering the duty-free thresholds here too, as the shift to online purchasing from overseas is apparently making quite a hit on their GST-take.
All the more reason why Lego.com shouldn't charge and pocket the local sales-tax.
[Note I do not purport that Lego.com state they are charging a GST-component, nor forwarding it anywhere].
Try us in the UK then. VAT is payable on imports from outside the EU over £15. And you get charged a £8 fee for the privilege!
Although I have no idea what the tax implications are for TLG, but I'm not about to test it and order >$1000 worth from [email protected]
I suppose I should have a look at the invoice from my last order and see if GST is listed, if not then TLG should not be charging the inclusive GST price at [email protected] IMO.
@duilim check out your local Kmart as HH has been on clearance for $189 since Christmas. (RRP: $269.99) still some around at my local stores.
You raise a lot of good examples about our cost of living which is defenatly high compared to the US but the US is cheaper then most OECD countries.
A couple if things though, we have cheaper health insurance, and you we can get by (in most cases) fine without it & median household income is higher.
nearly forgot, Australia is obvious a much better place to live :p
If you're wealthy, America is a very nice place to be. If you're poor, it sucks. There is very little social safety net. Some does exist, but not to the extent as most other 1st world nations.
In fairness, we could probably fund it all tomorrow, if we didn't have such a huge military industrial complex. Lets be honest, much of the West has benefited over the past 50 years from the defense umbrella of the US. Our spending on our military has allowed many western nations to underspend for defense, knowing that we'd come to their rescue.
We should be sending them a bill for that. :)
A classic example is European cars, built in Europe and exported to the US to be sold for 2/3 of the price the European natives can get them for. I'm not talking about the countries like Denmark and Finland that double the price in Eco taxes, but countries like Germany, UK, France, Spain where you pay VAT (16-22%, depending on the country) on the car, and that is it as far as taxes go. Shipping is a pittance within the EU when compared to going to the US.
Take a VW Golf GTI - built in Wolfsburg, Germany (the lower models are built in Mexico for the US market, but not the GTI). Around 29k Euros in Germany, £26k in the UK and $26k US. Perhaps the US version is a bit spartan on equipment? Not at all - it comes with free metallic paint (£525 option in UK) and other equipment that is optional in Europe at about £900/1100 Euros cost.
Unsure what the import duty into the US will be on that GTI, but it won't be free.
Surely VW can't afford to sell a £27500 car (inc US specific options) in the US for the equivalent of £16k and still make a worthwhile profit? If they want to compete with the home grown models that's what they have to sell them at.
Makes me wonder how much profit there actually is in that GTI and how much the EU buyer is subsidising the US buyer. In that example, we aren't talking of a bigger market in the US for VWs than in the core counties of the EU with similar car taxation.
The EU market will bear it because they are used to paying that for a new GTI, the US market would scoff at a £45k GTI.
We're all mugs, and need to find a way of getting them out wholesale from America in bulk, and beat the system!
Reading back over the thread from when I started it back in 2011 the only thing I can tell is the pricing discrepancies by territory are the same if not worse than before. For all the reasons that may exist for varying prices by region the simple fact remains that Lego price their product by the value they can obtain within that market. I expect they also go to some lengths to stop 'leakage' between teritories to keep regional profits in line with their targets etc. beating the system isn't an easy task.
I do bemoan the price of lego in the UK and was chatting with a couple of staff in one of the Lego store a few days ago and the topic of ever increasing prices came up and despite being told that sales figures in that store where still good that same topic is raised daily by customers, so what does that tell us? We all complain about the costs but it isn't stopping us buying the goods and that tells Lego something as well... Just look at the latest CMF line, £0.50 more expensive yet outselling the last wave by all accounts.
The rising costs will mean a cutbacks this year in the volume of lego bought in our house but I expect there will still be more than enough bought, I'm just glad I don't have to pay Aussie or NZ prices.
But history is full of cases of companies taking it too far, not knowing when to stop.
You can push and push and push... and then one day you cross some invisible line, and the customers rebel...
When that happens, it is very hard, if not impossible, to push back. It can be done, but it isn't easy.
At a macro level to pointless hike from £9.99 to £11.99 for the SW planets stopped me buying them at cost, although I did grab them in a sale.
The Simpson house is great but at £170 I will have to pass as can't justify that and the May the 4th release so close to each other.
I think this is where it starts, higher prices and greater saturation of products, however good they are means people start to pick and choose more and that means some items under perform and then a company looks how to respond.
In many ways I think Lego already are responding before this becomes an issue by very cleverly positioning themselves as so much more than a toy company and the prices on a lot of their non lego products are very good (clothes apart, those SW lego t-shirts are pricy, but good). It will be interesting to see how the upcoming film performs. Their current adventures into the multimedia world have mostly worked so far and there are more and more books every year and so on.
The trick is to do all that without compromising their core product, which so far doesn't seem to be an issue and I don't think will be, the current range of themes is as good and varied as I can remember and the designes and quality matches, so the only question is how far dare they push their prices (wow, that is a ramble and a half).
I just hope we see a few years of static prices, it's the best we can hope for really.
The LEGO Movie could be considered positioning themselves in the entertainment industry, but that remains to be seen. At this point, it's difficult to say whether the movie exists to market the toys or the toys are merchandising for the movie. In my opinion, they already have compromised their core product for the sake of merchandising, the prime example being Chima.
Lego would sell more product at reduced international prices; Keep more dedicated fans happy; better enable entry into what can be life-long purchasing custom; make cheaper brands sweat more as their sales fall in favour of increased market share by Lego; dis-incentivise fake knock-ups from Asia;