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Last year I couldn't even enter the LEGO booth at Toy Fare. Business is so good they don't have to spend time with non business partners at the show. It is like trying to enter a top secret club.
There's a collectable I used to be into. As a side thing, I used to buy out inventory from businesses going under or those just trying to trim down. The collectable company had restrictions on who could buy, minimum orders, set the prices (influenced I should say as its not really legal), did not allow internet retailers without a big b&m store presence. Then one day they changed their policies, became more open and the bottom fell out of the market. If Lego did the same we could probably all enjoy our hobby more cheaply, but we certainly would not be reselling it.
I'm surprised it is that low, I would have thought it was much higher, $50K or more. I spent over $10K on the Walmart clearance sales alone, maybe I should give TLG a call...
And talking with local independent shops that buy from Lego they said availability is limited, you have to order months in advance and there is no guarantee that your orders will be 100% fulfilled. All this for roughly 30% off RRP, plus a mandatory 5% freight charge added on.
I think the TRU's and WM's get a better deal in volume and then are willing to take losses to some extent when they sell at 50% - %70 off.
Does anyone know the details? I was wondering what sort of discount independent shops get and if it would be worthwhile for a group of AFOLs to get together to generate a large single order?
I think @bahnstormer knows something and I keep meaning to ask :)
one of the wholesale chains (idee spiel) here recommends 100-120k euro as an opening investment to get the lease and fully stock a new shop through them.
in theory that sum would only allow you to deal direct with 5-6 major manufacturers and you would need to re-invest it every year or lose your account.
this is why the vast majority of german indies operate under one of the two national franchises.
^^ over here brickset could set up as a limited club with the legal status e.V. which would allow it to run as a business and could then order thru wholesalers / direct , can you do that in the UK?
also you may have to factor in VAT if turnover is over a threshold and then have hours of fun answering HMRC questions as to where the stock is - from a legal and accounting perspective, taking the lego from "the club" home could cause a few headaches
But yes, you're right, once you do that you have to submit company accounts, and you have to pay a huge variety of taxes...
- Corporation tax on profits
- employees and employers income tax and national insurance on any money taken out, including dividends these days, and of course
- VAT on anything you sell.
Would still probably work out cheaper though, and the cost of running all that for a small (£100k/yr) business would only be about £2k (not including the tax bill of course), so probably very much still worth it, depending on how deep the discounts are. What kind of difference are we talking about? I'd expect at least 50% once all the tax and hassle is taken account of.
.. And youre right, any Lego paid for by the company which doesnt remain as a company asset (i.e. which someone keeps) would need to be accounted for in the company accounts, so there would need to be a 'purchase' transaction where the director pays the company for the asset.
PM me your email addy , lets take this off line
As for minimum initial orders, I recall it depending on your store size and LEGO branded area within your store. The numbers there will not put anyone off. I don't believe ongoing minimum orders are an issue at all. Stock supply will be what hurts you. They cannot (or perhaps will not) manufacture enough product to meet demand so the small independents are the last to have orders fulfilled. The major multiples call the shots. Amazon also have their own almost unique way of doing business.
The major toy magazines here in the UK run regular columns on the state of the nation in independents and all will report strong LEGO sales and most will allude to stock supply issues (although seldom naming LEGO, presumably in order to avoid making matters worse!).
As for discounts, 50%? Not a chance. Gross margins is likely to be in the 30-35% region max. Consumers can buy some sets from Amazon cheaper than retailers can purchase direct from LEGO.
Its a shame that Lego treat the little guy so unfairly, but centralisation is the way of the world.
I still cant help but wonder whether a group of afols guaranteeing £100k/ year purchases couldnt negotiate wholesale prices.
Amazon have taken centralisation to a relatively new level. My last point isn't just true for LEGO though. I buy LEGO books wholesale from DK and they are rarely much cheaper than Amazon. Then The Book People wade in and do a branded print run of 50,000 Ideas Books and sell it for £4.50 at one point. Fortunately they sell out and I pick up the business at better margin. I just have to be patient...
Interesting that the largest discount would be 30-35%...I always (incorrectly) assumed retailers got sets around 50% off.
^ depends on the numbers you work with. Ex VAT, it will be around 50% of SRP (which includes VAT).
^ I've always wondered that too
The fact that my business is almost exlusively online means that I don't fit in their plan. One day that might change...we'll see.
I owned the first chain of video stores in the U.S. (yes I’m an old fart) back in the 80’s and 90’s and wanted to carry video games when Nintendo hit it big. The contract I was required to sign to buy direct stated that I would buy a minimum of $250,000 a year of product, that was in 80’s dollars, equal to about a million in today’s dollars. I’m sure Lego has a similar agreement with its retailers. There were people in the 80’s who tried to do what you’re talking about with video games and they failed, sorry.
As far as the online angle, I believe it would devalue their product selling to just "any" online retailers. I've seen it happen with other companies/products. You get too many people who will sell it far below RRP either because they have no overhead or because they don't even realize they aren't making money. Either way it takes the sales away from their big accounts with B&M locations. Obviously they need the big accounts and all their exposure to Lego. I'm sure you know this but I just get rambling :P
@dougts where are you located? I'm planning my next purchase today for some MF and Podracers with him.
The only thing missing is Olive Branch, MS.