How to Become a LEGO Distributor

Yellowcastle · February 2012

This discussion was created from comments split from: Toys R Us....Are You for Real and A New Local Toy Shop Cannot Buy LEGO.

y2josh · February 2012

Absolutely not. Small, independent toy stores also purchase toys from LEGO at wholesale.

Actually, as far as I can tell, LEGO has no interest in selling to small, independent toy stores at all. When contacting them about setting up a wholesale account, they politely told me to get lost. You CAN get LEGO through third-party wholesalers, but this is a lot more expensive than just buying it during a good sale.

yys4u · February 2012

Absolutely not. Small, independent toy stores also purchase toys from LEGO at wholesale. The MSRP is set by the manufacturer as a suggested price that all stores - big and small - should be able to profit off of.

I don't know if that's necessarily true. I once walked into a independent comic store and asked if they carried LEGO collectible minfigures Series 1. I had to describe it to the guy and finally he remembered getting the chance to order them a while back but said the price they were charging him was so high that he'd have to charge a ridiculous amount and no one would but them, so he didn't bother,

Odindusk · February 2012

I visited a semi-upscale, independent toy store the other day and found that they carried LEGO. I saw some series 5 for sale, and asked the shopkeeper when they expected to get series 6 in. He rolled his eyes at me and sighed. "Oh boy. LEGO sure is fun to do business with..." in a painfully obvious sarcastic tone. He went on to explain that "LEGO isn't selling series 6 to us right now" and that they aren't even able to get Friends sets until August.

bmwlego · February 2012

I attend Toy Fare each year with the hope of seeing the new LEGO sets in person and have inquired about opening up an account with them. If I remember correctly you have to place an initial order of $10,000 just to start a relationship with them. It was something like $2,000 just a few years ago but $10,000??? I don't have that type of money to invest in the hope of flipping it for a profit, nor do I have the storage space for $10,000 worth of LEGO because I have to store the LEGO I build with and have collected since 2006!

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.

gmpirate · February 2012

For us, I imagine its a good thing they only sell to select volume customers. If they sold to anyone at the same cost we would not enjoy the aftermarket like we do ;)

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.

LegoFanTexas · February 2012

I attend Toy Fare each year with the hope of seeing the new LEGO sets in person and have inquired about opening up an account with them. If I remember correctly you have to place an initial order of $10,000 just to start a relationship with them. It was something like $2,000 just a few years ago but $10,000??? I don't have that type of money to invest in the hope of flipping it for a profit, nor do I have the storage space for $10,000 worth of LEGO because I have to store the LEGO I build with and have collected since 2006!

With respect, $10K is not that much money if you're serious about being in business. If you can't spend $10K, you honestly aren't worth having a relationship with from Lego's point of view. They want to deal with serious resellers, not guys in their house who just want to dabble in it, and less than $10K is dabbling.

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...

dougts · February 2012

I don't have that type of money to invest in the hope of flipping it for a profit, nor do I have the storage space for $10,000 worth of LEGO because I have to store the LEGO I build with and have collected since 2006!

From LEGO's standpoint, they aren't interested in providing wholesale pricing to every AFOL who inquires. If your concerns are a $10k investment and storage, then you clearly aren't a serious retailer. No offense, neither am I. 10k in initial inventory would be but a fraction of the total cost to startup a retail storefront.

y2josh · February 2012

I'm curious as to how people are being extended these offers. I'd be MORE than willing to put up $10k to start a wholesale account with them, but all I've ever gotten in response to wholesale inquiries is "Thank you for your interest, but..." Frustrating.

pcirone · February 2012

I'm curious as to how people are being extended these offers. I'd be MORE than willing to put up $10k to start a wholesale account with them, but all I've ever gotten in response to wholesale inquiries is "Thank you for your interest, but..." Frustrating.

Yes I tried very hard to buy directly from lego and was willing to spend way more than $10k. IIRC they wanted proof of a B&M that has existed for at least a year or an online storefront that has existed for at least two years.

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.

cloaked7 · February 2012

Also, WM simply sells an almost unbelievable amount of everything. One of my local WM's has sales of over 10 million a year. And, that is just one store. They don't have to make a huge percentage of profit when you turn inventory like they do.

Cam_n_Stu · February 2012

A new toy shop has just opened in my nearest town so I popped in for a look around - they have all the usual items you would expected with the exception of LEGO. I asked about the lack of LEGO and the owner informed me that they have a sizeable minimum order even for new stores.

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?

Si_UKNZ · February 2012

I agree, I dont think it would be hard for some people here to meet the requirements for a store on their own :)
I think @bahnstormer knows something and I keep meaning to ask :)

CapnRex101 · February 2012

I had that problem with a store here in Eastbourne at first, after about a month though they started to sell Lego (they actually started out by selling the series 2 CMs before anyone else!)

bahnstormer · February 2012

the capital outlay can be prohibitive. if the guy has opened a store have a look at what he has and you can roughly work out what he laid out in total by whats on the shelves.

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.

Si_UKNZ · February 2012

^ That said, the top 10 spending AFOLs in the UK combined could easily meet these investment requirements and open their own shop/ get stuff for trade prices.

drdavewatford · February 2012

My understanding is that it's not as easy as that, although @Martin may be able to elaborate....

bahnstormer · February 2012

^ there are other conditions which make it less attractive to the low volume seller

^^ 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

Si_UKNZ · February 2012

No, there's no concept of 'limited club' in the UK (as far as I know), I think pretty much everyone who needs something like that would just set up a limited company as it's very straightforward.

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.

bahnstormer · February 2012

my view is if I return around 20% then the money is doing better than in the bank

PM me your email addy , lets take this off line

Redbullgivesuwind · February 2012

Speaking to my local independant there doesnt seem to be a minium stock that he had to order as he stocks star wars, friends, batman, ninjago, and some creator sets which is small compared to the larger toy store which has most stuff. However what He found was that there was a huge waiting list to get recognised as a store and to get the items in. For himit was about a three month wait.

Martin · February 2012

If you have never approached LEGO as a retailer then you're all in for a surprise. I've been talking to LEGO UK for two years now. For starters, if you don't have a physical store in a location they deem relevant then you just can't open an account with them. If you sell purely online, forget it. They already deal with enough online retailers and they simply don't want any more. That's been the case for the past two years.

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.

Si_UKNZ · February 2012

that last point is interesting, i know a small lego store has a strong bias towards sets which have been heavily discounted on amazon. now I know why ... thats exactly where theyre coming from no doubt.

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.

Cam_n_Stu · February 2012

Si, I was thinking a group of AFOLs could just funnel that business through a small B&M shop for a minimal margin to meet LEGOs requirements.

Martin · February 2012

^ Don't forget, LEGO don't need your wholesale business. Ask any independent retailer. I wonder whether you would get any exclusive or hard-to-find sets? Anything 10xxx is completely unavailable to any other retailer in the UK...unless LEGO decide they need to offload excess through those channels (e.g. Winter Toy Shop)

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...

tk79 · February 2012

Even if you funnel through a B&M though to try and secure a discount, it sounds like there's no guarantee the group would get the sets they want given the previous comments.

Interesting that the largest discount would be 30-35%...I always (incorrectly) assumed retailers got sets around 50% off.

Martin · February 2012

^^^ Ha! You do know that independent retailers (in UK at least) have spend limits with LEGO don't you?

^ depends on the numbers you work with. Ex VAT, it will be around 50% of SRP (which includes VAT).

gmpirate · February 2012

Its not a matter of Lego being mean or not liking the "little guy". Lego is a business. A businesses objective is to maximize profit. It costs Lego time and money to manage wholesale accounts -- both large and small. A good deal of time and resources go into maintaining these accounts whether they are big buyers or not. That fact that anyone even sees Lego in some independents I think is evidence that they are trying to work with them when it really is not worth the effort.

streeker · February 2012

^ Anything 10xxx is completely unavailable to any other retailer in the UK...unless LEGO decide they need to offload excess through those channels (e.g. Winter Toy Shop)

Neither does Amazon UK carry D2C sets, in contrast to the other European Amazon sites. What's the reason?

Si_UKNZ · February 2012

^^ true to some extent, but also people in general tend to take the easiest option and little guys are more hassle to do business with. big guys put a lot of effort into making it easy to work with them, but will screw money out in different ways. In many ways small guys are better for Lego as they don't predate [email protected] sales as much, especially the ones with very little online presence.

^ I've always wondered that too

Cam_n_Stu · February 2012

What are the D2C sets?

bluemoose · February 2012

Direct To Consumer, aka the 10xxx numbered sets.

Martin · February 2012

@gmpirate, I've never said that LEGO are mean or don't like the little guys; they do. They just have a business and marketing plan and they execute it. In my experience they are always pleasant to talk to but independents just can't always get what they want.

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.

Coolsplash · February 2012

With respect to above comments. How is it possible for stores in the US and UK to put items on 30-40 or even 50% off sale when we speak about a total 30% off retail. Do we even know the exact retail of a set or am I lost somewhere :P

roxio · February 2012

Because they have already made their profit from rrp sales, they need to shift EOL stock quickly to make way for new lines. It's all about the volume

dougts · February 2012

also, big stores like TRU presumably get steeper discounts of course, given the volume they buy in. But yeah, at some point 30-50% off is just cutting losses

doriansdad · February 2012

Hmm seems like alot of work and risk for a discount that can be easily matched on sale days from other big distributors. Pass!

avoiceoreason · February 2012

^ Or they just mark up the sets 25-40% over RRP to compensate. ;)

chuckis · February 2012

Okay I hate to rain on your parade but having owned retail stores and dealt with large companies for products, especially products in demand. There’s a reason why three party distributors exists, most smaller retailer’s can’t meet the sales figures required to buy direct from the manufacturer and as Martin said earlier, you have to have a store front.
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.

gmpirate · February 2012

@Martin I really wasn't directing my comments at anyone in particular and really didn't remember who said what. Just after reading through the thread (and others) I just get the impression sometimes that people don't see the business side of it. If it makes financial sense to make a deal with someone then a business will do it -- if not, they won't.

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

Coolsplash · February 2012

Makes sense @roxio but @dougts is also right about cutting losses. Something I heard from someone I deal with on and off who is based in Denmark told me once that LEGO sets up a monthly target for their retailer to buy items and he cannot pick what he wants, and then there is a long list of other retailers to be catered with respect to volume. And this certain volume is huge. But this guy gets the new released items a bit later then others, as we know the overall market is way better in the US region then in Denmark. And I have figured a discount of about 40% from retail, and have bought lots of stuff from him. Then online retailers also get some discount/rebate from logistic companies. Just a thought.

BrickDancer · February 2012

I just made a nice local connection with someone who can get new sets for 35%-50% off RRP and no tax (example: Batcave for $45 no tax), so I'm sure large retailers are getting a better rate than that. However, I'm restricted access to 1xxxx sets. Does anyone know what approx. discount TRU or Target buys stock at?

Yellowcastle · February 2012

^ Sounds fishy to me.

dougts · February 2012

^ wow, i want your connection!

dougts · February 2012

^ assuming it's on the up and up of course. as Yellowcastle said, it doesn't sound legit. That type of discount A) wouldn't leave any profit for your connection and B) still seems like more of a discount than even medium sized retailers can get direct from LEGO.

BrickDancer · February 2012

@Yellowcastle my girlfriend said the same thing. But I met the guy and deal took place for $350 (~$700 RRP). I have physical proof in my closet =). But really he had a lot of sets left after still, SW; Ninjago; Dino.

@dougts where are you located? I'm planning my next purchase today for some MF and Podracers with him.

Coolsplash · February 2012

You and me both @dougts :D

Yellowcastle · February 2012

@BrickDancer - I'm just going on what you're telling me, but it seems pretty clear to me that your person did not get these sets legally and is now unloading them to you at a steep discount.

BrickDancer · February 2012

@dougts he's getting it from someone very close to manufacturing/distribution is my guess. From the volume of sets he's getting in and selling out, it would be hard to pull off as a scam on a regular basis. He's helping a lot of resellers from what I can tell.

BrickDancer · February 2012

@Yellowcastle "Proceed with Caution" is my current mindset. But this is too good to be left ignored. I'll let you know how it goes on this upcoming 2nd purchase.

Yellowcastle · February 2012

Current Sets / Large Volumes / Steep Discounts

The only thing missing is Olive Branch, MS.

How to Become a LEGO Distributor

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