The different prices on LEGO in the US vs. Europe

[CopMike]

Ok, bring it on!

CopMike

[Alldarker]

OK!

Well, there you have it, straight form the horses mouth: Lego sees their European market as a cash cow to subsidize the losses they (evidently) make on the US market!

Frankly, this makes me absolutely sick:

we have for years priced our products higher in eg Europe than the US

and

we have consciously decided not to let this (hopefully short term) weakening of the dollar hurt the US consumer

and

in order to stay profitable as a company, we cannot decrease our European prices

...

Don't get me wrong, I'm not flaming America or Americans, but I am saddened by these kinds of arguments... In the big picture it's actually price issues such as these that are causing increasing wage demands by Europeans, leading to strikes, inflation, as well as leading to higher costs for production due to increased wage demands. This again leading to outsourcing of production to cheaper low wage countries, where labour standards aren't as high as in Europe...

Edited July 31, 2008 by Alldarker

[Joey Lock]

Lego...You have failed me for the last time!

I need a quick moan

I see what you mean but...I dont belive that.

I think its because if they were higher in the US, people would stop buying the sets since there are so many people living in America. You only care about losing that scale of customers (My opinion).

I think the reason why you raise prices is because you know people want these things so you can raise the prices as high as you want because Its the peoples only choice.

I guess I shall just save money by buying it over the Internet.

My two pennys.

EDIT: If you send these views to Lego.com they would proberbly throw this straight In the rejected pile...

Edited July 31, 2008 by Joey Lock

[Deinonychus]

Furthermore, the US market is by far the most price competitive in the world.

Yeah, let's hear people bemoan the existence of Megabloks now. It's because they, and other clone brands exist, that your US LEGO prices are so low.

Everything in that statement makes absolute sense. I'm probably going to get dog-piled here because I'm in the US and am the beneficiary of the pricing policies, but this is how business works. LEGO is reducing profit margin in the US to make up for it in gross profit in the long term. It's smart, it's savvy, it's how successful companies make money, stay solvent, and keep operating.

And as "unfair" as all this may seem, these are, in the end, children's toys we've chosen to collect as grown adults. They are nothing we have to buy. Even less, they aren't something we need to survive. LEGOs are a luxury. We should be thankful we have enough spare cash at the end of the day to afford anything we need beyond the means to get by.

[Opproperaar]

@ Joey

The market scale I think isn't the real issue here. Canada has a population of 30 million and the US has 300 million inhabitants. The European Union has 500 million inhabitants. The Schengen accords also see to it that international shipping within the union is a lot more cost effective than it in any case used to be.

I believe this has rather something to do with the 'all out laisez-faire market' in the United States. Especially given the homemarket's advantage of Megabloks in North America.

To be clear that last scentence is speculation on my part, which I think is the real cause of the price difference.

Nipper after all stated that: "The US market is by far the most price competitive in the entire world."

My thoughts, ...

[Teddy]

OK!

Well, there you have it, straight form the horses mouth: Lego sees their European market as a cash cow to subsidize the losses they (evidently) make on the US market!

Yep, you are right Alldarker,

the main reason is:

-a company asks what the fool is willing to pay.

The other arguments are just nonsence to obscure this simple fact of life.

Our selling costs in Europe and Asia are higher than in the US because of the size of US market and retailers (economies of scale).

The EU market (16,8 triliion dollars) is about 22% larger than the US market (13,8 trillion dollars) (IMF 2007 numbers)

With the dollar falling another 10% or so after these numbers where published the difference has only increased...

and

Finally, final pricing in the market place is obviously determined by retailers, which is something we cannot and will not influence.

now to the retailers, lets bypass them all together and go straight to the company itself.

just a quick look at the new Star Wars sets on lego.com:

Republic Attack Gunship 7676 in europe: 139,99 Euros in US: 119,99*0.6374 = 76,48 Euros

Price difference: 139,99 - 76,48 = 63,51 Euros or : 1,5686*63,51 = 99,62 dollars

a wopping 100 dollars! difference on one set priced at 119,99 dollars.

Please dont tell me this factor of 2 has anything to do with economy of scale and retailers...

Its all just plain and simple, the price is what the fool is willing to pay. No more no less.

[Joey Lock]

@ Joey

The market scale I think isn't the real issue here. Canada has a population of 30 million and the US has 300 million inhabitants. The European Union has 500 million inhabitants. The Schengen accords also see to it that international shipping within the union is a lot more cost effective than it in any case used to be.

I dont know why Lego is rising prices high in its own home country of Denmark...Still I dont really mind that much for now...

The thing thats really annoyed me is the Price for new Clone Wars Clone Troopers... They better bring out a Clone Trooper battle pack or every Star wars fan shall lose faith in Lego.

[Kakihara Smile]

I'll be the first to say I don't understand ecconomics 100% but Lego is basically subsidizing the losses created by the ecconomy in the larger US market with higher prices in Europe, right? If so that makes complete sense (to me anyway). Still, this whole situation just seems like it could lead to alot of America hating though.

[Jipay]

Translation of the whole answer :

Europe = Cash cow

On the positive side, they're being honest. Now the second adressed question should be : "What are your plans to change this situation in the near future ?"

[Joey Lock]

Translation of the whole answer :

Europe = Cash cow

On the positive side, they're being honest. Now the second adressed question should be : "What are your plans to change this situation in the near future ?"

Here here!

Thats exactly what we need! Cacth em out, I bet they had no intention of changing if for years to come. If we post that we can sense if they are lieing or not.

[Teddy]

Translation of the whole answer :

Europe = Cash cow

On the positive side, they're being honest. Now the second adressed question should be : "What are your plans to change this situation in the near future ?"

they would be bad business man if they would change it.

The only reason for them to change this would be economics.

So either:

- we stop buying unless they lower proces

or the most realistic option:

-there is serieus competition (clone brand) driving prices down.

[Jameseh]

We have consciously decided not to let this (hopefully short term) weakening of the dollar hurt the US consumer

Its not like UK have had a Credit Crisis or anything, just stuff the little guys.

Edited July 31, 2008 by Jameseh

[BillytheKid]

LEGO, your arguments are just rubbish/megablocks (sorry for my words). You keep the EU-prices too high for your own purse. And besides of the high prices, the quality is just the same rubbish/megablocks then I used too in the '80's.

The quality and themes of playmobil is 100times better. Only bad I've already an attic filled with 12v trains of lego (also many thx to USA why these 12v is gone ).......... If I had to choose when I have nothing, I choose playmobil. Or better reallife trains!

[Eilif]

What LEGO said (should be listed here for folks who didn't see the earlier topic)

QUOTE

Our selling costs in Europe and Asia are higher than in the US because of the size of US market and retailers (economies of scale). Furthermore, the US market is by far the most price competitive in the world. These factors combined mean that we have for years priced our products higher in eg Europe than the US. In recent years, the difference has been increased due to the weakening US dollar - but we have consciously decided not to let this (hopefully short term) weakening of the dollar hurt the US consumer. And in order to stay profitable as a company, we cannot decrease our European prices - especially seen in the light of increasing cost pressure on oil, labor etc. Finally, final pricing in the market place is obviously determined by retailers, which is something we cannot and will not influence.

Most folks posting here seem to miss the statement LEGO makes about "economies of scale". The implication LEGO is making is that they are selling alot of product in the USA. Selling more and charging less is how you keep a brand viable. And it is true that there is absolutely tons of competition in the marketplace.

The USA doesn't try to ban other brands like certian other contries. It's an open market, and Coby/Bestlock, MB, and Knex are both putting out a construction product at price points that are much lower, lower and equivalent, respectively. If the US was charging European prices, LEGO simply woudn't sell, and then LEGO would really start losing money. USA prices will rise some, but significant raises in US prices simply are not an option if LEGO wants to remain viable in the USA market.

The suggestion that LEGO is subsidizing "losses" in the USA with European sales is unfounded. The profit margin may be smaller, but there is nothing in the quote from LEGO suggesting that the USA market is some kind of gigantic "loss-leader" for the company.

Of course LEGO could lower it's European prices and accept lower profits, but as long as LEGO continues to sell at it's current prices it is unlikely that european prices will change. Further, as LEGO has only recently returned to profitability, and is by no means "out of the woods" they are unlikely to do anything to damage their bottom line.

LEGO is not a bargain toy, it's a premium toy, and if there is one lesson their recent history has taught us it's that in order to survive, they need to charge what the market will bear.

Edited July 31, 2008 by Eilif

[Deinonychus]

What LEGO said (should be listed here for folks who didn't see the earlier topic)

Most folks posting here seem to miss the statement LEGO makes about "economies of scale". The implication LEGO is making is that they are selling alot of product in the USA. Selling more and charging less is how you keep a brand viable. And it is true that there is absolutely tons of competition in the marketplace.

The USA doesn't try to ban other brands like certian other contries. It's an open market, and Coby/Bestlock, MB, and Knex are both putting out a construction product at price points that are much lower, lower and equivalent, respectively. If the US was charging European prices, LEGO simply woudn't sell, and then LEGO would really start losing money. USA prices will rise some, but significant raises in US prices simply are not an option if LEGO wants to remain viable in the USA market.

The suggestion that LEGO is subsidizing "losses" in the USA with European sales is unfounded. The profit margin may be smaller, but there is nothing in the quote from LEGO suggesting that the USA market is some kind of gigantic "loss-leader" for the company.

Of course LEGO could lower it's European prices and accept lower profits, but as long as LEGO continues to sell at it's current prices it is unlikely that european prices will change. Further, as LEGO has only recently returned to profitability, and is by no means "out of the woods" they are unlikely to do anything to damage their bottom line.

LEGO is not a bargain toy, it's a premium toy, and if there is one lesson their recent history has taught us it's that in order to survive, they need to charge what the market will bear.

God...thank you

The difference between profit and profit margin just doesn't get through to a lot of people. There is no possible way LEGO would be selling in the US for a profit loss and making up for it with higher EU and Australian prices. They'd be crazy to do so and would be loosing money hand-over-fist.

If I recall correctly, from LEGO's annual report, their second largest market is the US. The first being Germany. But even just taking those two markets as an example, the increased profit margin in Germany could never hope to make up for a mass profit loss in the US.

[mandalore]

i live in America and I feel bad for Europeans because TLC refuses to lower their prices and in the USA they are actually raising the prices it`s not as bad as European prices but its still not as cheap as it once was and i assume they are doing the same in Europe another problem i have is wat joey lock said

"If you send these views to Lego.com they would proberbly throw this straight In the rejected pile..."

ive tried posting these things on lego.com but they dont like you saying anything remotely bad about them which really ticks me off. so frankly i think lego should have lower prices everywhere in Europe in america in Australia and in asia or at least stop raising the prices everywhere :)

[Fluyt]

The USA doesn't try to ban other brands like certian other contries. It's an open market, and Coby/Bestlock, MB, and Knex are both putting out a construction product at price points that are much lower, lower and equivalent, respectively. If the US was charging European prices, LEGO simply woudn't sell, and then LEGO would really start losing money. USA prices will rise some, but significant raises in US prices simply are not an option if LEGO wants to remain viable in the USA market.

Europe protects its own market, just like any other country or continent would. There is a lot of competition in Europe as well (we also have megablocks, knex and stuff like that), but most Europeans seem to prefer LEGO, that's why they can raise their prices. But no matter what argument LEGO has (competition, taxes, exchange rates etc.), the sometimes even double (!) prices Europe has to pay when compared to the US, is nowhere near justified. I just cannot believe the difference is caused by the arguments LEGO brings forward, especially when the difference fluctuates very much (sometimes 50% more and sometimes even more than a 100% more). That's just pushing it way to far.

[Joey Lock]

I would just like to point out that did anyone read Bonapartes post?

Im just seeing lots of spelling mistakes and bad language.

Anyway I disagree that Lego are doing it for the competition or they have problems. Come on, Lego is one of the most famous brands in the world..."Oh where having finacial problems..." What a load of old tosh!

I don't we shall be looking forward to a cheap Clone Wars battle pack anytime soon.

[brickzone]

It is somewhat insane that I can purchase from the US a set that has an Irish RRP of €45, and pay a price cheaper than the €23 limit for having to pay import duty, and even with postage from US to Ireland it ends up being €32. If it wasn't for the potential where price is above €23 of having to pay 20% import duty and 21% sales tax, I would buy far more Lego from the US. As it is, the authorities are stricter on items such as electronics - and second-hand toys don't count at all fortunately.

I'm glad prices here are in Euro though, at least you can compare with the rest of the Eurozone and see if you are being ripped off more. It's more awkward for the UK, Denmark, etc. cause they have the complications of having to convert from pound sterling, kroner, etc. The sooner they get into the Eurozone the better, that will make the Eurozone a larger more cohesive market - providing more economies of scale to Lego and anyone else. Unfortunately doesn't look like happening anytime soon.

As for the Euro/Dollar gap - I think anyone expecting that to be short-term is being unduly optimistic.

Edited July 31, 2008 by brickzone

[Front]

I don't know what all the questioning of the price settings are all about.

Look at any other goods, like cameras etc. and the price difference between USA and Europe is exactly the same.

You see the dollar drops, but no company can let their selling price to USA increase at the same amount. If they do, they are won't sell anything. And the USA market is important for many companies.

[Cardinal Brick]

Last time I read Single European Act and Maastricht treaty I discovered that Europe was meant to be a single market! Therefore I rather think that the European market is a tad bigger than the US as is Germany for example as for economies of scale last time I checked my orders from shop@home came from mainland Europe and didn’t come from the UK so you are just treating me like a customer in say Virginia getting my package from another state. We don’t have interstate tariffs in the EU so as far as I can see bar a few exceptions like the UK and Denmark with an added currency we are just like America, different sales taxes but otherwise not much else that’s different.

I can in my local Woolies despite it looking like something from the dark days of the 80’s ever single alternative toy that I seen on my travels in the US, not a huge range but Toys R Us have a good selection, so I can’t see what apart from buying habits make us less competitive. If the toy market is really uncompetitive perhaps it’s time to refer it to the EU commission or whatever your local country’s had ie UK Competition Commission.

I am aware that you can’t set the retailers price but you must give them a guide and anyway you can set your own at a fair level.

Regardless of all thus, the God’s honest truth is I don’t mind paying a bit more. Hell in the UK it’s a way of life really, but that doesn’t justify all those years that you charged the US $19.99 for a Star Wars set and us £19.99, nothing in my mind justifies that and never could. Though maybe from all the unsold Tie Crawlers and AT-STs that recently cluttered the Bluewater store before the sale you’ve learned to be just a little less greedy in the UK market.

[adik_sa_lego]

it's an illustration of the law of supply and demand.

In Europe, there is high demand, even if supply is adequate, this demand drives those prices up.

In the US, there is lower demand and higher supply due to the presence of competitors. Hence, they need to lower their prices.

As for Australia and Asia, I have just come to terms that shipping and customs costs are the ones causing these prices to go way too high.

Edited July 31, 2008 by adik_sa_lego

[Lord Admiral]

It's surprising that Germany is Lego's largest market, and the US is in a close second, despite the US having 2.5 times the population.

Anyway, the drop in value of the USD with respect to the EUR and CAD is very recent, within the order of two or three years. Companies can't simply jack up all of their prices immediately, if they expect to sell anything. And they can't have prices fluctuate with the currencies either. That's just how it is.

So what they have to do is either do a bit of speculation and price according to what they think the average conversion will be during the lifetime of the product, or they do no speculation, and price according to what the market will allow. Lego is doing the latter. It wouldn't hurt if they started unpegging the prices, but the fact that the number before the currency is the same across the board doesn't mean Lego isn't looking at each individual market and trying to sell close to the optimal price point for each market.

Oh, and luxury items do not drive up inflation. The increase of the cost of basic needs (food, fuel, shelter) drives up inflation. If everybody's suddenly poor because of inflation, the market for luxury items will die.

[xzanfr]

I feel that it is misleading to compare u.s. prices with u.k. prices - in the u.k. we have 17.5% tax added to the retail prices for our goods whilst the u.s. tend to exclude the tax in the quoted price as it varies from state to state.

I assume that this is also the case for the european monetary member countries but please correct me, fellow U.S. / Euro AFOLs if I'm wrong

Cheers

Gary

[Snake...SNAKE...SNAAAAKE?!]

Oh Your God

The first official explanation on eurobricks and probably the millionth one ever.

It's simple. People will always complain. you could yell it in thier faces and they turn the other way.

Nice try TLC, but it'll never work.