20 replies to this topic

[jFox]

As the title says, I'm wondering about the price of City sets, and why they seem to be a little on the expensive side.  Over time I've noticed people lean towards $0.10 per part as a good price for sets.  For some licensed sets like Star Wars or Pirates of the Caribbean the price can go up due to licensing fees LEGO has to pay; this makes higher prices for those sets understandable.

But I was looking at some City sets that had interesting pieces and noticed the price seemed higher for a non-licensed set.  For example:

Forest Police Station -- $79.99, 633 pieces, $0.126 per part
Robbers' Hideout -- $39.99, 317 pieces, $0.126 per part
Space Center -- $69.99, 494 pieces, $0.14 per part

Are these sets (or this line of sets) more pricey because they have some uncommon--and more costly--parts?  Or does LEGO price them higher because it's simply smart business; they know they will sell regardless of the price?

(And sorry if this has been discussed before, I looked around but couldn't find a thread)

[tedbeard]

I think it is simply that the days of $0.10 pp average are gone. Prices have risen. In the latest issue of HispaBrick they have an interview with Jørgen Vig Knudstorp who talks a bit about the rising price of raw materials.

I started really getting back into LEGO about a decade ago and the $0.10 pp average was talked about then. Times change, petroleum-based products are not likely to get cheaper.

[sharky]

I feel that sometimes the sets with new molds, large pieces, or high minifigure count (per piece) tend to be a bit higher priced per piece.  Those sets you mention would appear to fall into those categories not to mention the Dino theme.  Of course this is just anecdotal observation on my part.

[jFox]

Oh wow, I hadn't looked at the price on those Dino sets, but they are pretty high.  I suppose you're right, sharky, it's the custom pieces that drive the cost up.  I guess that's why if you look at some of the modular buildings the price-per-part is pretty low in spite of the high piece counts; the types of pieces in those sets is pretty common though (at least it looks that way to me).

[fred67]

The main thing that drives the prices up is demand.  Honestly.  We keep trying to figure it out, but it's really quite simple - it's not just licensing, it's not just the cost of oil or shipping, it's what their marketing research tells them will maximize their profit.  They are a profit driven company, and that's not a bad word and it doesn't make them a bad company - their profit motives drive them to keep delivering new and great sets.

I will throw this out there as an example: the LICENSED Star Wars Clone Trooper Battle pack with a speeder-bike and four troopers is $12.99; the similar Mandalorian BP is the same; I could name more, but you get the idea.

Now the city accessory set 853378, with four fire fighters and little else, is $14.99 (of course, it's not even available anymore... it was only around for a couple of months in the U.S.).

So $2.00 more for the same number of unlicensed figures?  I don't know how they come up with that price... but it has little to do with licensing or cost of materials, and there was nothing particularly interesting or new.

Again, don't get me wrong - I like LEGO; if I had a problem with the prices or the fact that LEGO tries to maximize how much they get from us, I wouldn't buy it.  Profit is not an evil word, it's what drives companies to produce... but if you want to know why the prices go up faster than inflation can explain, it's because LEGO charges a premium and has a relatively high (very high, in fact) profit margin - even in the U.S..  God bless them... keep going, TLG, the more successful you are, the more you'll bring us and the longer you'll be around.

EDIT: I wanted to add this, as well... TLG has a monopoly on LEGO sets.  That sounds dumb, but it's true - and what pulled them back from "the abyss" (on the verge of bankruptcy) is partially the fact they realized that they had the best building brick on the market and shouldn't be ashamed to ask a premium for it.  Their profit margins soared, and so did their actual profits - because people who knew bought LEGO, despite the price increases, because it was still more worth it than other brands.

Edited by fred67, 18 April 2012 - 04:25 AM.

[Clone O'Patra]

Have you looked at the recent set of $20 vehicles?  I'm talking about 4431-4435.  All of these sets have over 200 parts, besides for 4431, which has 'only' 199.  4208, another $20 set, amazingly has 243 pieces.  4206 is $30 for 297.  4205, $40, 403 pieces.  4430, $50, 522 pieces.  These are excellent price per part ratios.  You're picking and choosing.  

Not all sets make the nonexistent ideal of 10 cents per piece.  Ten cents per piece was never really a thing; look back to sets in the '80s and '90s and you won't see it there.  All of those Castles and Space sets and Pirate ships were quite expensive with not so many pieces because of big wall panels and baseplates and who knows what else.  City is not particularly expensive.  Compared with other themes, City has far more 'nonsensical magic ratio' sets.

I can address the figure pack situation as well.  It's not fair to compare this figure pack to the Star Wars battlepacks, which are normal sets.  Other themes like Pirates and Kingdoms had similar blister-packed battle packs, for the same $15 price.  I think it's the blister-packing that drives up the price, just like the Ninjago spinners which are $10 for a spinner, a minifigure, and a handful of weapons.  The SW battlepacks, however, are not influenced by the cost of blisterpacking.

[Cara]

Being sold in the LEGO shops and online only, those firefighter blister packs probably had a lot smaller production run than the SW battlepacks and so cost more to produce. Now if only they had have produced them in the same format as the SW battle packs with the 4 guys, a bit bigger tree and the flame that they already had...

[train_nut]

It's because of "Quantitive Easing" or the US printing money in another words. The value of one US dollar is not what it was two years ago.

[mrklaw]

The big city sets have a lot more plastic in them. Lego themselves talk about keeping things affordable in that core range, hence the use of cheaper panels rather than bricks. But you can't get away from the physical size of the large playsets, and large baseplates

[fred67]

From this report,, from 2007 to 2010, profit margins nearly doubled.  12.8% in 2007, 23.2% in 2010.

The profit margin is the real value you want to look at when trying to compare apples to apples.  They will offer up every excuse in the book - I'm telling you, the volume of plastic in an average LEGO set needs a relatively small amount of petroleum, for example - it's a tiny fraction of the total price.  You can double the cost of petroleum, and it only very slightly affects the manufacturing cost.

And again, I'm not belittling TLG - not only do they have every right to be a successful profit driven company, but the more successful they are, the more products we get.  I know it's hard for some people to get over the fact their favored company is profit driven, the thing is to realize that profits are not evil.  But I stand by my assertion that the biggest cost increase to consumers of LEGO over the past few years is increased profit margin, plain and simple.  In the U.S., CMF prices went from $2.00 to $3.00 from one series to another.  I know people outside the U.S. will whine about us still getting the best prices, but that's not the issue (and I feel your pain) - the issue is that increase is 100% profit due to the success of the series.  Even if their profit was ZERO before the price increase, their profit margin is 33% after it... and you have to think that it certainly wasn't zero before.

I want to also state that I never felt price per piece made a valid comparison.  Would you pay the same for 500 1x1 plates as 500 2x4 bricks?  It's a wildly inaccurate way to determine the value of a LEGO set; it's more of a starting point, and after you have to figure in the value of minifigures, and consider the various types of parts you get in the set.  Even then it's still just a "ballpark" valuation.

The bottom line here, despite any bickering we might have about it, the value of a LEGO set is entirely up to you - it's either worth it or it's not.  I like discussing issues like this (I'm definitely into politics and the economy and trying to understand how businesses work), so I hope I'm not rubbing people the wrong way... businesses are not evil; they create and sell products we want and need, and we're free to buy from competitors (or not all in most cases).

[fyrmedhatt]

fred67, on 18 April 2012 - 08:06 PM, said:

From this report,, from 2007 to 2010, profit margins nearly doubled.  12.8% in 2007, 23.2% in 2010.

The profit margin is the real value you want to look at when trying to compare apples to apples.  They will offer up every excuse in the book - I'm telling you, the volume of plastic in an average LEGO set needs a relatively small amount of petroleum, for example - it's a tiny fraction of the total price.  You can double the cost of petroleum, and it only very slightly affects the manufacturing cost.

And again, I'm not belittling TLG - not only do they have every right to be a successful profit driven company, but the more successful they are, the more products we get.  I know it's hard for some people to get over the fact their favored company is profit driven, the thing is to realize that profits are not evil.  But I stand by my assertion that the biggest cost increase to consumers of LEGO over the past few years is increased profit margin, plain and simple.  In the U.S., CMF prices went from $2.00 to $3.00 from one series to another.  I know people outside the U.S. will whine about us still getting the best prices, but that's not the issue (and I feel your pain) - the issue is that increase is 100% profit due to the success of the series.  Even if their profit was ZERO before the price increase, their profit margin is 33% after it... and you have to think that it certainly wasn't zero before.

So well said! I agree that a great amount of the increase in prices is the increase in profit margin. It simply means that Lego is a healthy company that has money to expand and try out new and exciting products, as well as having more money for that rainy day.


As for the City sets being expensive, it has the same reason that Ninjago is expensive: popularity. Lego City is on of their most in demand lines and is always a big seller, which means that they can charge more for those sets compared to what they charge for themes that Lego is just trying out, like Alien Conquest or Pharao's Quest. Last year the highest grossing set Lego had was the City Police Station, showing that City is something lots of parents buy for their kids, and it's something kids really want, so why not make them pay for it.

Some city sets are also more expensive due to large parts; many buildings are constructed with large panels and roof wedges, as in the case of last year's Marina, which had a notoriously bad parts per piece ratio.

[jFox]

fred67, on 18 April 2012 - 08:06 PM, said:

From this report,, from 2007 to 2010, profit margins nearly doubled. 12.8% in 2007, 23.2% in 2010.

The profit margin is the real value you want to look at when trying to compare apples to apples. They will offer up every excuse in the book - I'm telling you, the volume of plastic in an average LEGO set needs a relatively small amount of petroleum, for example - it's a tiny fraction of the total price. You can double the cost of petroleum, and it only very slightly affects the manufacturing cost.

And again, I'm not belittling TLG - not only do they have every right to be a successful profit driven company, but the more successful they are, the more products we get. I know it's hard for some people to get over the fact their favored company is profit driven, the thing is to realize that profits are not evil. But I stand by my assertion that the biggest cost increase to consumers of LEGO over the past few years is increased profit margin, plain and simple. In the U.S., CMF prices went from $2.00 to $3.00 from one series to another. I know people outside the U.S. will whine about us still getting the best prices, but that's not the issue (and I feel your pain) - the issue is that increase is 100% profit due to the success of the series. Even if their profit was ZERO before the price increase, their profit margin is 33% after it... and you have to think that it certainly wasn't zero before.

I want to also state that I never felt price per piece made a valid comparison. Would you pay the same for 500 1x1 plates as 500 2x4 bricks? It's a wildly inaccurate way to determine the value of a LEGO set; it's more of a starting point, and after you have to figure in the value of minifigures, and consider the various types of parts you get in the set. Even then it's still just a "ballpark" valuation.

The bottom line here, despite any bickering we might have about it, the value of a LEGO set is entirely up to you - it's either worth it or it's not. I like discussing issues like this (I'm definitely into politics and the economy and trying to understand how businesses work), so I hope I'm not rubbing people the wrong way... businesses are not evil; they create and sell products we want and need, and we're free to buy from competitors (or not all in most cases).

Thanks for that link! While I may not be that into economics in general, I do still like seeing "under the hood" about things that interest me (such as LEGO). And I hope my original post didn't come across as playing the victim card, like a "Woe is me, why is LEGO so expensive?!" I know this isn't the cheapest hobby in the world, and the price doesn't really bother me. I was originally just curious what made a line like the City sets seem to be more expensive than some others. I've started to get a "feel" for the Star Wars and Castle/Kingdoms sets and their price ranges (they're mostly what I'm interest in). For Star Wars, the answer to a question of cost always seemed to be "licensing fees, licensing fees!" When I started to look at City I was surprised a bit by the difference. But like some others have pointed out not all lines (or sets) are created equal. In some cases it's the cost of the parts, but in some cases it's just due to popularity. Sell the product for the as much as you can, it's just business.

Like you said, it comes down to personal preference on the value of a set. I don't begrudge LEGO when they charge (what I think) is too much for a set; if it's not a good value I just won't buy it. Like the set 10215, Obi-Wan's Jedi Starfighter. I love it, think it's a beautiful set. But it's original price of $100 for the piece count was (to me) a little ridiculous, so I didn't buy it until it went on sale before it was discontinued.

Edited by jFox, 18 April 2012 - 10:23 PM.

[Callwork]

jFox, on 18 April 2012 - 10:02 PM, said:

Thanks for that link! While I may not be that into economics in general, I do still like seeing "under the hood" about things that interest me (such as LEGO). And I hope my original post didn't come across as playing the victim card, like a "Woe is me, why is LEGO so expensive?!" I know this isn't the cheapest hobby in the world, and the price doesn't really bother me. I was originally just curious what made a line like the City sets seem to be more expensive than some others. I've started to get a "feel" for the Star Wars and Castle/Kingdoms sets and their price ranges (they're mostly what I'm interest in). For Star Wars, the answer to a question of cost always seemed to be "licensing fees, licensing fees!" When I started to look at City I was surprised a bit by the difference. But like some others have pointed out not all lines (or sets) are created equal. In some cases it's the cost of the parts, but in some cases it's just due to popularity. Sell the product for the as much as you can, it's just business.

Like you said, it comes down to personal preference on the value of a set. I don't begrudge LEGO when they charge (what I think) is too much for a set; if it's not a good value I just won't buy it. Like the set 10215, Obi-Wan's Jedi Starfighter. I love it, think it's a beautiful set. But it's original price of $100 for the piece count was (to me) a little ridiculous, so I didn't buy it until it went on sale before it was discontinued.

Lego sets are very expensive especially here in the philippines. I discovered enlighten bricks. Check out my comparison review here of enlighten bricks

Edited by Ricecracker, 22 April 2012 - 02:08 AM.
removed oversize image

[Super Goblin]

Those look like bootleg Lego's to me and I wouldn't support them.

[Ricecracker]

Callwork, on 21 April 2012 - 09:59 PM, said:

Lego sets are very expensive especially here in the philippines. I discovered enlighten bricks. Check out my comparison review here of enlighten bricks

Hi there. Welcome to Eurobricks! Why don't you introduce yourself in the Hello, My Name is... forum so we can get to know you a little better?

While there are a few reviews here of Clone Brand sets, Eurobricks is a LEGO-related forum. Additionally, your image was larger than 800x600, so I've removed it for now.

[Tragic Banjo]

This topic piqued my curiosity on pricing standards across entire themes, so I decided to do a little math. Taken all together, the City sets released so far this year (not including the summer wave sets, though I might dig through the Toy Fair pictures later for their prices and piece counts) have an average price per piece of just under 10.9 cents. For comparison, Super Heroes sets come in at an average of just under 10.7 cents per piece, the Star Wars sets released so far this year average 12.7, and Dino is just over 14.1 cents per piece. Architecture, widely considered an overpriced theme, averages 11.5 cents per piece, and Creator, known for being a good value, has averaged a little over 9.1 cents per piece so far this year.

(And of course, this is all with the caveat that price per piece is just a sort of jumping-off point in determining a set's value for the money.)

Now, there are a whole bunch of factors that contribute to these differences - licensing, unique molds, target age group, and how long the theme has been around, or plans to be around, among them. Looking at City in comparison to some other themes can help us get a sense of what it is about each line that can determine its pricing. I'd wager that one of the biggest factors for City is that it is an "evergreen" theme with a pretty well established base of buyers, meaning it's less of a risk to charge a little more. The other themes of course have their own various aspects that affect their cost, but that's a discussion for another thread.

Edited by Tragic Banjo, 23 April 2012 - 05:04 PM.

[Xyver]

Here in Australia, the City sets are the cheap ones.

Take for example the new releases this year, set 4431-Ambulance (City) and 9490-Droid Escape (Star Wars). Both of these sets RRP for $19.99 in US, but here, the Ambulance is 29.99 (fair enough) but the Droid Escape is 39.99. That's an extra $10 for nothing. Plus the piece count is 199-137 in favour of the Ambulance, so the price per piece for the Droid Escape is 29c which is outrageous. I got a real shock when I bought that one as there was no price label for it, but my daughter would have killed me if I put it back at the checkout once I realised the price.

[NiceMarmot]

I think the number one reason a set is expensive is because TLG thinks they can charge a higher price for it!

In general though, I believe that unique, rare, and new parts make a set more expensive, as do larger pieces.  I also suspect that some themes and/or sets are more likely to be bought by older children with their own (allowance) money (e.g. Harry Potter), whereas City is probably more bought by parents for their younger kids, and they might not be as price-sensitive as a pre-teen with their limited funds, especially for larger sets.

Here's a good discussion on LEGO set costs on FBTB.  In a nutshell, the actual cost of the ABS is practically negligible.  The mold is expensive (from $5K - $100K), but for common pieces can be amortized over a large run (>$100mm pieces, over several years). But for parts that won't be used very much, the mold could contribute significantly to the part cost.  A $20,000 mold amortized over 100,000 units is $0.20 per unit -- that's a lot more than the common $0.10 target.

How many sets sell over 100,000 units? From an interview on Gizmodo in 2008, TLG sells 7 sets per second. That's 220 million sets per year. Currently they sell about 8 sets per second; or about 250 million sets per year. From that interview (and a few other sources), it appears that the number of sets per year is in the 180-200 range; let's assume 200, as we want sets-being-made, not just sets-introduced.  So the average set sells somewhere around 1.25 million units per year. Given a two year run, the amortized mold cost for that special, unique piece is only $0.01. Not much. You'd have to have a lot of unique/rare pieces in a set to justify a real price bump.

Revenue in 2011 was 18.731 billion DKK, of which DKK 18.507 billion was for goods (not licensing), or $3.461 billion. That's only $13.73 average per set. At 36 billion bricks per year, the average set sold has only 143 parts!

In 2011, they break out operating expenses as follows:

• DKK 3.1b - raw materials and consumables (packaging?). This is 17% of goods revenue; not a negligible amount, but only 11% of retail price (see below).
  
• DKK 3.4b - employee expenses.  18.4% of goods revenue, or 12% of retail price.
  
• DKK 0.64b - depreciation and amortization
  
• DKK 1.25b - license and royalty expense, most of which is paid to KIRKBI, the family investment firm, for use of the LEGO brand. TLG doesn't actually own the LEGO brand; KIRKBI does. Of course, KIRKBI owns 75% of TLG...
  
• DKK 4.66b - "other external expenses", by which I suppose they mean other suppliers, shipping, utilities, etc?

Note that TLG lists the "production costs" as DKK 5.519 billion, which probably includes the DKK 3.1b materials, DKK 1.1b of employee expense, DKK 0.441b of depreciation & amortization, and about DKK 0.9b of those license and royalty and "other external expenses".  That's about 30% of the goods revenue, or just over 19% of the retail price.  Let's guess that 3/4 of the licensing/royalties are to KIRKBI, and therefore only 1/4 (DKK 0.313b) are 'production-related' (i.e., licensed themes).  Then that 0.9b breaks into DKK 0.313b of L&R and DKK 0.587b of "other external expenses".

BTW, my guess is that the mold costs are in that depreciation and amortization, as they would be capitalized and then depreciated over their effective lifetime.  R&D costs were DKK 335 million, or $62.6 million. I'm guessing this covers the designers' costs, and any industrial R&D to improve manufacturing.

So, assuming a 35% retail margin, the average set is sold at retail for $21.12. That's $0.148 per part; I think it's skewed higher because this includes non-sets like magnets, CMFs, keychains, etc, which are pricier per part than ordinary sets. Our average set's 143 parts cost $2.33 in materials and consumables, or $0.016 per part (and that includes packaging).  Given that, the cost of ABS could have an impact, but not much more than probably 5% of a set's price. I mean, how much could it go up, or how much could a few big pieces (DINO) skew the raw materials cost?  I'm guessing that bigger pieces might have a bigger impact on the packaging cost than the ABS.  Each piece's total production costs are only $0.028 -- that includes materials, packaging, production labor, utilities, shipping, etc.

So here's the breakdown of the retail price, based on a 35% retail margin (may not add up due to rounding):

• 35% - retailer's margin
  
• 15% - TLG profit!
  
• 14% - non-production-related "other external expenses"
  
• 11% - raw materials and consumables, probably including packaging
  
• 8% - non-production TLG labor (sales, admin, marketing, HR, finance, IT, etc)
  
• 5% - taxes
  
• 4% - production TLG labor
  
• 4% - license and royalty expense, some of which is basically profit to the family, the rest is probably for licensed themes
  
• 2% - production-related "other external expenses", probably utilities, suppliers, shipping, etc.
  
• 2% - depreciation and amortization

Always nice when one of the top two items on the list is your profit!    So why would a set be more expensive?  The biggest things that stand out are: 1) giving the retailer a bigger markup, perhaps because the set isn't as attractive to the retailer, 2) TLG profit, or they think they can charge more because it will still sell, 3) materials and/or packaging is more expensive (I'm guessing packaging is more of a factor here).

Interestingly, I don't see license fees as adding significantly to TLG's costs for a set. If you estimate that half their sales are licensed themes, and even if 1/2 the L&R expense is for licensing themes (as opposed to KIRKBI), then theme license costs only add 4% to the retail price of a licensed set as opposed to a non-licensed set (and I'll be it's actually lower). I suspect that on average, licensed sets are more than 4% more expensive than non-licensed sets (per part), so the rest must be pure profit for TLG and the retailer. No wonder we're seeing more licensed themes -- they're more profitable than non-licensed.

OK, I got totally carried away with this. I'm sure that's way more analysis than you really wanted to know...

[gotoAndLego]

tedbeard, on 17 April 2012 - 04:40 PM, said:

I think it is simply that the days of $0.10 pp average are gone. Prices have risen. In the latest issue of HispaBrick they have an interview with Jørgen Vig Knudstorp who talks a bit about the rising price of raw materials.

I started really getting back into LEGO about a decade ago and the $0.10 pp average was talked about then. Times change, petroleum-based products are not likely to get cheaper.

I disagree. Ther are quite a few sets that either match or come under the $0.10 barrier: All the Modulars & Mini Modulars, Maersk Train, Tower Bridge, VW Camper, almost all the Creator sets, etc. I just think its a case of town sets having more specialized/expensive parts.

[NiceMarmot]

gotoAndLego, on 23 April 2012 - 08:32 PM, said:

I disagree. Ther are quite a few sets that either match or come under the $0.10 barrier: All the Modulars & Mini Modulars, Maersk Train, Tower Bridge, VW Camper, almost all the Creator sets, etc. I just think its a case of town sets having more specialized/expensive parts.

I noticed that larger sets, such as most of the ones you mention, usually have a lower price-per-piece ratio.  I think this is because 1) a higher price-per-piece ratio would make them too expensive and they wouldn't sell well, 2) packaging and distribution costs are probably lower per piece on larger sets, and 3) some costs are fixed and not dependent on the number of pieces (e.g. marketing, back office, etc).

Edited by NiceMarmot, 23 April 2012 - 10:08 PM.

[gotoAndLego]

NiceMarmot, on 23 April 2012 - 09:55 PM, said:

I noticed that larger sets, such as most of the ones you mention, usually have a lower price-per-piece ratio.  I think this is because 1) a higher price-per-piece ratio would make them too expensive and they wouldn't sell well, 2) packaging and distribution costs are probably lower per piece on larger sets, and 3) some costs are fixed and not dependent on the number of pieces (e.g. marketing, back office, etc).

I don't think #1 is the case because otherwise instead of losing a little money on a small set Lego would be loosing a lot of money on large set. I honestly think the sets which are under the $0.10per barrier don't have many expensive parts. They are mostly regular bricks. #2 is possible because, except for the creator sets, they are only at Lego stores or online. No distribution costs to regular toy shops. #3 seems strange because the development costs should be higher on Creators due to designers having to develop alternate models which use the same parts; that should make the cost-to-develop higher. Aside from development the other fixed costs wouldn't factor in it because they are the same across the board.

Regardless, there are many sets which are either at or under the $0.10 barrier so there is no reason to think that trend will disappear.

Edited by gotoAndLego, 24 April 2012 - 07:15 PM.