Would pay 3 times the price for LEGOs if they raised the price?

[johnsocal]

The Galaxy Explorer #497 sold for $32 (USD$) in 1979 and when you adjust that price for inflation it equals $91 (USD$) in 2007. This set wasn't cheap by todays standards since it only had 325 pcs. [ http://peeron.com/inv/sets/497-1 ] 10 cents in 1979 is equal to 30 cents in 2007 so for LEGO to have the similar profit margins like they had in the late 1970's they would need to charge nearly 3 times more for sets then they do today. Sure LEGO can cut costs and outsource what they can, but those things only mask the reality that LEGO has been experiencing deflationary retail pricing pressure on a global scale while operating costs have continued to rise.

Using that as just one example you can see that LEGOs were far more profitable in the past then they are for the LEGO Group today. When you consider the LEGO Group makes less money per set today in conjunction with a more fractured retail toy environment and its no wonder LEGO struggles financially.

What could give LEGO improved profitability per set that exlcude cost cutting measures like outsourcing and moving MFG to countries with cheaper labor (which they are already doing)?

1. Good designs that inspire young and old alike are always the best solution. LEGO must simplify their own iconic brands and prevent market confusion by labeling them simply as LEGO City, LEGO Castle, LEGO Space, LEGO Pirates, LEGO Racers, and LEGO Robots. Names like 'Mars Mission', 'Knights Kingdom', 'Exo-Force' and even 'MindStorms' dilute the LEGO brand. LEGO can even merge some of their own brands together such as making 'SPACE CITY', 'SPACE RACERS' and even 'SPACE PIRATES' who will cause havoc for residents of 'SPACE CITY'.

2. Continue to license other (non-LEGO) brands (like Star Wars) that have a loyal following and are willing to pay a premium.

3. Continue to expand S@H's internet presence with more internet driven advertising on Google and etc.

4. Continue to open LEGO stores in malls with heavy traffic since they also make great forms of advertising. Even though LEGO owned and operated stores have better profit margins since they bypass the middle-man (like a Wal-mart or TRU) they still don't have anywhere near the annual sales volume of a Wal-mart or TRU which brings me to my 5th suggestion.

5. Franchise LEGO stores in a similar way as fast food restaurants like Subway.

* Exclaimer* - I realize that many countries around the world pay far more for LEGOs than the USA.

[Grrr]

The other thing to remember is that the cost of production (and thereby the balance left for profit) is directly dependant on the price of OIL. Bear in mind that plastic is made out of oil, and that to get these wonderful boxes which are half full of air to us; they need oil.

As we all know - oil is a scarce product, and overall; the price can and will only go up in the long term (though there will definately be ups and downs).

In all reality, development costs, and the administration/wages for their 5000 odd staff can't be that high compared to the actual cost of the plastic and paper that make up the sets - and the transport costs.

Unfortunately I can't really see any way to get plastic/paper any cheap to TLC - I wonder if somehow they can recieve other's recyclable plastics and use those - though I doubt this is possible with the same quality levels.

Logistics and transport definately show room for improvement. If I use S@H to get lego here in NZ, I pay near half the price of the set in freight - air freight - even though there is a central warehouse here in NZ that distributes lego to toystores - one has to wonder why they can't send it directly from there - and have the lego brought in by boat (which is a lot cheaper and more environmentally friendly) - as well as making the product cheaper and thereby more desirable. They could even take some of the savings and put them straight into their profit pot.

To be honest I doubt we will ever see lego again as it was during the GKC era - but we can wait and hope. I do believe that we need to go back to the unified lego system (miniland, legoland, lego system), and have the product brand rebuild itself rather then compete against itself.

I have also seen how godawful lego's distribution here in NZ is at the moment - it is hard to find any particular sets, shops run low on stock, and don't stock a complete range - as a result many have stopped stocking it completely.

Worse still, with the cost cuts made in packaging, the lego sets are often shop soiled and look worse then ever - I now frequently see large lego sets ducttaped shut and in the bargain bin. I would suggest going back to the smaller packaging of the past, which will save drastically in freight costs, and also retain more structural integrity.

Instead of making the boxes appeal due to their enormous size (only to disappoint when they are found half empty), I would suggest going back to the large models that used to be in every store - these are a lot better then any box art will ever be - particularly when motorized and well setup.

Overall however - I do feel that the core product quality is this year finally returning to a level that it was some time ago, sets with high part counts (particularly of basic elements), and good solid model design. I do feel that Lego is moving on from the issues after GKC's death - overdiversification (how many times have they stung themselves on the girls' market), over marketing, and bad design decisions.

[johnsocal]

Just as LEGO RACERS includes everything from small $10 sets up to an expensive $250 RC car, 'LEGO ROBOTS' could be the same thing. New 'LEGO ROBOTS' would offer everything form basic little $10 droids and bots that dont have any motors and batteries and then larger sets with more features. An RC robot that does not require programing or a computer could be offered for around $99 while the current Mindstorm NXT set would become 'LEGO ROBOTS NXT' for their top model.

There's a logical reason why premium brands like BMW, Cadillac, Mercedes, and etc use alpha-numeric names like 7 series, SRX, or S-class because all those alpha numeric names require you to use their brand name prior (such as 'BMW' 7-series, 'Cadillac' SRX, or 'Mercedes' S-Class). Doing this requires the consumer to emphasize the brand (BMW) and not the current model (7 series) since particular models can come and go but the brand must remain.

While using generic terms like ROBOTS, SPACE, CASTLE, PIRATES, CITY and RACERS isn't exactly the same as using alpha-numeric names. This generic terminology would require a person to use the 'LEGO' brand before the generic term and therefore promote the 'LEGO' brand in every mention.

[phoinix]

the "LEGO" brand sure needs promoting..

during the holidays i called a few toy shops to ask if they have lego in their store...

most of them said yes and i was horrified to discover that they didnt have any lego..

they had look-alikes...bad bad clones...(a lot cheaper than lego)

so lego tends now to be the name for any brick build toy

and there are a lot of them out-there!

so the lego brand needs to reclaim its name and originality!

[mutley777]

Well if you live in europe the chances are that you are already paying twice the US price. *n*

[johnsocal]

Well if you live in europe the chances are that you are already paying twice the US price. *n*

I wonder if the big changes LEGO is making will help bring Europes prices down closer to what Americans are paying or if US prices will start to climb towards Euro prices. I guess prices in both countries could go up or even go down, but things could just stay as they are, |-/

[highlandcattle]

I wonder if the big changes LEGO is making will help bring Europes prices down closer to what Americans are paying or if US prices will start to climb towards Euro prices. I guess prices in both countries could go up or even go down, but things could just stay as they are, |-/

You also have to realise that americans generally make less money then us europeans. It's only logical that every thing is cheaper overthere

[Chuck]

You also have to realise that americans generally make less money then us europeans. It's only logical that every thing is cheaper overthere

You Europeans also have better hygene, <-spelling, and culture than us Americans :-P

-l2k-

[larry marak]

I suspect moving the plant to Mexico will hold prices down for some time. Mexican labor is cheap, about $5.50 per day for a factory job, Mexico is a net petroleum exporter, so oil is cheaper for Mexican factories. And neither Mexico nor the U.S. use value added taxes, which prevents one form of price inflation.

On the other hand, Mexico is not that far from civil war at the moment.

A lot of the general shortage of Lego is doubtless due to the factory move. Lego's competitors, MegaBrands, Best-Lock and now K'nex (yes, K'nex is now making technic blocks, plates, and adapter pins to make their system cross compatible with Lego) are not experienceing stock shortage at the movement and are getting better exposure due to the current Lego shortage.