TLG's disappointing 2017 financial performance

[Fuppylodders]

I've noticed my Lego urge has considerably dropped, and I'm in the best position I've ever been to afford whatever Lego I feel like buying. The problem is for me, there is now too much choice. Star wars used to be my thing, but the Disney tax on certain sets is just ludicrous while the sets are becoming more about minifigs and small minibuilds which have no substance or using as many pieces possible on small vehicles and whacking the prices up, additionally that all the spammage of new sets just look like half-complete sets, and don't mean anything to me even after having watched the new films that I find it too easy to stop buying SW altogether. I'm just all about the UCS sets now. I have all the older ships I want, and they don't venture out to any new 'older' stuff so I'm happy with what I have. 

My tastes have changed though. I bought the ninjago movie dragon mech, and recently the ucs hulkbuster and garmadon mech because I think they're nailing the substantial size, detailing, proportions and awe-inspiring overall aesthetics of them while having a very good price value. 

I'm also now in the modulars and creator fairground stuff. 

All stuff which is few and far between, so less taxing on my wallet but significant in every aspect (size, piece, detail etc)  enough to justify the wait between sets. 

I did buy all of the TLBM sets, still had them all boxed. But I came to realise that while they were nice enough sets, that's just a crap load of Lego that I bought simply because it touched an interest and I could afford to, so, why not? Staring at the pile of them, I realised I'd easily do that for the next wave, and probably the next theme that perks my interest. Then I realised enough was enough, I had bought more than I actually cared for really wanting because of actually liking everything about the set. It became about feeling the need to have the entire collection regardless if it was good value, even if I wasn't keen on the set. 

So I sold nearly the lot. I kept 2 sets. And those are the 2 sets I'd have only bought had I only been able to afford one or 2 sets. 

I like a lot of other sets but damn, I only have so much space available that I have to restrict buying not because I can't afford them, but because there are just too many things/themes out there. So strangely, because there is more choice, I'm pulling back even more and simply not buying, or just choosing to stick to a few regular slow releases (modulars). I feel swamped, and dislike the commercialisation of the licenced themes detracting from what Lego used to be.

I actually liked nexo knights (only bought one small mini figure power up set) for the creativeness and in-house theme of space castle, I'm kind of gutted I didn't buy any as I like space sets and could have enjoyed making my own from the pieces. The figs were also really good. But, I was swamped by so much other choice of other things, that ultimately it went elsewhere which I ended up regretting and selling anyway. 

For me personally, I'd like them to dial back the licenced themes and add more in house stuff. (I loved elves too, with the dragons, but sold them because storage space became a premium) 

Edited March 24, 2018 by Fuppylodders

[zoth33]

On 3/22/2018 at 1:16 PM, koalayummies said:

That's actually not the root of the reason why, it has already been discussed at length in this thread.

Simplified cliff notes version: Private equity, obtain cheap credit, acquire profitable but slow-growth company (like TRU), force purchased company to pay for majority of its own acquisition to private equity with loans, saddle it with debt, cut costs everywhere making company even less successful, fire people, short term profits, take fee payments on the debt, ~40% chance the leveraged buyout fails, move on to the next. https://www.rollingstone.com/politics/news/why-private-equity-firms-like-bain-really-are-the-worst-of-capitalism-20120523

Not smartphones. Not internet sales. Not Amazon or Walmart or kids not wanting toys.

Yeah I know TRU has made alot of mistakes and its not just amazon sending them under.  I was commenting more on the fact that people are worried about lego sales because TRU is going under.  I think lego will be fine.  Looks like buying more lego online for me.  

[Faefrost]

9 hours ago, Fuppylodders said:

I've noticed my Lego urge has considerably dropped, and I'm in the best position I've ever been to afford whatever Lego I feel like buying. The problem is for me, there is now too much choice. Star wars used to be my thing, but the Disney tax on certain sets is just ludicrous while the sets are becoming more about minifigs and small minibuilds which have no substance or using as many pieces possible on small vehicles and whacking the prices up, additionally that all the spammage of new sets just look like half-complete sets, and don't mean anything to me even after having watched the new films that I find it too easy to stop buying SW altogether. I'm just all about the UCS sets now. I have all the older ships I want, and they don't venture out to any new 'older' stuff so I'm happy with what I have. 

My tastes have changed though. I bought the ninjago movie dragon mech, and recently the ucs hulkbuster and garmadon mech because I think they're nailing the substantial size, detailing, proportions and awe-inspiring overall aesthetics of them while having a very good price value. 

I'm also now in the modulars and creator fairground stuff. 

All stuff which is few and far between, so less taxing on my wallet but significant in every aspect (size, piece, detail etc)  enough to justify the wait between sets. 

I did buy all of the TLBM sets, still had them all boxed. But I came to realise that while they were nice enough sets, that's just a crap load of Lego that I bought simply because it touched an interest and I could afford to, so, why not? Staring at the pile of them, I realised I'd easily do that for the next wave, and probably the next theme that perks my interest. Then I realised enough was enough, I had bought more than I actually cared for really wanting because of actually liking everything about the set. It became about feeling the need to have the entire collection regardless if it was good value, even if I wasn't keen on the set. 

So I sold nearly the lot. I kept 2 sets. And those are the 2 sets I'd have only bought had I only been able to afford one or 2 sets. 

I like a lot of other sets but damn, I only have so much space available that I have to restrict buying not because I can't afford them, but because there are just too many things/themes out there. So strangely, because there is more choice, I'm pulling back even more and simply not buying, or just choosing to stick to a few regular slow releases (modulars). I feel swamped, and dislike the commercialisation of the licenced themes detracting from what Lego used to be.

I actually liked nexo knights (only bought one small mini figure power up set) for the creativeness and in-house theme of space castle, I'm kind of gutted I didn't buy any as I like space sets and could have enjoyed making my own from the pieces. The figs were also really good. But, I was swamped by so much other choice of other things, that ultimately it went elsewhere which I ended up regretting and selling anyway. 

For me personally, I'd like them to dial back the licenced themes and add more in house stuff. (I loved elves too, with the dragons, but sold them because storage space became a premium) 

What you describe is actually a well known marketing effect. We discussed back at the beginning of the thread. Too much choice starts to cannibalize your sales. It's what leads to niche market crashes. The 1980's Video Game crash was caused by it. As was the 90's comic crash. The marketspace becomes so cluttered with product that the consumer cannot tell the good from the bad, has trouble making a clear decision and just walks away. Ray Krock (sp?) documented this pretty well back in the early days of McDonalds. It's why McDonalds always keeps it's menu as simple as possible. Whenever they start getting creative sales tank. Too much choice = consumer confusion and apathy. Lego has long gone through cycles of suffering from too much choice and cleaning up their operation to avoid it. They are reaching peak cluttered shelves once again.

42 minutes ago, zoth33 said:

Yeah I know TRU has made alot of mistakes and its not just amazon sending them under.  I was commenting more on the fact that people are worried about lego sales because TRU is going under.  I think lego will be fine.  Looks like buying more lego online for me.  

Lego will be fine because Lego is the best positioned of the toymakers to ride it out. They diversified their sales channel years ago. Plus they started cutting back TRU's credit lines limiting their exposure. Which is why Lego was only hit for $34 million when they filed for Bankruptcy while Hasbro has twice that and Mattel is on the hook for $168 million. To put it in perspective the company that makes Hatchimals has almost twice the outstanding (and now uncollectable) TRU debt than Lego. 

[ShaydDeGrai]

On March 25, 2018 at 12:28 AM, Faefrost said:

Lego will be fine because Lego is the best positioned of the toymakers to ride it out. They diversified their sales channel years ago. (snip)

While I very much agree with this, I think there will still be consequences, particularly in the realm of entry-level impulse sales.  Toys R Us was a great venue for buying something when you weren't sure what you wanted (or in the case of Aunts, Uncles and Grandparents, didn't quite know what Johnny or Janie would like) or (speaking as the father of a young, strong willed child) just needed to buy a quick stocking stuffer to trade for a quiet car ride home.  For some people, (myself included) these impulse buys become the gateway drug for discovering Lego in a world increasingly obsessed with virtual, screen-based entertainment.  Several million bricks ago, I came out of my dark ages because of an impulse buy at TRU.  My niece got into Lego because her mother took her into a TRU to buy a doll and she (the kid) decided to get a LEGO kit instead.  Granted this is just anecdotal evidence based on two data points, but my gut tells me that we can't be the only ones who ended up embracing the hobby due to a serendipitous find when we weren't looking for anything in particular or started off looking for something else.

TLG enjoys great brand loyalty (something increasingly rare these days) among its established customers.  Most AFOLs I know hope their kids will get into it as well.  But as a children's toy (and a pricy one at that) the reality is there is always another generation of kids who are aging out of their of the target demographic and another wave that need to be introduced to the toy.  Losing TRU means losing an avenue of introduction.  On-line sales are fine and I'm very lucky to live within easy driving distance of four LEGO stores and a Discovery Center gift shop; but those are all predicated on the idea that you've gone out of your way to buy something "LEGO".  Going to an actual toy store when you're not into/really aware of LEGO gives one the chance to discover and embrace something new.  Growing up with LEGO and being part of the AFOL community often makes it easy to forget that there are non-(but potential)-FOLs out there; but that is the very demographic most essential to sustaining the company.  Attracting new customers is the only way a business can avoid market saturation.  Losing TRU, costs TLG about 15% of its "showroom" for attracting new customers, and they'll need to make up for that somehow.

Sadly, from a society standpoint, I think there will also be some class ramifications to the TRU closures.  I can't speak for the rest of the country, but at least in my area the LEGO shops are all in higher end malls catering to upper-middle class families.  The two TRU stores (left at this point) are both in strip malls in, let's just say, less affluent suburbs.  I walk into the LEGO store and the staff is far more diverse than the clientele.  I walk into TRU and I see people of all ethnicities; I hear people speaking half a dozen foreign languages.  As a former engineering professor and INROADS (a program to encourage minorities in engineering professions) mentor, I think it would be a shame fewer kids from poorer neighborhoods got the opportunity to discover LEGO (and their own creative potential) because their folks don't shop at malls that charge for parking and sell coffee for $10 a cup.

[Artanis I]

What will happen to those buildings with a TRU in it?

In my experience, whenever a major/minor chain goes down something else similar always fills the physical void in no time. Maybe Lego will open up in some of those malls.

[koalayummies]

2 hours ago, Artanis I said:

What will happen to those buildings with a TRU in it?

In my experience, whenever a major/minor chain goes down something else similar always fills the physical void in no time. Maybe Lego will open up in some of those malls.

Cobbwebs R Us? Because this is only just the beginning of the 'retail apocalypse' Malls around the globe are going to start looking like they do in zombie movies. Wait a minute, I don't want that. Gotta get my Cinnabon fix now before its too late!

[AmperZand]

8 hours ago, koalayummies said:

Cobbwebs R Us? Because this is only just the beginning of the 'retail apocalypse' Malls around the globe are going to start looking like they do in zombie movies. Wait a minute, I don't want that. Gotta get my Cinnabon fix now before its too late!

There is already a trend of shopping centres closing. Some retailers are focusing on small format shops in city centres and at/near major transportation hubs (as well as online of course).

Some out-of-town shopping centres will likely be demolished and replaced with residential complexes or light industrial parks. Others will focus more on goods that favour in-person purchases, infrequent purchases and challenging returns such as furniture, or goods that can be combined with a shopping 'experience' such as makeup with a makeover. I am not convinced that TLG should be seeking out-of-town shopping centre outlets but if they do, they should emphasise the play experience for kids.

   

[Lordofdragonss]

By now Lepin will still keeps winning - I know a lot of moms that don't care If they buy Lego or other brand - a lot of kids also don't care as long they will get the set/minifig they want. That's why Lepin is slowly winning - you can get SAME set with almost same quality as Lego but 3 times cheaper on aliexpress with home delivery.
Lego just needs to make their prices lower.They have "The Power of the brand" -So if they will make prices better - they can easliy get the growth in sales.

The orther problem I see is that they try to mimic the toys around them instead of making new trends that others will follow - that's why Lego electronics are usualy outdated when they hit shelves - it happened with mindstorms and it happens now with BOOST.

Edited April 5, 2018 by Lordofdragonss

[MAB]

3 hours ago, Lordofdragonss said:

Lego just needs to make their prices lower.They have "The Power of the brand" -So if they will make prices better - they can easliy get the growth in sales.
 

1

That doesn't work though. If you slash the price of a premium product to try to kill off competition, you damage the premium brand.

[Lyichir]

2 hours ago, MAB said:

That doesn't work though. If you slash the price of a premium product to try to kill off competition, you damage the premium brand.

Particularly illegal competition that cuts almost all engineering and licensing costs by stealing part designs, set designs, and licensed IPs outright. Trying to compete on price with a company that refuses to play by the rules is a fool's errand.

[Aanchir]

8 hours ago, Lordofdragonss said:

The orther problem I see is that they try to mimic the toys around them instead of making new trends that others will follow - that's why Lego electronics are usualy outdated when they hit shelves - it happened with mindstorms and it happens now with BOOST.

Mimicking the toys around them is not a new trend for LEGO by any means… after all, LEGO trains were basically a building toy version of toys like Lionel, LEGO Technic was basically a building toy version of Erector/Meccano, etc. Also, while this does seem to hold them back sometimes when it comes to tech toys (with that market segment being a little more volatile), the BrickHeadz which imitate collectible figurines like Funko Pops and Munnys seem to be pretty popular. And while Mindstorms is not particularly cutting-edge, I don't think it's a particularly unsuccessful theme, either. Back in 2015, the already two-year-old Mindstorms EV3 set was one of the year's top-selling products.