Why is LEGO so expensive?

[Eilif]

A pretty good read from a financial perspective.

http://www.dailyfinance.com/2011/08/24/why-are-legos-so-expensive/

Makes some good points about the longevity and brand image that LEGO has cultivated as well as the company culture.

[22kane]

Great article, thanks for sharing. I find it interesting that lego has gone after the Mega Blocks company many times to no avail. I never knew that.

[AmiPolizeiFunk]

Good read, thanks for the link.

[Lyichir]

I must admit, when I saw the topic title I braced myself for another disgruntled fan who couldn't grasp the various market forces that influence the price of LEGO. But instead I was pleasantly surprised by a deconstruction of this common question and a thorough answer and analysis. My one concern with the article is that it seems to group all AFOLs under the title of "collector", when we're really much more diverse: there are collectors in our ranks, but there are also artists seeking to exhibit and exercise their creativity, along with those of us who buy sets just because the inner child in us still wants, every now and again, to engage in play.

[Brickdoctor]

I must admit, when I saw the topic title I braced myself for another disgruntled fan who couldn't grasp the various market forces that influence the price of LEGO. But instead I was pleasantly surprised by a deconstruction of this common question and a thorough answer and analysis. My one concern with the article is that it seems to group all AFOLs under the title of "collector", when we're really much more diverse: there are collectors in our ranks, but there are also artists seeking to exhibit and exercise their creativity, along with those of us who buy sets just because the inner child in us still wants, every now and again, to engage in play.

Heartily agreed. A lot of the content there I already knew, but it was just nice to see it all published as part of an article.

[horizon]

This I understand. Not the differences between US & Europe in pricing. ;)

[Tamamono]

Thanks for the link, Eilif! It was a really interesting and informative read, even though I already knew about much of the material covered in the article. I personally don't find LEGO that expensive, but I can see why a parent shopping with their child would. When compared to other toys, LEGO can be a bit price-y, but you definitely get what you pay for.

[Eilif]

While I've got your attention, I may have posted this before, but if you enjoyed the Financial perspective on LEGO pricing, here's a Supply Chain Managment perspective from a few years back on how LEGO survived near-bankruptcy.

http://www.strategy-business.com/article/07306?pg=all

I geek out on this kind of LEGO company info.

Edit: The link above isn't working for everyone. Just put:

Rebuilding LEGO Brick by Brick

into google. It will be the first article that pops up and you won't have to register.

[AmiPolizeiFunk]

While I've got your attention, I may have posted this before, but if you enjoyed the Financial perspective on LEGO pricing, here's a Supply Chain Managment perspective from a few years back on how LEGO survived near-bankruptcy.

http://www.strategy-business.com/article/07306?pg=all

I geek out on this kind of LEGO company info.

It's telling me I have to register.

[gotoAndLego]

It's telling me I have to register.

Then you need to register to read their content.

[AmiPolizeiFunk]

Thanks for the newsflash bra.

Perhaps Eilif has a simpler way of viewing the content?

Edited August 25, 2011 by AmiPolizeiFunk

[ACWWgal2011]

Unless lego wants to face another financial crisis, they should find SOME ways to cut corners b4 people begin to stop shopping. Personally, I USED to be a HUGE lego fan, but now i'm stopping almost ALL lego buying now that i visited the lego store. Only thing I have plans for are the following items: One lego hand unless I can score it free from TLG(I just realized that the caveman i got from the BAM bin is missing a hand), one skateboarder(series 1), lego series 5 lizard, and series 6 skater girl(when she comes out). As much as i'm interested in the products, the prices are getting to darn high.

Also, it is just my imagination or is the article full of fluff? From what i've read of it, it looks mostly stuff NOT answering the question.

And yes, i know lego uses oil/oil products and oil is pricey, but the prices are moving up from "barely fair" to "NO WAY JOSE!".

[legoguy475]

Thanks for posting that link. Its definitely written from an adult perspective instead of from some twelve year old who lied about his age and posted his stupid, annoying, pointless rant on Eurobricks. A very nice article.

[Eilif]

Sorry about the bad link. Aparently they make their articles unlinkable

Just plug " Rebuilding LEGO Brick By Brick "

Into google. It will be the first article that shows up and you won't have to register.

ACWWgal2011,

You completely missed the point. The title of this thread is not an invitation to rant, it's the title of the article that uses the question as a jumping off point for discussing LEGO and it's relationship with it's customers.

[fyrmedhatt]

Unless lego wants to face another financial crisis, they should find SOME ways to cut corners b4 people begin to stop shopping. Personally, I USED to be a HUGE lego fan, but now i'm stopping almost ALL lego buying now that i visited the lego store. Only thing I have plans for are the following items: One lego hand unless I can score it free from TLG(I just realized that the caveman i got from the BAM bin is missing a hand), one skateboarder(series 1), lego series 5 lizard, and series 6 skater girl(when she comes out). As much as i'm interested in the products, the prices are getting to darn high.

Also, it is just my imagination or is the article full of fluff? From what i've read of it, it looks mostly stuff NOT answering the question.

And yes, i know lego uses oil/oil products and oil is pricey, but the prices are moving up from "barely fair" to "NO WAY JOSE!".

I do understand your apprehension of paying so much more for Lego than you did five years ago or even last year, but Lego's rising prices is a sign of economic health, they would not raise prices if their product didn't sell. In fact, in case of Lego, its worst years and the years they were recovering were also when Lego was cheapest because the product didn't move and later because they needed to get back into the market. The time period we are in now is really a new golden age for Lego, their products are great and they are selling, so they reap their rewards, just as they did in the eighties and early nineties when prices were even higher than today. I've even read that Lego's prices, or at least their no compromise philosophy is an advantage in today's weak economy. People have less money to spend on their children's toys so they want to make sure they get their money's worth, which they can be sure of when buying Lego, not so much with other products that cut corners.

Lego's production costs money, they spend a lot of money researching new products, they spend lots of money on marketing etc., and in the end they are not a charity, so they will make a profit. The low prices in the US has been a gamble on getting a larger market share in the world's largest toy market, and I don't think Lego ever intended to keep the low prices. The fact that they are rising prices in the US more than in Europe comes to show that they have been successful, which should excite us as fans as more customers will result in more exciting products for us in the future.

That is not to say I'm not critical of some of the economic decisions made by Lego, especially when it comes to value in the form of printed pieces. Why should Lego increase prices, then make pieces that are used in lots of sets made of stickers rather than printed pieces when they've been printed pieces until this year. Generally an increase in price should come with an increase in value.

In the end, it was an interesting article that hopefully made a few people understand the expenses involved in making a quality toy such as Lego.

[22kane]

While I've got your attention, I may have posted this before, but if you enjoyed the Financial perspective on LEGO pricing, here's a Supply Chain Managment perspective from a few years back on how LEGO survived near-bankruptcy.

http://www.strategy-business.com/article/07306?pg=all

I geek out on this kind of LEGO company info.

Edit: The link above isn't working for everyone. Just put:

Rebuilding LEGO Brick by Brick

into google. It will be the first article that pops up and you won't have to register.

Another great article, thank you. Kristiansen was very smart to step aside when he did. I knew about a few of the problems Lego had but never had all these details. Again, great read and thanks.

[BasOne]

It's a nice article but it doesn't answer anything.

It can be summed up with:

Why is LEGO expencive?

Because it's a high quality product.

This I understand. Not the differences between US & Europe in pricing. ;)

Mostly tax rates i think.

But the price difference is ridiculous.

The Unimog, 199 USD 189 Euro (270 USD)....

Even taking VAT or salestaxes into acoount the difference is 60-70 USD.

Could be due to oil prices or TLG have cheap Mexican labour in their US. factory

And that's also the problem with most 'LEGO is too expencive' rants, most are rants by Americans, they don't realize how lucky they are

Allthough i can't help but wonder if they knocked off 25% off the price they'd sell more ie. make more money.

LEGO in Europe atleast is overpriced, but what do i care, i'm in love

[Brickdoctor]

It's a nice article but it doesn't answer anything.

It can be summed up with:

Why is LEGO expencive?

Because it's a high quality product.

That is an answer. They just added a lot of other stuff to back up that answer and turn it into an article.

And that's also the problem with most 'LEGO is too expencive' rants, most are rants by Americans, they don't realize how lucky they are

Agreed.

And in the end, haven't TLG's profits been going steadily upwards these past few years?

[Eilif]

I was hoping this thread wouldn't go there, but since it has, I would just remind folks that adjusted for inflation, LEGO is as cheap or cheaper than it has been for most of TLG history.

[Rick]

I was hoping this thread wouldn't go there, but since it has, I would just remind folks that adjusted for inflation, LEGO is as cheap or cheaper than it has been for most of TLG history.

Right, I think I've done a comparison once on a Dutch forum. I compared the price of 6382 (1980s fire station) with 7945, which showed that, adjusted for inflation, you get even more parts for the same amount of money. However, this comes at the expense of a less varied parts assortment per set.

[Aanchir]

Mostly tax rates i think.

But the price difference is ridiculous.

The Unimog, 199 USD 189 Euro (270 USD)....

Even taking VAT or salestaxes into acoount the difference is 60-70 USD.

Could be due to oil prices or TLG have cheap Mexican labour in their US. factory

And that's also the problem with most 'LEGO is too expencive' rants, most are rants by Americans, they don't realize how lucky they are

Allthough i can't help but wonder if they knocked off 25% off the price they'd sell more ie. make more money.

LEGO in Europe atleast is overpriced, but what do i care, i'm in love

Other factors in different costs in the US and Europe could include how much American and European retailers and consumers are willing to pay for LEGO, how expensive it is to distribute the products in different countries, and factors involving the different countries' economies. This article is one of the most straightforward ones on the topic I've seen, even though it probably doesn't address all the factors involved in the pricing discrepancy.

One correction I'd make to your post: There is no "US factory". The only factory in North America is in Mexico, so "cheap Mexican labor" is a given. At one time there was a factory in Enfield, Connecticut, but that is now just offices for TLG (as well as their base of operations in the US).

Anyway, I'm enjoying all these articles, especially the one that discusses LEGO's financial recovery in the mid-2000s. A lot of fansites' reports on LEGO's economic suffering in the late 90s and early 2000s try to trace the failures and recovery to just a few decisions that the fans find most important. LEGO Star Wars fans tend to attribute a lot of TLG's recovery to LEGO Star Wars (the theme in 1999 and the video games starting in 2005). BIONICLE fans tend to attribute the recovery to that theme's introduction, with an emphasis on BIONICLE being one of the top-selling product ranges in 2002. (Some BIONICLE fans are also hesitant to accept that BIONICLE did not stay the company's most successful product range.)

Particularly cynical AFOLs attribute TLG's recovery to sacrifices made in product quality or quality control, such as the restructuring of the color palette or the change from buying pre-colored granulate to mixing colorless granulate and dye during production. As for the failures, AFOLs tend to focus on some specific factors they tended to dislike-- for instance, "juniorization" in the late 90s, the move towards heavily story-based themes, and the introduction of non-traditional themes like Belville, BIONICLE, and Galidor.

It's true, most fans aren't too far off the mark when they look at all these factors' positive and negative impacts on the company's financial situation. But looking just at the product is thinking far too narrowly. The "Rebuilding LEGO Brick-By-Brick looks at the company's situation much more broadly.

Some of my favorite quotes:

The initiative encouraged the designers to think in terms of price trade-offs when they were developing a new item: Yes, you can give sparkling amber eyes to your new Bionicle space alien action figure, but it may limit your choices on its claws.

"Sparkling amber eyes" brings to mind the color Transparent Fluorescent Yellow (Bricklink's Trans-Neon Yellow), a color used almost exclusively in BIONICLE. Many fans don't even recognize a difference between this and regular Transparent Yellow, probably part of the reason it was discontinued. Transparent Fluorescent Red, Tahu's eye color, was likewise discontinued, probably because it was too similar to Transparent Medium Reddish Violet (Bricklink's Trans-Dark Pink).

Cost transparency gave developers a new way to define their achievement. “The best cooks are not the ones who have all the ingredients in front of them. They’re the ones who go into whatever kitchen and work with whatever they have,” wrote a senior manager in a memo to the Lego Group’s own Kitchen. The designers seemed to take those words to heart.

This is a design value I'm sure a lot of AFOLs sympathize with. Yes, designing new parts is often valuable, and I love some of TLG's most recent part designs. I also like some of LEGO's recent colors, and almost never MOC with colors not on the current palette. But at the same time, designing with constraints is in my opinion a challenge that leads to a better-designed end product.

Edited August 26, 2011 by Aanchir

[Joebot]

Allthough i can't help but wonder if they knocked off 25% off the price they'd sell more ie. make more money.

Maybe for a while, but over the long haul, they'd end up undermining their own brand image.

The thing is, TLC has trained its consumers to pay more for a high-quality product. We all complain about the prices, but we keep buying, because we value that quality. TLC is perceived as a premium product. Other companies like BMW and Apple have done the same thing.

If TLC were to slash their prices, they'd slowly destroy their own image as a premium product. It's the same reason BMW doesn't sell a $10,000 compact, or Apple doesn't sell a $200 laptop.

Besides, slashing prices to sell more volume is a slippery road. Once you start doing that, there's no telling where it will stop. I don't know what TLC's profit margins are, but I'll bet they're pretty healthy. There's an old salesman saying: "We take a loss on every unit we sell, but we make up for it in volume!" That is not where TLC wants to be.

[doriansdad]

Lego is not cheap but offers excellent VALUE. Business 101 - never compete on price if you offer a premium product. Lego learned well from Jobs at Apple. Kudos.

[ACWWgal2011]

As far as stickers, it could be that lego wants people to reuse the parts in their own manner. Or maybe it's just easier for them to get the stickers then it is to send the parts off to be printed.

*hangs lego buying hat up*

Honestly, until the prices come down OR the excess amounts of cheese slopes/studs come down in sets and better pieces come in, i'm done except for a few small things(keychain minifigure, 1 series 1 figure, infomanic, and a series 6 figure when it comes out). Sry TLG but i need to start saving up b/c of some strong 3DS redesign rumors surfacing and lego is not worth it anymore. I've been planning this for a while. My lego store trip is done and my BL order is here. All the items on my wish list are done except for the few items above.

[Rook]

Obvious. Quality.