The Lunacy of Lego Investors

[feed]

It’s a marketing strategy to control supply on Kids products. All toy companies do it, limit release on the Christmas must have toy, when parents can’t obtain it, they have to buy something else, and then original product when it’s available again. This has been used since the 70’s and original SW products.

Lego are driving the investment market with their product strategy. Want a recent example: Exo-suit. Why the limited release, everyone knew how popular it would be. And it is a collector’s items or toy? Designed for AFOLS, or for kids? The queues at bluewater for the prelaunch didn’t look much like your average parents buying for the kid.

Besides if you look at what serious investors hold, it isn’t small sets. Its high cost exclusives bought with min discounts and held. Sets that are available for 2-3years plus. All of the talk at the moment is around GE and SSD. How long have they been available, and what max discount has been available. 10% on black Friday, VIP and a poly? Besides are they really kids toys? UCS kids toys? UCS are by far the biggest investment market.

The bargain basement 50% supermarket sale sets are picked up by opportunists for a quick flip. Or Bricklink stores looking for inventory. Not investors.

Reality is the buy and hold investors are really just riding the coat tails of Lego exceptional marketing strategies. Bricklinkers are something slightly different, in supplying a service that Lego can’t.

[ummester]

MAB - I agree that the LEGO company is probably more interested is sales than what people actually do with their product. So long as someone doesn't do something with their product that creates bad press, a sale is a sale.

However, we'll have to agree to disagree on what the intended use of the product and play actually is. Keeping something in it's bag is not playing with it, or enjoying it in any tangible way.

I get that a company keeps a vault of each product it has sold, over the years, as it is of historical and educational value to the company. For most, a vault is a place to keep valuables of financial worth.

The primary value of a toy product should always reside in how it functions as a toy - it's not even complicated. Keeping it in a bag may increase it's financial value - but it can't possibly increase it's functional value and thus negates it's purpose. Investors impose a purpose on the product for their own gain that is outside of the product's design. It's fine, it's not illegal or anything and an investor can validate it however they want - but you will never convince me that it fair use within the products intended design.

You can sit on a collectors set and sell it for a massive profit in 5 to ten years and pat yourself on the back, or you can design an impressive MOC and put it on display. I know which one I think is more in line with the products intended purpose and which accomplishment would make me feel more pleased. I see a beautiful MOC and feel inspired, I read someone sells a Mr Gold for over $1000 or something and it just feels disappointing.

feed,

I do agree that TLG marketing does feed (oops :) ) the LEGO investor mindset.

Edited August 8, 2014 by ummester

[Hive]

An adult has as much legal right to buy a LEGO set as a child. However, an adult should be adult enough to realize that toys are ultimately made for children and not them. My argument was concerning a situation where there is only one set left in a particular store, that you want, and a sad child looking on who also wants and has the means to purchase it. The adult thing to do is let the child have first pick, because it is a toy. It's like letting an elderly person or pregnant woman have your seat in the bus, it's the decent thing to do given the situation.

But this is a strictly theoretical example. How many times does this happen? Who here has encountered such a situation? Most often, the heavily discounted "last one in stock" sets are so heavily discounted because the shop can't sell it anymore and just want to get rid of it so they can stock new sets that kids aren't tired of/haven't gotten already yet.

Either way, if you are buying more LEGO than you can actively use, don't you ever ask yourself why?

I do the same thing, and I'd wager most here does: buy sets that we eventually have a strong desire to build, but doesn't yet have time and/or space to do. Why we do it? Well, because we want it and don't want to miss out.

Besides, I actually enjoy even my unopened boxes. I look at them on my shelf, enjoying the feeling of having the building experience of a potentially exciting set yet-to-come. It brings joy to me that I know I have one or more good LEGO experiences waiting for me sometime in the future.

However, we'll have to agree to disagree on what the intended use of the product and play actually is.

I don't think anyone disagrees with you on the statement that LEGO is intended as a product to be played with. We just disagree with you on the importance of it's intended use.

[ummester]

Hive,

I may be a bit different in that I don't often have a strong desire to build TLG sets anymore. I do have a strong desire to design in LDD and realize designs in bricks. I guess I have more of a desire to play and invent my own designs, which I was also like as a child. TLG sets are the best toys around, made better by the fact they can be used for the creation of even more.

People talk about the UCS falcon as some kind of golden chalice of value - I can honestly say I'd want it more for the parts than either the initial build or it's financial value.

[MAB]

Keeping something in it's bag is not playing with it, or enjoying it in any tangible way.

Yes it is. Does a minifigure collector that frames and displays their minifigs enjoy them? Does a polybag collector that displays their unopened polybags enjoy them any less? Does a MISB collector that displays the unopened boxes enjoy them any less?

Different people enjoy things in different ways.

Edited August 8, 2014 by MAB

[ummester]

It's true - we are all individuals. Looking at an unopened box seems like a strange way to enjoy a toy to me, though I can accept the possibility that other people get pleasure from it.

Like Hive said, it may be the pleasure of looking forward to a new build - and I can appreciate that, I used to feel it.

If it's just the pleasure of wondering how much it might be worth next year, it strikes me as a little greedy - but it is still valid pleasure.

Edited August 8, 2014 by ummester

[kibosh]

My argument was concerning a situation where there is only one set left in a particular store, that you want, and a sad child looking on who also wants and has the means to purchase it. The adult thing to do is let the child have first pick, because it is a toy. It's like letting an elderly person or pregnant woman have your seat in the bus, it's the decent thing to do given the situation.

If an adult and a child arrive at the same store and want the same set, and there is only one copy, then yes the adult should give the child the opportunity to make the purchase. You are correct; it is the right and decent thing to do.

If the adult gets to the store, and there is only one copy of a given set on the shelf, should they leave it in case a child may want it at some point? No, and they should not feel bad about it.

I have 5 sets unbuilt in boxes in storage, not because I'm waiting for the secondary market price to increase, but because I don't have room right now to display them. If, say, in a few years, I decide I don't care about ever putting them together and displaying them, and toss a few up on eBay, and they happen to sell for hundreds of dollars, does that mean I deprived a child of their seat on the bus?

If you intend to build/display but can't find the time/space, I'd say the purchase was a bit of a waste but was still in line with the design of the product.

If your intention was to store for profit, from the get go, then it is a misuse of what the product was designed for and callous neglect for all of the sad children helplessly looking on in the world :D

Either way, if you are buying more LEGO than you can actively use, don't you ever ask yourself why?

I buy more LEGO than I can use all the time. Why? Because to me, LEGO is a luxury good. I don't need it. I like it and I want it. Therefore, I will NEVER pay more than MSRP, and usually won't buy unless there is a sale. I buy sets I know I won't get around to for quite some time because if I don't buy it now, it won't be available to me later at prices I am willing to pay.

People talk about the UCS falcon as some kind of golden chalice of value - I can honestly say I'd want it more for the parts than either the initial build or it's financial value.

The UCS Falcon is the LEGO Holy Grail for several reasons. One, it's the biggest LEGO set ever. Two, it's arguably the most iconic thing from the most iconic movies of all time. It hits the top of the list of two rabid fanbases.

[legoman19892]

Plus I don't think lego cares too much about how often the products are played with, they care about how many are sold.

Considering they try really hard to only sell to the end user....

[Hive]

The UCS Falcon is the LEGO Holy Grail for several reasons. One, it's the biggest LEGO set ever. Two, it's arguably the most iconic thing from the most iconic movies of all time. It hits the top of the list of two rabid fanbases.

Technically, the Taj Mahal is bigger... that aside, I was curious and looked up the set on Brickipedia to see what all the fuss was about (and I must admit, it does look nice) - and found this little gem:

There is a rumoured Re-Release set for 2015

[MAB]

Technically, the Taj Mahal is bigger...

What do you mean by technically bigger?

For number of parts, yes.

But for weight, no. Box size, no. Largest dimension, no.

There is a rumoured Re-Release set for 2015

I doubt it would ever be a re-release. A newer version maybe, but that is not a re-release and wouldn't affect the secondary market pricing of the original.

[TheLegoDr]

^LEGO has stated they won't do any re-releases. They most likely will redesign the Falcon to sell to the new fanbase with the new movies coming out, but it won't be a re-release of the UCS Falcon. That's one thing for sure.

[ummester]

If the adult gets to the store, and there is only one copy of a given set on the shelf, should they leave it in case a child may want it at some point? No, and they should not feel bad about it.

This is the point where it gets interesting kibosh.

I agree that an adult shouldn't feel bad if their intention is to build the set, use the parts, or as discussed, appreciate the packaged set as a potential future build.

If the only reason the adult is purchasing the set is to turn a profit - then I would always argue the adult should feel bad about it because they are removing a potential sale for play or build from either another child or adult. Of course, you don't know that the next buyer will not be an investor either, so the argument can be made by an investor that they are just getting in before another investor does - however, if the whole investment mindset was removed from the LEGO equation, then everyone could build and play more equally.

As already discussed here - if collectors weren't prepared to pay ridiculous sums of money for a toy, then investors would have no point in buying to hoard. So, ultimately, I would say that both investment and collection miss the point of a toy product entirely, from my point of view and fully agree with the logic in feed's post that shows TLG marketing strategy re-enforces both mindsets.

On a personal note - I have thought about it. I've seen LOTRs sets on sale, which I have no desire to build or own but know they have unique minifgs. The thought to get the set, put it in cupboard and sell it for a profit to fund my MOCing down the track has crossed my mind - but I stop myself as I believe it is not the decent thing to do.

Edited August 9, 2014 by ummester

[Darth Punk]

It’s a marketing strategy to control supply on Kids products. All toy companies do it, limit release on the Christmas must have toy, when parents can’t obtain it, they have to buy something else, and then original product when it’s available again. This has been used since the 70’s and original SW products.

Lego are driving the investment market with their product strategy. Want a recent example: Exo-suit. Why the limited release, everyone knew how popular it would be. And it is a collector’s items or toy? Designed for AFOLS, or for kids? The queues at bluewater for the prelaunch didn’t look much like your average parents buying for the kid.

Besides if you look at what serious investors hold, it isn’t small sets. Its high cost exclusives bought with min discounts and held. Sets that are available for 2-3years plus. All of the talk at the moment is around GE and SSD. How long have they been available, and what max discount has been available. 10% on black Friday, VIP and a poly? Besides are they really kids toys? UCS kids toys? UCS are by far the biggest investment market.

The bargain basement 50% supermarket sale sets are picked up by opportunists for a quick flip. Or Bricklink stores looking for inventory. Not investors.

Reality is the buy and hold investors are really just riding the coat tails of Lego exceptional marketing strategies. Bricklinkers are something slightly different, in supplying a service that Lego can’t.

In general I think this is an accurate description. As long as a balance is maintained this would not negatively affect TLG.

However, TLG obviously believes that a danger does exist thus their attempt to slow down the secondary market, not stop it.

Some have mentioned that TLG doesn't care who buys their product. Be it a child or AFOL or someone who is solely buying for investment. That is untrue to some extent but maybe not for the reason people seem to be talking about. The secondary market has exploded recently and is creating a much larger group of investment buyers. One can spend a little time on brick picker.com to see how many sets are being bought in mass quantities. It is true as Feed has stated that these purchases are geared more toward the higher priced $100 plus sets. And more and more causal buyers are joining in the fray, maybe only buying a few extra sets here or there or perhaps 10s of sets. So what's the problem?

One only has to look at the most recent housing bubble to see the effect that a rise on investment can have on a commodity. While rising investment means more sales it also skews who is buying. In this case a rise in the number of sets means more profit for TLG it does not translate to a growing base of consumers. TLG has sets available in a sense for 1.5 years to 99+, they want to win a new customer but also keep that customer for a very long time. There is always a problem when a company grows too fast. Growth means more factories have to be built, more employees hired and a larger diversity of products have to be produced. Done in a measured way while growing your customer base ensures not only short term success but also long term viability. While there are always downturns, having a reliable base can help to minimize the impact. If growth is done too quickly one can easily overextend oneself. Taking too many or too much in loans to pay for growth is often a big danger for many companies.

The problem comes in when the secondary market starts to decline. It will, because it always does. How much decline would be determined by many known and unknown factors which would be a topic all on its own. But when it does it will have a ripple effect. Declining prices on eBay will keep some away from investing and might make some stop investing altogether if the margins become too small. Regardless a decrease in sales means less profit and less expansion, and eventually contraction. Factories closed, people lost go and less successful lines reduced and/or eliminated altogether. Plus if you start losing the number of customers this affect will become magnified. All of this of course can easily snowball and has wiped out large corporations. So the speed of growth is always a concern of any business.

Another good example is blockbuster video. They were so successful that they could only maintain rising growth by continually expanding the number of stores they owned. They expanded so quickly they eventually saturated the market and no longer had room to grow. Couple that with a changing market and you have a recipe for disaster and a South Park episode.

In conclusion, while TLG and the consumer does benefit from a secondary market, like all things when things become unbalanced trouble begins.

Edited August 11, 2014 by Darth Punk

[rodiziorobs]

I was relieved to hear that the Exo Suit was planned for more than one production run--not only because it means I might be able to get one, but also as a kind of a blow to the commenters on brickpicker who were bragging about their multiple accounts they had made to game the system in order to buy more sets. With the wider availability, the secondary market price won't rise like they had wanted.

Serves 'em right.

[kinggregus]

I was relieved to hear that the Exo Suit was planned for more than one production run--not only because it means I might be able to get one, but also as a kind of a blow to the commenters on brickpicker who were bragging about their multiple accounts they had made to game the system in order to buy more sets. With the wider availability, the secondary market price won't rise like they had wanted.

Serves 'em right.

I was not aware that they would go for a second run. If this is true, that's indeed really good news. I am however under the impression that this set sold so fast no because of casual fans demand but because a lot of people felt like investing in the set when they heard that it was going on a single run.

[MAB]

On a personal note - I have thought about it. I've seen LOTRs sets on sale, which I have no desire to build or own but know they have unique minifgs. The thought to get the set, put it in cupboard and sell it for a profit to fund my MOCing down the track has crossed my mind - but I stop myself as I believe it is not the decent thing to do.

There is a reason that the set is on sale. It is because it is not selling. People don't want it at the RRP.

Plus there is not much point selling the set to fund MOCing. Open it up, and sell the minifigs. That is where the value is. And you have the bricks left for MOCing.

[Darth Punk]

I was relieved to hear that the Exo Suit was planned for more than one production run--not only because it means I might be able to get one, but also as a kind of a blow to the commenters on brickpicker who were bragging about their multiple accounts they had made to game the system in order to buy more sets. With the wider availability, the secondary market price won't rise like they had wanted.

Serves 'em right.

Happened much the same when the minecraft set first came out. And it's still available at shop@home.

The exo suit was on amazon briefly, but I imagine it will be back soon.

[ummester]

There is a reason that the set is on sale. It is because it is not selling. People don't want it at the RRP.

Plus there is not much point selling the set to fund MOCing. Open it up, and sell the minifigs. That is where the value is. And you have the bricks left for MOCing.

That's not a bad idea MAB - which I think is also a fair trade off. Some folks like minis, so it saves them buying the set and get's me parts. 'Always held to the notion of fair trades in all my dealings' - sure I heard that in a TV show once :)

[kibosh]

If the only reason the adult is purchasing the set is to turn a profit - then I would always argue the adult should feel bad about it because they are removing a potential sale for play or build from either another child or adult. Of course, you don't know that the next buyer will not be an investor either, so the argument can be made by an investor that they are just getting in before another investor does - however, if the whole investment mindset was removed from the LEGO equation, then everyone could build and play more equally.

I still fail to see this as a problem. Outside of a VERY small percentage of LEGO sets, LEGO sets are mass produced. I can't think of a single retail set I was not able to find on retail shelves. Maybe they sold out in the first couple weeks of release, but they were always replenished. The only exception to this are limited run sets at the LEGO stores, and those are a different discussion. I'm talking retail like Walmart, Target, etc.

There is a reason that the set is on sale. It is because it is not selling. People don't want it at the RRP.

Plus there is not much point selling the set to fund MOCing. Open it up, and sell the minifigs. That is where the value is. And you have the bricks left for MOCing.

Totally agree on both points here.

[fred67]

If the only reason the adult is purchasing the set is to turn a profit - then I would always argue the adult should feel bad about it because they are removing a potential sale for play or build from either another child or adult.

I have to agree with kibosh, especially on long running sets (like LOTR, perhaps not the exosuit or research institute). Everybody had their chance to get it. What the investor is doing is saying "a year or two from now (or more) someone will come along and realize they missed a great set... and I'll have a brand new one, in the box they can buy... they can experience all the fun and satisfaction of opening a brand new set and building it."

That is, if it's important... I'm personally happy enough buying used sets if they're complete, but some people aren't.

I also have a lot of sets I bought for me, but I don't have the space to display them. Someday I hope to move to a new house with a dedicated LEGO room for me... I don't want to miss out, I don't want to pay ridiculous prices, so I buy the sets and stick them in a closet. Then you know what happens? Suddenly the set I bought for $140 is selling for over $1000 new in box.... yes, I'm looking at you, Cafe Corner... but when my daughter picked you out from various sets for a family build, I built you anyway! But what happens if I lose interest? What if I decided I'm never going to have space for a Star Wars display? What do I do with my 4504 Millennium Falcon that I got on sale on Black Friday for $80? Am I supposed to feel bad that someone might pay me $300? Well... I don't.

I'd also like to add that, personally, I would never buy a set I didn't like. I've often bought a set, thought it was great, and bought another one... maybe I'd sell it in the future, maybe it'd make a great gift... maybe I'll give it to my grand kids someday. Or, you know what? Maybe I see it sitting on the shelf and decide it's time to sell it. I'm glad I bought four Emerald Knight sets... I built one, I converted the second one to a Ruby Knight, I sold one to someone who wasn't into LEGO trains when it was available (and he didn't complain, he thanked me), and I still have one that I don't know what I'll do with it... maybe build it just for the coach, but maybe I'll sell it. I don't feel bad about it... nothing you could possibly say could make me feel bad about it.

Now, the people scalping the ideas sets are a different story... bragging about getting dozens of copies when you were only supposed to get five (initially, I think), then reduced to 1 per household? The problem is that THEY caused the shortage... so yes, I really dislike that, when people didn't have a chance at all. However, these sets are not bread and butter, they are not necessities... the only reason a seller can charge so much is because people are willing to pay it. It's really that simple. To solely blame the seller is incredibly short sighted, IMO. I've gladly done without rather than paid outrageous prices for things. I make a pretty decent living, and there are plenty of sets I could lay out the cash for (looking at you, SDCC exclusives!) but it's crazy to pay that much for a little plastic figure... so I don't do it. Therefore I'm not a "victim" of the "evil" seller. If I decided to buy it... well, you can't willingly be a victim in this case.

But there's something TLG could do about those cases... why they choose to do nothing is baffling. Why they'd limit an ideas set to a single run when you can still buy the last round's sets just confuses the hell out of me... I mean, I can think of a couple of things, but nothing that makes it make sense to not have another run.

But when it comes to sets that are sitting on the shelves for a year or more, blaming the sellers years later is just wrong, IMO... often a case of sour grapes when someone misses out on a set and then "needs" to pay more for it.

[BrickG]

I was heavily considering becoming a Lego investor. Invested a bit. However the amount of work involved in parting out was pretty daunting. Sets I bought that I didn't part out just sat there. In order to make it financially viable it took time and a whole lot of effort. In order to make enough to say, live off of, it becomes basically a real job.

Well since then my non-Lego career has taken off and it's a decent job I don't hate going to (I don't ever have the Mondays, hang out with coworkers and voluntarily stay and work extra time all the time). And my like of Lego didn't extend to shipping them and spending all day sorting them... so I stopped doing it. Now I just have enough money to support the hobby so I just buy them. And honestly I think if I had to do that stuff all the time I'd like Lego a lot less since I'd have to deal with it ALL THE TIME. Sorting sucks.

I never got over that period of time that you kind of have to wait on your investment. Unless you are pro at buying the retiring sets and see them explode in price quickly after retirement (which usually doesn't happen) you'll be waiting around for like two years before you can stabilize your investment.

[ummester]

I still fail to see this as a problem. Outside of a VERY small percentage of LEGO sets, LEGO sets are mass produced. I can't think of a single retail set I was not able to find on retail shelves. Maybe they sold out in the first couple weeks of release, but they were always replenished. The only exception to this are limited run sets at the LEGO stores, and those are a different discussion. I'm talking retail like Walmart, Target, etc.

I'm probably thinking mostly on sale. Where I used to live, if Target or whatever did 20 % off, you could guarantee all of the popular lines were gone from shelves immediately. I was only shopping for my kids at this stage, I used to go after work to try and get the big Spongebob for Xmas or whatever.

Anyway, I got to know some local AFOLs down the track and found that a preferred method was to go as soon as the store opened and put a bunch of popular line sets on Layby. 1 to build, 1 to keep in the box and some for Ebay - the plan was to try and pay for the Layby with the Ebay sales. Of course, there may have been some parents employing similar methods to get their own children sets at little to no cost - 1 for their child and 3 for Ebay kind of thing.

This was 5-10 years ago now. The AFOLs I befriended were happy to grab whatever set my kids wanted, once they realized how frustrated I was trying to find sets on special after work. Yet it was a serious eye opener for me at the time - that the buying of toys on special for your children was made difficult because of adult collectors/flippers.

[kibosh]

I also have a lot of sets I bought for me, but I don't have the space to display them. Someday I hope to move to a new house with a dedicated LEGO room for me... I don't want to miss out, I don't want to pay ridiculous prices, so I buy the sets and stick them in a closet. Then you know what happens? Suddenly the set I bought for $140 is selling for over $1000 new in box.... yes, I'm looking at you, Cafe Corner... but when my daughter picked you out from various sets for a family build, I built you anyway! But what happens if I lose interest? What if I decided I'm never going to have space for a Star Wars display? What do I do with my 4504 Millennium Falcon that I got on sale on Black Friday for $80? Am I supposed to feel bad that someone might pay me $300? Well... I don't.

I'd also like to add that, personally, I would never buy a set I didn't like. I've often bought a set, thought it was great, and bought another one... maybe I'd sell it in the future, maybe it'd make a great gift... maybe I'll give it to my grand kids someday. Or, you know what? Maybe I see it sitting on the shelf and decide it's time to sell it. I'm glad I bought four Emerald Knight sets... I built one, I converted the second one to a Ruby Knight, I sold one to someone who wasn't into LEGO trains when it was available (and he didn't complain, he thanked me), and I still have one that I don't know what I'll do with it... maybe build it just for the coach, but maybe I'll sell it. I don't feel bad about it... nothing you could possibly say could make me feel bad about it.

Now, the people scalping the ideas sets are a different story... bragging about getting dozens of copies when you were only supposed to get five (initially, I think), then reduced to 1 per household? The problem is that THEY caused the shortage... so yes, I really dislike that, when people didn't have a chance at all. However, these sets are not bread and butter, they are not necessities... the only reason a seller can charge so much is because people are willing to pay it. It's really that simple. To solely blame the seller is incredibly short sighted, IMO. I've gladly done without rather than paid outrageous prices for things. I make a pretty decent living, and there are plenty of sets I could lay out the cash for (looking at you, SDCC exclusives!) but it's crazy to pay that much for a little plastic figure... so I don't do it. Therefore I'm not a "victim" of the "evil" seller. If I decided to buy it... well, you can't willingly be a victim in this case.

But there's something TLG could do about those cases... why they choose to do nothing is baffling. Why they'd limit an ideas set to a single run when you can still buy the last round's sets just confuses the hell out of me... I mean, I can think of a couple of things, but nothing that makes it make sense to not have another run.

But when it comes to sets that are sitting on the shelves for a year or more, blaming the sellers years later is just wrong, IMO... often a case of sour grapes when someone misses out on a set and then "needs" to pay more for it.

Exaaaaaaaaactly........

I have bought sets I don't care for, ut it was because I wanted specific things out of it; either parts or minifigs. But this has been rare.

Those SDCC exclusives just make no sense to me. They do nothing for their target audience.

[Darth Punk]

.

Those SDCC exclusives just make no sense to me. They do nothing for their target audience.

Perhaps not. But they do create a great deal of buzz which is often the purpose of promotionals.

Just look how much discussion there has been on this site alone over four minfigs.

[kibosh]

Perhaps not. But they do create a great deal of buzz which is often the purpose of promotionals.

Just look how much discussion there has been on this site alone over four minfigs.

Yes, but among LEGO fans who already are devoted fans. Those exclusives do nothing for the AFOL fanbase in general, nor the target audience, which is children. Do they make us buy more sets? No. If we pay $500 for one of them, does LEGO make a profit on it? No. What's the value of negative "buzz"?