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In lugnet.lego.direct, Mike Petrucelli writes:
> In lugnet.lego.direct, Dave Schuler writes:
> > In lugnet.lego.direct, Steve Bliss writes:
> > > $0.0167 for LEGO
> > > $0.0143 for Mega-Bloks
> > >
> > > Or about a 14% markdown for MB (looking at it the other way, LEGO is marked
> > > up about 17% from MB).
> > >
> > > That sounds about right to me, based on the current differences in brick
> > > quality. I'd actually expect LEGO bricks to cost at least 25% more than
> > > MB.
> >
> > Since the tubs are a bulk dump of basic bricks, they're not necessarily
> > the best indicator of piece:price ratio.
>
> Ok you missed my original point. Bulk tub prices are an acurate reflection of
> material costs. Actual sets from both Mega Blocks and Lego have added printing
> and R&D costs. So why the huge price difference.
Hmmm, I don't agree that bulk prices are an accurate reflection of pure material
costs. For one thing, there's the manufacturing costs-- Lego bricks have
superior (and more consistent) binding performance.
There are other, less tangible costs: Lego advertises, MB does not (not in any
significant way that I'm aware of, anyway). One could argue that MB essentially
trades on Lego's brand to get better consumer awareness-- effectively getting a
negative cost in its column.
> ... Consider that TRU had Mos
> Espa Podraced sets at clearance for $34.99. They still make money on that. At
> KB when sets are marked half off, they still turn a profit.
Just because the retailer is making money selling Lego's overstock doesn't mean
Lego is making money on the same transaction. (And when a retailer like TRU
sells at half off, it's not always at the manufacturer's expense anyway-- they
may be taking the loss if they over-ordered the product in the first place.)
Besides-- Lego *actually lost money* last year. The money went somewhere-- I
don't think there's much argument in that. You might pick a bone over how they
spend their money, and whether it's on things that you as a consumer are willing
to foot the bill for (as I would), but I just don't see how their actual losses
(2000, and 1998) jibes with an outrageously high profit margin (including a
profit from clearanced overstock).
> ... Simply put we are
> paying for the name and nothing more.
>
> -Mike Petrucelli
While I do think there's some merit to the general argument (the brand itself
adds cost to the product), I just don't believe Lego's profit margins are *that*
high. They wouldn't be in the position they're in now if they were.
Kevin
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