Subject:
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Re: Business query
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Newsgroups:
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lugnet.general
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Date:
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Tue, 6 Nov 2007 04:58:11 GMT
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Viewed:
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7944 times
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In lugnet.general, Jonathan Lopes wrote:
> I noticed quite a number of non-toy items in the sales and deals section of
> lego.com
> <http://shop.lego.com/SalesAndDeals/Default.aspx?va=1>
>
> If I am not mistaken, these showed up in a catalog for the first time at the
> beginning of the summer. (ie: a new product)
>
> It seems like a huge loss of revenue to me - clearancing them out like this, so
> quickly.
>
> Does anyone know why a company would do this? Do they typically just have
> budgets in other areas that they need to use up?
>
> This isn't at all a knock on TLG. I am just trying to understand.
>
> I look forward to your thoughts.
>
> Jonathan
It indeed looks like the newly-introduced storage items (and various
LEGO-branded merchandise) are listed as being "on sale". While this typically
implies (for LEGO S@H) that something is on clearance, I don't believe that is
the case with the new storage items. My theory is that the initial prices were
set much too high for the market to sustain (Realistically, how many people will
buy their kid a $150 toy chest when a $10 plastic tub will work just as well?!)
Rather than drop the price quietly, these items were put on sale to present more
of an enticement to buyers.
TLC can afford to drop the prices on these LEGO-branded merchandise items
because they are made by outsourced labor; the profit margins for such items are
much larger than those for LEGO sets. My guess (strictly a guess here) is that
a LEGO set is priced at roughly twice the manufacturing cost. I would think
that for the LEGO-branded merchandise, that multiplier is closer to ten - the
$150 toy chest requires only about $15 to produce, while the $150 7898 R/C Cargo
Train might command $75 in production costs. So, LEGO can knock the prices down
on their LEGO-branded merchandise and still turn a good profit, just not as good
as they were hoping for.
In short, I think the almost immediate discounting of these new storage items is
an indication that the prices set at release were simply too high. But I do not
think that they are being discontinued at this time.
-Jordan
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Message is in Reply To:
 | | Business query
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| I noticed quite a number of non-toy items in the sales and deals section of lego.com (URL) If I am not mistaken, these showed up in a catalog for the first time at the beginning of the summer. (ie: a new product) It seems like a huge loss of revenue (...) (17 years ago, 6-Nov-07, to lugnet.general)
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