Subject:
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Re: minifig series 3 goes up from $1.99 to $2.99
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Newsgroups:
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lugnet.general
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Date:
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Sun, 26 Dec 2010 04:49:14 GMT
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Viewed:
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20248 times
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In lugnet.general, Ram Sreerangam wrote:
> I had to reply, since it looks like $3.52 works out to be cheaper. If I
> account for VAT (25% for Sweden?) you get $2.82. In the case of US prices,
> without tax it is $2.99.
>
> I agree the math does not work for all Lego sets. But that maybe a function
> of the market size. I am pretty sure Technic will work out to be cheaper in
> Europe (in most cases) whereas Star Wars would be a better deal in US.
*pulls out well-worn soap box*
Okay, here's how it works. TLC has internal costs, and they have to make sure
that they cover those costs and make a profit beyond that when they sell their
products, so they have a wholesale pricepoint in mind when they produce a new
set. They negotiate that price with retail chains and other distributors if
they're large enough to have that sort of bargaining power, or they dictate it
to very small retailers. The big chains, in turn, come back to them and tell
them how much they want to sell sets for, so MSRP (Manufacturers Suggested
Retail Price) is actually suggested by the retailers, not the manufacturer.
I've actually seen this in practice from the manufacturing side, where a company
I worked for sold industrial parts. One industrial supply catalog came back to
us and said they were happy with the prices we charged them for our products,
and they were making enough money at our standard prices to make them
happy...but they wanted us to publish price lists for them that had all the
MSRPs _doubled_, so they could in turn pretend they were giving the customer a
great deal by cutting 50% off the price. Also, it probably encouraged those
same customers to keep buying through their catalog rather than trying to buy
them directly from us.
So, in the US, Walmart likely dictates the US MSRP based on whatever price
scheme they can negotiate for the LEGO catalog domestically. In Europe, where
store chains tend to be more localized to smaller regions (a national chain in
Europe is more equivalent to a statewide chain in the US), they won't be able to
bring that wholesale price down as low. On top of that, if the local cost of
living is higher than it is across the US, the store chains have less incentive
to ask for a rock-bottom MSRP, since that cuts into _their_ profit margins.
Selling a product isn't just pure profit beyond the wholesale price. The rest
is mostly split up between utility companies, rent/property taxes, and employee
wages. If you have high utility costs and high minimum wages, your local MSRP
is absolutely going to be higher than ours, because otherwise your local stores
would all go out of business.
Now, as for S@H sales, well, most manufacturers are contractually restricted
from undercutting their own MSRP, so they can't pointedly cut out the middleman.
And since the vast majority of their sales come through brick-n-mortar
operations, they can't afford to piss off the retail chains by refusing to make
that agreement, since even a single chain pulling their entire product line off
the shelves would more than offset any increased profits they could expect.
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Message is in Reply To:
 | | Re: minifig series 3 goes up from $1.99 to $2.99
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| (...) I had to reply, since it looks like $3.52 works out to be cheaper. If I account for VAT (25% for Sweden?) you get $2.82. In the case of US prices, without tax it is $2.99. I agree the math does not work for all Lego sets. But that maybe a (...) (14 years ago, 25-Dec-10, to lugnet.general)
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