Subject:
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Re: LEGO Brick Masters Launches!
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Newsgroups:
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lugnet.lego
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Date:
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Wed, 22 Sep 2004 14:11:17 GMT
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Reply-To:
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robots@deeletef3p.com#Spamless#
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2883 times
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Christian Treczoks <ct@braehler.com> wrote:
> Jake McKee wrote:
> > I'm not sure if you're just venting about your "higher" prices, and I'm not sure
> > that I'll ever be able to convince you that European prices don't "subsidize"
> > "lower" North American prices. Rest assured, however, that that's not the case.
> Yes, partially I _am_ venting about high prices. But even more on the
> reasons behind them.
>
> OK, lets get some facts straight.
> 1. Almost any LEGO set/Product is typically 20-50% more expensive here
> in Europe than it is in the US, even after subtracting VAT.
This is largely an apples and oranges comparison. In the world of
international commerce the cost of the actual product (the bricks and
the box) is likely a very small part of the retail cost. For
starters, it is likely that there are three or more levels of sales
before you get your hands on the product: LEGO sells to a distributor,
a distributor sells to a retailer, and a retailer sells to you. All
of them have a markup, and this markup is driven by local costs. Some
of the local costs that vary by location are taxes (VAT and otherwise)
licensing, labor costs, distribution costs (how much does the truck
driver get paid who delivers the product? how much did the truck
cost?), environmental issues, border crossing fees, regulatory issues
(in the USA you have several government organizations that try to make
things safe for consumers), etc.
Some of the reasons products *might* be cheaper in the USA is that we
have a factory here, and there are virtually no costs involved in
crossing a state border. We have fairly uniform tax, regulatory and
environmental structures across all states. We have (probably) the
largest market and therefore the highest likely ROI (Return On
Investment, how much money you made compared to how much you spent.).
Everything costs money, and when you have a large population to spread
those costs over, it makes the end result cheaper. That's why so many
companies want to sell in China - they have over a billion people.
As an example of regulatory problems, I once designed a product for
sale here in the USA. The base material for the product was aluminum
(aluminium for those across the pond). It worked great, cheap, easy
to machine, etc. We wanted to sell it in Canada. Canadian
regulations said we couldn't use aluminum, but had to use brass. So,
to sell in Canada we had to machine the product out of a block of
brass instead of using an aluminum extrusion, the machining time went
up, the costs skyrocketed, the end product weight went from around 1
lb. to about 4, and the market was only about 1/10th of the US market.
Then we wanted to go to another country, and they wanted us to use
Stainless Steel....
> 2. As far as one can derive it from the available information sources,
> spending for misc. purposes (TV Advertising, Brick Masters, Event Kits)
> is propably way higher in the US than it is in Europe.
Spending overall may be higher, but per-sales spending is likely much
lower. In the US they produce for 1 language, maybe 2 (English, maybe
Spanish) and they server 280 million people. In Europe they would have
to produce many more languages and adapt the advertising to many
different cultures in order to get that much coverage. And we won't
even get into production costs and regulatory issues (hint: there's a
reason that the USA is so media-oriented).
> Point one can easily be checked by anyone who can read a catalog and do
> some basic math. Point two may be disputed due to the fact that no
> precise numbers are available to the public, although is quite
> staggering how many projects are US-only, and advertising is relatively
> expensive in the US.
I'm not sure where you get your advertising cost numbers. But given
the size of the market, it makes economic sense to run test projects
on the largest uniform available market.
> So, tell me, what is "Reaping More Money at One End and Spending More
> Money on the Other End" other than subsidizing? Or, to return to your
> point of view, if the European prices are not "higher" and the US prices
> are not "lower", why do they still differ? And don't come with the VAT
> argument. We don't have a VAT of 87%...
What many many many people seem to not understand is that LEGO
corporation is a Business. They exist for 1 single and solitary
reason: To Make Money. They may seem altruistic and that they really
care (and I'm not saying they don't, just using this as an
illustration), but "caring" doesn't pay the bills. If they don't make
money, they go bankrupt and we no longer have colors to argue about.
The likelyhood that LEGO would use one part of the world to
"subsidize" sales in another part is approximately zero, at least in
the direction you are implying. I really doubt that they are selling
at a loss in the USA and making it up in the rest of the world. It is
more likely (and Jake indirectly confirms this) that they are taking
the most risks in the USA market, so that when a concept proves itself
they can move it to other smaller markets and still be profitable.
The alternative, that the corporation roll out every new program
equally across the entire world, would mean that either the
corporation would not exist, or we'd still be using just red 2x4
bricks. Or wooden ducks.
Ok, that's enough for today. Gotta go get dressed and face the world.
-Jon
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Message has 1 Reply:
 | | Re: LEGO Brick Masters Launches!
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| (...) Packaging often costs more than the product it contains. Also, in retail marketing, about half of the final sale price goes to the store, and most of that is spent covering overhead. (...) We have a packaging plant. No bricks are molded (...) (20 years ago, 22-Sep-04, to lugnet.lego)
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Message is in Reply To:
| | Re: LEGO Brick Masters Launches!
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| (...) Yes, partially I _am_ venting about high prices. But even more on the reasons behind them. OK, lets get some facts straight. 1. Almost any LEGO set/Product is typically 20-50% more expensive here in Europe than it is in the US, even after (...) (20 years ago, 22-Sep-04, to lugnet.lego)
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