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Lego Sales Model Idea

alaskaguyalaskaguy Member Posts: 157
Background/Disclaimer:
The idea I propose below is from someone who really does not care about:
  • "collecting" (which I define as buying sets to keep unopened, unused, simply to "have" them with the intent of their increasing in value - but with genuine interest in the items collected)
  • "speculating" (which I define as buying sets purely to resell at a profit, either immediately or in the future)
  • "protecting collectors" or the "secondary market"
  • Viewing Legos as any kind of investment, or anything more than toys
The intent is simply to get Legos into the hands of people who want them, for whatever reason, but probably to play with them or have their kids do so (or both).

The Idea:
Make "out of print" sets available when sufficient demand has been established. Think of it as how the "Ideas" program works, except people vote by putting up their money, and the designs are all Lego rather than customer-submitted. This mechanism might work as follows:
  1. Program is limited to VIP members only.
  2. Lego posts the "minimum demand" required to produce a run. This figure can vary by model and run, but once established for a particular run, would not be changed.
  3. Lego posts whatever price it wants for each copy in the run (optionally, with different prices for runs 1, 2, 3 or 10 years out).
  4. Interested parties can "sign up" for the run, indicating how many copies they want, and how long they're willing to wait for production to be confirmed (let's say, 1, 2, 3 or 10 years).
  5. Customers PRE-PAY for their order - including any shipping fees, based on the maximum price they would pay as indicated by their wait time (with early delivery resulting in the appropriate refund).
  6. Payment is NOT-REFUNDABLE unless Lego fails to confirm production by the customer's indicated wait time.
  7. If a customer's wait time is exceeded, customer is given the option to "renew" or take a refund (reducing the number of orders received).
  8. Once the required number of copies have been ordered, Lego would announce a "cutoff date" to get an order in for that run (orders received after the cut-off would go into the queue for the next run).
  9. Lego would begin production no later than 6 months after production is confirmed by order count, with customers guaranteed shipment within 3 months of production start.
Anticipated Results:
Here is what I think would happen:
  • Lego would develop valuable, accurate data on customer demand, which would both allow it to create "build to order" supply chain capability, and develop NEW sets based on demonstrated and proven demand.
  • Lego reduces risk of producing unwanted sets that end up heavily discounted, damaging its brand.
  • Lego collects enhanced revenue from "pent up demand", rather allowing re-sellers to collect that revenue. Essentially, Lego would OWN the secondary market (more or less).
  • Lego books current revenue against future production.
  • Average consumers who want "out of print" sets (including collectors) would have a chance to get them, without buying at inflated prices on the secondary market.
  • Speculators would largely be driven out of business - with demand for their services largely reduced to the "must have it right now" crowd. This allows "real customers" a better chance to get current production items
  • Current item production runs can be reduced (thus reducing risk), since speculators are no longer driving up sales based on pure speculation (simplifying forecasting).
  • Collectors who are largely motivated by the "toys as an investment" philosophy would be pissed off.
  • Collectors who are largely motivated by the "this stuff is cool, so I want it" philosophy would get more for their money.
  • Collectors could actually un-box, build and play with their toys without worrying (too much) about losing value.
My Question:
So, what do you think? If this program were announced, would you be for it, against it, or indifferent? Personally, I would immediately order two copies of every Classic Space and Castle set ever made, and indicate I would wait ten years (:



mak0137Matthew

Comments

  • AanchirAanchir United StatesMember Posts: 2,313
    edited September 17
    I don't see this as being really viable. You'd probably need each set to sell at least 10,000 units to even be worth producing, and that's assuming that it didn't need any discontinued molds to be reintroduced, which would raise the production costs even more and require producing even more units to adequately subsidize those costs. I don't know how many people would be willing to pre-pay for a re-release in the way you're describing. Also, LEGO has tried re-releasing classic sets with far fewer obstacles and strings attached in the form of the LEGO Legends line and it wasn't profitable. I don't believe that was a case of the sets being wildly overproduced or anything like that. The demand just wasn't there.

    Even if all these obstacles could be overcome, I don't see any way that this would be a better use of the LEGO Group's resources than producing actual new sets that meet today's higher design standards.
    Jackad7stluxLego_Star
  • alaskaguyalaskaguy Member Posts: 157
    The question wasn't would it be viable....it was whether you personally would be for, against or indifferent? (:

    But with respect to viability...there isn't really any risk to Lego, beyond fairly minimal costs to establish the program. They're setting the price...they can factor mold costs, etc. into that price.  If not enough people are interested, no skin off their noses - they've got no obligation unless they meet the target number that they have determined makes it worth their while. It's a lot like putting your car on Craigslist for a high price.  Yeah, sure, probably will not sell, but it doesn't cost you anything, so why not?

    With respect to Legends...the difference here is that it is customer driven...proven demand, vs speculation.


  • drdavewatforddrdavewatford Hertfordshire, UKAdministrator Posts: 6,019
    I'd be against it - it'd divert resources and production capacity away from the design and production of new and (generally) improved sets.

    Plus as @Aanchir states, history has shown us that insufficient units would be sold to make it economically viable....

    catwranglerdougtsstluxLego_Star
  • PaperballparkPaperballpark UKMember Posts: 2,765
    I'm with @drdavewatford and @Aanchir on this - it would be neither desirable nor viable. Let's take a couple of sets as examples:

    #10179 - a 10-year old model, now far surpassed in terms of detail and techniques. Why would Lego have produced this again when they could (and have) simply redesigned it, improving it in the process?

    #10182 - probably the most 'wanted' of all the old modulars, and yet, again, it's a 10-year old model. The current modulars are far more detailed and advanced in building techniques. It doesn't even have an interior. Plus there is at least one part which is out of production, so it would either require a redesign anyway, or a new mold - do not underestimate the massive cost of producing a new mold. It's worth it when they anticipate selling half a million of the sets it's in, but not at all when they only expect to sell 10k - 20k.

    Not going to happen, and for good reasons.
    stluxgmonkey76
  • gunther.schnitzelgunther.schnitzel Member Posts: 92
    You probably realise this, but it is basically the crowdfunding model. The money would need to sit in escrow until the production run target is met.


    I think it has some merit but the timeframes you mentioned would be unrealistic, looking at Kickstarter, a duration of max 3 months would be more realistic. If quantity not met then refund after the 3 months. LEGO would need to decide on production run size and unit cost in advance which determines the total they need to raise to fund the set.


    Exchange rate fluctuations would be a problem (compare EUR / GBP rate from 2 weeks ago versus today or a year ago), plus accounting would be a hassle if escrow not used.
    catwrangler
  • catwranglercatwrangler Northern IrelandMember Posts: 1,566
    Further to other people's comments, I'm not sure how many people would want to wait for the longest periods mentioned to get the set. I could have money sitting in escrow for 10 years, or I could have it in my savings account accumulating interest. 

    Since nobody's linked to it yet this time, here's TLG's Jamie Berard posting on Brickset to explain why they don't do set re-releases... obviously, you may feel that the UCS Falcon surpasses the arguments he makes, but that's a remake and also a one-off in a franchise with seemingly bullet-proof popularity...
    Aanchirgmonkey76
  • HanzoHanzo VAMember Posts: 366
    So kickstarter for Lego sets? 
  • CCCCCC UKMember Posts: 15,101
    Against. Buy what you want on the secondary market or something different from the current line up of sets. There are loads of sets and variety available.
    drdavewatfordbgl_84stluxBumblepants
  • ScatterbugScatterbug WalesMember Posts: 80
  • CCCCCC UKMember Posts: 15,101
    alaskaguy said:
    The question wasn't would it be viable....it was whether you personally would be for, against or indifferent? (:

    But with respect to viability...there isn't really any risk to Lego, beyond fairly minimal costs to establish the program. They're setting the price...they can factor mold costs, etc. into that price.  If not enough people are interested, no skin off their noses - they've got no obligation unless they meet the target number that they have determined makes it worth their while. It's a lot like putting your car on Craigslist for a high price.  Yeah, sure, probably will not sell, but it doesn't cost you anything, so why not?

    Viability is important. Personally, I am against lego doing anything that isn't viable. If they do something that they know isn't viable, then it is not a good sign.

    Also, it is not as "without cost" to LEGO as you make out. Some of these are similar to reasons given by others as above.

    1) If LEGO announce that they might remake a retired set if enough people want it, then this damages the secondary market for retired sets. Thus lego loses the reputation that you can sell on older (but new or used) lego sets for a reasonable price and this will affect future sales, whether to primary users or resellers. Just as important, this would push resellers towards reselling of current product rather than retired product, and this seems to be the opposite of what they want to do with resellers. They seem to want to stop reselling of current product and don't mind reslling of retired product. Why sit on sets for a few years when any that are likely to be good earners are remade, when you can aim to short stock LEGO on specific sets to make a quick flip.

    2) It ties up people's money. It wouldn't surprise me if people don't spend the £X/$X they have committed to spend on the remake on other LEGO after the time limit. They have committed to spend it, so they don't buy current product as well. Then when the time limit elapses, the buyer might decide to forget about the LEGO and spend it on something else. So LEGO don't get that money unless they do the remake. If they don't do the remake and refund the money, there is no guarantee that the buyer purchases current LEGO sets.

    3) It gives people hope / annoys them if i fails. This could turn against LEGO if they then decide the numbers are not quite there to make the product. Damn you LEGO for not remaking what I wanted, but for remaking that other crappy set.

    4) A big one - it would be against consumer law in many countries, unless they gave the buyers the option to cancel their reservation at any time and refund them. If they allow cancellations, then there is no point in the scheme. Why tie up money in the early stages if there is no benefit to going in early? Sensible buyers would wait until the remake is guaranteed and then sign-up. So there is a catch 22, nobody sign up until everyone else has signed up. Of course, they could do early bird specials, but again that may annoy customers. Why pay more than somebody else because you missed the early slot. Better to let the time limit expire and hope to be an early adopter next time. After all once it is remade, it becomes a retired set again, and so will enter the process again.

    5) Prices. If LEGO puts prices similar to the secondary market on it, then they would get slated for price hikes. Even if the price is reasonable compared to the secondary market, people would get annoyed at having to pay reseller prices to LEGO. They should be doing it at prices similar to the original or likely current RRP, not inflated prices.


    BumblepantsRakulbgl_84RogerKirksid3windrstluxcatwrangler
  • sid3windrsid3windr BelgiumMember Posts: 864
    Hanzo said:
    So kickstarter for Lego sets? 
    Brickstarter(c)(r)(tm) you say?

    Domain Name: brickstarter.com
    Registrar URL: http://www.godaddy.com
    Registrant Name: jose maria pascual

    Darnit.

  • ryjayryjay Member Posts: 861
    I walk into a store, I look on the shelf, if I like what I see, I might buy it...if a don't like it,  I move on...that is the extent of my opinion to Lego :)
  • alaskaguyalaskaguy Member Posts: 157
    Well, with the recent release of Taj Mahal, and Lego's layoffs, maybe this sales model idea might get some traction (:
  • SumoLegoSumoLego New YorkMember Posts: 7,939
    ^ Um, those really have nothing to do with each other.  Umdoubtably, they had already started production on the set before the layoffs.
    stlux
  • alaskaguyalaskaguy Member Posts: 157
    Maybe they did. But do you think Lego just woke up one day and said, "hey, let's lay off a bunch of people" ?  That was probably in the works for a while too (:

    Anyway - I was not really trying to make a direct link between the two (TM re-release and the layoffs).  My point really was really, "with less people, make Lego will be more inclined to be 'Lazy' and put out more re-releases".
  • FauchFauch FranceMember Posts: 1,776
    I doubt that's the people working on designing new sets who gets laid off.
    PapaBearsid3windrAanchir
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