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Now before you ask why LEGO costs more in your country again

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Now before you ask why LEGO costs more in your country again

Postby Solo » Fri Jan 08, 2010 2:55 am

I went dumpster diving and pulled this out of the old forum because it comes up often enough to warrant a permanent post:
sometime around 1997, I wrote:This has been beaten to death. It's not just simple currency conversion here - it's loads more complicated than any of us have gotten into. I think the easiest way to lay it down is this:
a while back, Steve wrote:The US toy market is the most competitive market in the world.
He said that many months ago talking about the Canada vs US issue, but it applies to all countries.

To elaborate:
speaknspell wrote:This is a difficult question and one I'm going to throw some discussion points at.

When considering the toy market there are several different factors to consider. Licensing, location, and competition are the primary factors that need to be considered when you're examining these differences.

Licensing:
What are the various parties having to pay in order to market a product with someone else's brand name and what kind of premium does that allow?

Location:
How is the market in various countries and in various retail outlets? Within certain countries do you have to sell your product at a loss while in other countries do you have to make up that difference due to an economic climate that allows for higher pricing?

Competition:
Within a given niche market (Star Wars for instance) how are the competitors pricing their products? Does having a lower price than a competitor reduce the apparent value of your product?

With respect to exchange rates (which are constantly fluctuating) a product has to be sold in a way that makes it profitable. Countries like the UK have a different tax structure than the United States. This accounts for some of the difference in price. Beyond this, pricing has to vary from country to country to account for the different laws and tax codes that allow for doing business there and that allow for importing product to that country.

This may not explain everything, but there is much more to it than simply exchange rate differences. The LEGO Group has to be profitable is the other part of the equation. Remember that we're coming off a series of years where the company was not profitable in the least and that new strategies have enabled the company to grow again. Comparing today's price structures to that of even a few years ago have to take into account that we've gone from near bankruptcy to profitable and growing in the course of a few years.

All this being said... its not fun when things are expensive and I acknowledge that. Just remember that imports and taxes are big factors but also that being profitable is one of the main drives for the company. I'm currently working on a project to explain this all better so I'll have more for you soon. Please feel free to continue this discussion though.

Steve


Additionally, admitting that it's not just LEGO products that have a gap to close proves outright that it's primarily the market - not the company - that is to blame for the higher cost. Driving down to the US and buying your toys there will just show how much stronger the American dollar really is [compared to the Canadian dollar], because while the exchange rate may be 1:1 or better for some reason, the buying power is still lower.


Expand:
I'm not trying to say it's necessarily all that fair, or that there is nothing they can do... I'm just saying it's a very complicated issue and while LEGO is in this to profit - they're not out to rip people off. They're probably reevaluated on a regular basis because that's just smart business, Not keeping up with the market would be financial suicide. But any changes won't really be effective until the next lines come out because the prices are established before the sets are released. If there is any noticeable change, expect to see it in the 2008 sets at the earliest. But I'll bet that's as descriptive as a response as you can get, because I don't think Steve could give specifics about LEGO's pricing strategy.
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