A digression on Scalping...

[Inzane]

It seems to be human nature for people to blame others for their "problems" these days.


Now, as for a possible "solution", I can only offer this:

--> LEGO eliminates the concept of a "limited" set. If upon early release a particular set encounters higher than expected sales and acclaim, produce more of it. Period. If the TLG corporate folk, or LEGO brand store employees, feel bad for the kids who miss sets the solution seems simple to me. Extend the set's production run.

Case in point: NOBODY should be complaining at this point that they missed the UCS Star Destroyer set.

[tamuhockey]

I know they don't like scalpers and I know the basic reasons why. I just want to know what they think is the core of the problem and what can be done about it. I just seem to take giant walls of text to say that.

Core of the problem is that no real problem exists - its just the free market in action. The LEGO sets in question are just underpriced for the market, and the "scalping" corrects it. You don't see people "scalping" on tubs of basic bricks right?

Raising prices gets rid of the underpriced products, leaving no room for "scalping" to correct it. But then it would cost more and people would complain about that.

There's no problem - and anything that is done to correct a non-existant problem will likely only create problems and new things for people to complain about.

[onions]

The LEGO sets in question are just underpriced for the market, and the "scalping" corrects it.

i don't even know where to begin to comment on this.

[meeotch]

As a question - do people whining about scalpers, consider it scalping if a someine is an autorized LEGO reseller (or even store resellers, ala Wal-Mart, Target, etc) - who are able to purchase the products direct from LEGO for below MSRP, but then turn around and sell them for MRSP, in bulk? Its really no different from people buying at MSRP, and asking for more than MSRP - there is time and money invested in the initial purchase, storage (long or short-term) and marketing for resale, that needs to be made back somewhere down the line - one cannot expect resellers to take a net loss on all their products. If anything, purchasing farther upward the supply channel gives them an advantage over all other potential customers, and allows them to control a much larger percentage of the markets' supply, than an ordinary retail customer. For sets purchased at retail - at least all market participants have an equal (in theory) opportunity to purchase.

I'm going to address your questions. I thought I had answered some of these earlier, but I have a habit of retyping my posts, so I may have deleted it. As far as retailers (and I'm speaking right now of major retailers, not mom-and-pop stores, because I don't know anything about them) controlling a larger percentage of a market, oftentimes, the percentage of total production of a product is guaranteed to a retailer, so just because they sell out too fast doesn't mean that they get more, or on the flipside, they can't back out of guaranteed purchases just because the product isn't selling as they hoped, especially once production and order filling has actually commenced. This is why sets go clearance.

There tend to be multiple retailers competing with each other for the same market, which is where a) retailer-exclusive, and b) other, (in this case) non-Lego offerings come into play. For the actual common Lego offerings, they do have to meet the market, and in what is at this point a macro-economic scale, the forces (prices) tend to remain equal throughout. Part of the "value" that these retailers are adding to your set are that you can make one stop and pick up practically any other toy (TRU); some toilet paper and curtains (Wal Mart); or some toilet paper and curtains at slightly higher prices but no crack-heads (Target).

As well - shouldn't you also be getting on TLC's case, for selling their items at MSRP via the website, when they are selling them for much, much cheaper to resellers, and don't have anywhere near the overhead that their channel partners have? That's just blatent profit, for profit's sake. We certainly Can't have companies making a profit on products they sell.

I waited for this paragraph to address this, but the most important thing is this: it is WAY WAY WAY WAY cheaper per unit to sell 5,000 sets to one retailer (who then goes through the trouble, on their end, to divide up the shipments and send them to distribution centers, to further divide it up and give them to individual stores) than it is to find that one set little Johnny wants to order from S@H, package it up, and UPS it to him. That's where the price discrepancy lies, and it's the heart of an economy of scale. *see edited point below

The term "SCALPING" is just a concept invented so people have someone/something to blame so that they can feel better about not being able to afford products that are underpriced for their respective market. What people seem to consider scalping, is really just the markets' natural way of correcting itself to try and reach equilibrium - without it, free market economies CAN NOT FUNCTION EFFECTIVELY. Its a necessary function - it provides a great service to the market (and all its participants - buyers/sellers) - and the only reason to get upset over it is that you seem to think the world is completely fair, and that you are entitled to something despite lacking one or more of the following (time/energy/money/intelligence) when compared to the rest of the market participants who are in the market for a specific underpriced good/service.

I don't think anyone is doubting that there are market forces at work here, but to say that it's an invented concept is quite a stretch. Scalping (in the ticket-scalping sense) is actually illegal just about everywhere, because it creates a flawed secondary market. Part of what's good about most industrialized nations is that there are protections afforded to a consumer by law. Many people who want to go see a concert (read: buy a Lego set) will wait until the last minute, for reasons both in and out of their control. Gotta' make sure it fits the budget. Didn't think I could find a babysitter the day of the show. Whatever. But if there was a way to prevent the nefarious people from obtaining what little product (tickets, sets) was left (and I know that there is no good way, that's why it happens, and it happens flagrantly, in the concert industry), then whoever always intended on using the product for its intended purposes gets it, and maybe 5 late comers get lucky enough to enjoy it AT TRUE MARKET VALUE, not inflated value due to a frenzy market and monopoly. It's at this point that things reach the microeconomic level, and it trickles through the system. This is why property values for entire neighborhoods change so drastically. One desparate party to the transaction (buyer or seller) completes the transaction at an over- or undervalued price, and it affects all similar subsequent transactions. Who do you think tends to control the transaction in these cases?

hint: it's the one controlling the inventory...

*edit: I meant to add this somewhere around the *. Most retailers do have a price control, at least on some products (I know for a fact on things like video games, so maybe Lego sets). So, they are legally bound to not sell something for less than x dollars. This is why EVERY SINGLE PLACE, including Wal-Mart, sells iPods and Wiis at the same price. When they actually are on "sale," you'll notice that the price is actually the same, but you get something else like an in-store gift card or something. And so, while the retailer could sell something for more than the "MSRP" (in quotes since it's more a Manufacturers Required Retail Price), it wouldn't behoove them to sell it for more than every single other competitor, or they'll also miss out on selling those other secondary purchases like other toys and toilet paper when the customer goes elsewhere.

[tamuhockey]

As a question - do people whining about scalpers, consider it scalping if a someine is an autorized LEGO reseller (or even store resellers, ala Wal-Mart, Target, etc) - who are able to purchase the products direct from LEGO for below MSRP, but then turn around and sell them for MRSP, in bulk? Its really no different from people buying at MSRP, and asking for more than MSRP - there is time and money invested in the initial purchase, storage (long or short-term) and marketing for resale, that needs to be made back somewhere down the line - one cannot expect resellers to take a net loss on all their products. If anything, purchasing farther upward the supply channel gives them an advantage over all other potential customers, and allows them to control a much larger percentage of the markets' supply, than an ordinary retail customer. For sets purchased at retail - at least all market participants have an equal (in theory) opportunity to purchase.

I'm going to address your questions. I thought I had answered some of these earlier, but I have a habit of retyping my posts, so I may have deleted it. As far as retailers (and I'm speaking right now of major retailers, not mom-and-pop stores, because I don't know anything about them) controlling a larger percentage of a market, oftentimes, the percentage of total production of a product is guaranteed to a retailer, so just because they sell out too fast doesn't mean that they get more, or on the flipside, they can't back out of guaranteed purchases just because the product isn't selling as they hoped, especially once production and order filling has actually commenced. This is why sets go clearance.

There tend to be multiple retailers competing with each other for the same market, which is where a) retailer-exclusive, and b) other, (in this case) non-Lego offerings come into play. For the actual common Lego offerings, they do have to meet the market, and in what is at this point a macro-economic scale, the forces (prices) tend to remain equal throughout. Part of the "value" that these retailers are adding to your set are that you can make one stop and pick up practically any other toy (TRU); some toilet paper and curtains (Wal Mart); or some toilet paper and curtains at slightly higher prices but no crack-heads (Target).

That is all true - but that applies to everyone, even the so called scalpers. There's no guarantee they will be able to resale, just like the big stores, its a risk. And in return for the risk, as well as additional value they add, they wish to realize a profit for it. But why is it only considered "scalping" when the little guy does it? Its the exact same thing - just on a smaller scale.

As well - shouldn't you also be getting on TLC's case, for selling their items at MSRP via the website, when they are selling them for much, much cheaper to resellers, and don't have anywhere near the overhead that their channel partners have? That's just blatent profit, for profit's sake. We certainly Can't have companies making a profit on products they sell.

I waited for this paragraph to address this, but the most important thing is this: it is WAY WAY WAY WAY cheaper per unit to sell 5,000 sets to one retailer (who then goes through the trouble, on their end, to divide up the shipments and send them to distribution centers, to further divide it up and give them to individual stores) than it is to find that one set little Johnny wants to order from S@H, package it up, and UPS it to him. That's where the price discrepancy lies, and it's the heart of an economy of scale.

Not in all cases - and if indeed true - would mean retailers like Target/Amazon/Walmart, etc, would have to charge alot more to buy the product online, than what TLC does, as they have the same overhead costs associated with selling online that TLC does, but also has the added cost of having to purchase the sets from TLC (where TLC does make a profit) as well as paying for the initial shipment from TLC's distribution centers, to their own.

The term "SCALPING" is just a concept invented so people have someone/something to blame so that they can feel better about not being able to afford products that are underpriced for their respective market. What people seem to consider scalping, is really just the markets' natural way of correcting itself to try and reach equilibrium - without it, free market economies CAN NOT FUNCTION EFFECTIVELY. Its a necessary function - it provides a great service to the market (and all its participants - buyers/sellers) - and the only reason to get upset over it is that you seem to think the world is completely fair, and that you are entitled to something despite lacking one or more of the following (time/energy/money/intelligence) when compared to the rest of the market participants who are in the market for a specific underpriced good/service.

I don't think anyone is doubting that there are market forces at work here, but to say that it's an invented concept is quite a stretch. Scalping (in the ticket-scalping sense) is actually illegal just about everywhere, because it creates a flawed secondary market. Part of what's good about most industrialized nations is that there are protections afforded to a consumer by law. Many people who want to go see a concert (read: buy a Lego set) will wait until the last minute, for reasons both in and out of their control. Gotta' make sure it fits the budget. Didn't think I could find a babysitter the day of the show. Whatever. But if there was a way to prevent the nefarious people from obtaining what little product (tickets, sets) was left (and I know that there is no good way, that's why it happens, and it happens flagrantly, in the concert industry), then whoever always intended on using the product for its intended purposes gets it, and maybe 5 late comers get lucky enough to enjoy it AT TRUE MARKET VALUE, not inflated value due to a frenzy market and monopoly. It's at this point that things reach the microeconomic level, and it trickles through the system. This is why property values for entire neighborhoods change so drastically. One desparate party to the transaction (buyer or seller) completes the transaction at an over- or undervalued price, and it affects all similar subsequent transactions. Who do you think tends to control the transaction in these cases?

hint: it's the one controlling the inventory...

Ticket Scalping is illegal - only because ignorant politicians made it so to appease the masses. If tickets to ultra-popular/limited events were more expensive to begin with, there would be no scalping. Its only because those tickets were initially offered to the market at an undervalued price, that scalping can occur. Scalpers lose all the money invested in the tickets, if they can't sell them, and they aren't going to risk money for tickets they can't sell.

It takes 2 parties to make a transaction - and even if there are bunch of transactions where one party is desparate - it does not impact the entire market, especially in the long term, unless the product/service is under/over valued to begin with. If I were to sell a UCS MF for $2000 right now, it wouldn't impact the market for UCS MF sets at all in the long term, aside from removing one buyer and seller from the market. Other sellers may try to get that much - but there won't be enough desperate buyers to complete the sales, and the sellers will be forced to lower prices, or keep it (which is defacto them "buying" it at that price). If a product is under/over valued - no amount of desperate party transactions will have a long term affect on the "price" of the product/service in question. If I own a house that is estimated to be valued at 200K, in a neighborhood of 200K houses, and I sell it for 300K, it doesn't raise the value of other houses to 300K. If other sellers tried to sell at 300K, and no one else will pay it - the prices will drop, and drop, until buyers, who get the final say in what a product is "worth" purchase it, which would be back down around $200K. If enough desperate buyers are available, yes it will raise the price, but if so many buyers are desperate - obviously, there is value in the product above and beyond its initial offering price, hence it being undervalued.

[onions]

your reasoning behind items being over/undervalued at MSRP is baffling. aftermarket prices does not dictate what the retail value should have been. when it comes to selling assets, such as property, cars, stocks, price is determined by a buyer willing to pay the seller's asking price. you said it yourself in your example. when it comes to buying goods at retail, the price is determined by a lot of factors, paramount of which is determining what the fair asking price is in order to move inventory. it does a retailer no good to sit on goods priced at after-market value if they move 10% of the stock; retailers would rather see 100% of their stock out the door into customers hands. they could care less about aftermarket value. that does not determine if something is overvalued or undervalued.

now if those goods are removed from retail either by end of production run (LEGO) or limited supply (action figures), supply and demand will either drive the cost of those goods in the aftermarket higher or lower. that still doesn't dictate whether it was over/undervalued when it was still available through retail. those things aren't even remotely related.

[Solo]

Ace is right. Also, If LEGO doubled their prices to match the aftermarket costs, the company would simply crash. It's a very small number of people willing to pay that; a larger number think retail is too much and wait for sales and clearance.

Just because there are two parties involved in the deal doesn't mean the one selling it isn't responsible for picking the price. It's still scalping. Just because someone else is dumb or desperate enough to pay so much doesn't mean it's not. And again: ticket sales are nothing like LEGO sets. You're comparing apples to ...something a lot more limited than apples and shouldn't be compared.

Here's the typical life of the average SW set:

• A few people preorder as soon as they can because they want the set right when it comes out.
• Sets show up in most areas and sell out in a few off the bat. They start popping up on bricklink and ebay for a little over retail. S@H has plenty of stock.
• Sets are everywhere you can expect them, aftermarket is flooded and few sell for more than retail.
• Sales and Clearances come and go, and availability drops. Second hand sets online get a bit more expensive. S@H still has them in stock.
• Most areas are sold out, sets on bricklink and ebay are marked up more, S@H has sporadic availability.
• Everywhere sells out, aftermarket prices are at least half again more than retail and climbing.
• Leftover stock is found in warehouses at random, popping up in stores and S@H in single digit quantities, and sell out quickly.

Ticket sales are nothing like that. Or houses. I can't even fathom how you connect these with this hobby.

[meeotch]

If I own a house that is estimated to be valued at 200K, in a neighborhood of 200K houses, and I sell it for 300K, it doesn't raise the value of other houses to 300K. If other sellers tried to sell at 300K, and no one else will pay it - the prices will drop, and drop, until buyers, who get the final say in what a product is "worth" purchase it, which would be back down around $200K.

Specifically on your housing scenario: yes, if a house in a neighborhood sells for an increased value, the assessed value of the houses in the surrounding area most certainly goes up. To use your numbers, no their originally 200K houses don't go up to 300K, but they most certainly do go up to 215K. And so on and so forth. This is also why foreclosures are creating such a snowball right now. A foreclosed house reduces the property value of all houses in the neighborhood. Period. This isn't even an opinion, it's simple fact. If you don't get that, then it certainly explains your "pragmatic" view of economics.

As to your post on the whole, I can't help but notice that all examples spouted off (with the possible exception of the housing market, which I will address momentarily) concern transactions with non-competing suppliers or consumers. No one talks about vegetables being "over- or under-valued." Why? Because there are literally thousands of farmers competing to sell their wares to millions of consumers. Let's look at your two examples (and how they work in reality)through this prism...

Ticket scalping... even if 99% of the tickets are purchased by regular people, there're 1% out in the hands of scalpers. There are probably (almost certainly, since scalpers don't scalp tickets to local bar bands, they do it for Nine Inch Nails and Hannah Montana) more than the total tickets left available of people that got the night off from work unexpectedly, or found a babysitter, or moved some things around in the budget. So, let's say, 100 customers, 20 tickets left, in the hands of 3 independent scalpers. Who do you think is really in control of the price? Are you going to say the richest people in the group? No, the scalper decides how much money he will take for the ticket, whether he leaves it at 500 percent of the original price, or, due to some moral reasoning, "only" 200 percent. Either way, artificially inflated prices because, if the scalper wasn't there, the box office would still sell them for the original price to the first people to get there. Their prices practically HAVE to be guaranteed through law because they are a guaranteed monopoly (only Ticketmaster sells tickets to these bands, etc.) Just because a market will bear a certain price doesn't mean that it's justified in being charged.

Housing... right now has the opposite problem. Too many sellers competing for not enough buyers. So, just like the ticket scalping, the opposing forces are too out of whack to acheive a true equilibrium, and people are literally losing their houses over it. Ever heard of "buyer's market," because that's exactly what it is. Problem is, every seller is trying to undercut each other so badly that now (thanks to your free market) it's taking EVERYBODY down with it.

[MrCRskater]

I've been following this thread pretty closely and it has been quite interesting and thought-provoking for the most part. It is clear that there are a couple meat-heads here who are not interested in a discussion but merely in asserting their own narrow-minded views. But to those who have contributed to the dialogue, thanks! It's been a good read.

I think maybe what this boils down to is folks' sense of common decency and what is "fair". The act of walking into a single store and purchasing a cartload/clearing the shelves of one or two sets does carry some moral baggage in my opinion. Such a practice does ultimately rob others of the opportunity to own those sets. . . waited around for clearance prices to give others a so-called "fair" shot? It's still wrong because even though those sets may have been around a while, others were probably waiting around for the same moment to purchase those sets because they couldn't afford regular retail prices (imagine a 10-year-old with a $2.00/week allowance. A kid like that is not spending his money elsewhere, but is only saving up for the Republic Gunship, so "don't buy cola for 3 months" is not a valid argument).

As Don pointed out, if we lived in a utopian environment where everyone only took what they needed (i.e. only bought the sets they wanted, and only bought what they themselves would use), those high-demand items would still be difficult to come by. But the irksome element here is when I've visited 10 different stores within 100 mile radius and can't find what I want, look online and see that Joe Shmo-face has 5 and is selling them for double the retail price, my immediate reaction is that Joe Shmo-face and all of his shmuckity cronies have robbed me of the opportunity to own a set at what I believe is a "fair" price. Sure, it would be disappointing to know that several other LEGO customers just beat you to the punch, but that (and that alone) could be attributed to a capital market, and I could live with missing a set knowing that those who did get it are at home right now swooshing it around their house with a smile. But it's downright infuriating to know that someone beat you to the punch and stood to gain from it financially. For the record, disappointment and fury are two different emotions. . .

Now, as for a possible "solution", I can only offer this:

--> LEGO eliminates the concept of a "limited" set. If upon early release a particular set encounters higher than expected sales and acclaim, produce more of it. Period. If the TLG corporate folk, or LEGO brand store employees, feel bad for the kids who miss sets the solution seems simple to me. Extend the set's production run.

So far, this seems the best solution to me. Of course, it's not gonna happen because those retailers pay good money to TLG for those exclusive sets, and any kind of on-demand production isn't economically viable.

Finally, I'd just like to denounce those who think this practice is "smart". Sure, you can make a fair bit of money on retired LEGO sets, but on average you can only recoup about 5 or 6 times the retail price. There are far more lucrative "investment" opportunities out there, so scalping/investing in something with such a low kick-back doesn't seem very smart to me. . .

[tamuhockey]

your reasoning behind items being over/undervalued at MSRP is baffling. aftermarket prices does not dictate what the retail value should have been. when it comes to selling assets, such as property, cars, stocks, price is determined by a buyer willing to pay the seller's asking price. you said it yourself in your example. when it comes to buying goods at retail, the price is determined by a lot of factors, paramount of which is determining what the fair asking price is in order to move inventory. it does a retailer no good to sit on goods priced at after-market value if they move 10% of the stock; retailers would rather see 100% of their stock out the door into customers hands. they could care less about aftermarket value. that does not determine if something is overvalued or undervalued.

now if those goods are removed from retail either by end of production run (LEGO) or limited supply (action figures), supply and demand will either drive the cost of those goods in the aftermarket higher or lower. that still doesn't dictate whether it was over/undervalued when it was still available through retail. those things aren't even remotely related.

Do a degree, you are correct - aftermarket prices don't dictate what the retail should have been - but the reverse is also true - MSRP doesn't dictate what the aftermarket true value should be either. You can't have it both ways. My point is that - if the aftermarket or "TRUE" market value of the product is greater than the MSRP - scalping will occur, the market demands it. If the overhead costs of just hanging onto the merchandise for a later time to resale at true value, allows for a profit - believe me retail stores would do it - but often times the overhead does not allow it, or they have contracts in place with the manufacturers that forbid it. If the aftermarket value is less than MSRP - no scalping will occur, and the product will still be sitting on shelves. If the product is properly priced such that its MSRP reflects its true market value, or at least close enough to it, than overhead from purchase/storage makes it economically unwise to purchase and resell - the store will be able to sell them all - and there is no incentive for scalping to occur - the end result of course is that everyone ends up paying a higher price for the product.

If the item isn't "worth" the asking price, it doesn't sell - period.

[Solo]

OK, but that doesn't has any relevance on MSRP because it's no longer available at retail.

You're not being clear here by mixing the two markets. MSRP only applies to sets at retail. Hence the R. Once you toss in a middleman, MSRP goes out the window and the price settles at what people are willing to pay the scalpers. They're not underpriced for the aftermarket because the aftermarket price is already set by whoever is stepping in as the middleman.

[tamuhockey]

Specifically on your housing scenario: yes, if a house in a neighborhood sells for an increased value, the assessed value of the houses in the surrounding area most certainly goes up. To use your numbers, no their originally 200K houses don't go up to 300K, but they most certainly do go up to 215K. And so on and so forth. This is also why foreclosures are creating such a snowball right now. A foreclosed house reduces the property value of all houses in the neighborhood. Period. This isn't even an opinion, it's simple fact. If you don't get that, then it certainly explains your "pragmatic" view of economics.

Foreclosures are only creating a snowball where properties were OVERVALUED to begin with. Its why its only hitting certain areas hard - and why property values in my neighborhood, actually went up (albeit only about 1-2%) last year despite a few foreclsoures in the area.

As to your post on the whole, I can't help but notice that all examples spouted off (with the possible exception of the housing market, which I will address momentarily) concern transactions with non-competing suppliers or consumers. No one talks about vegetables being "over- or under-valued." Why? Because there are literally thousands of farmers competing to sell their wares to millions of consumers. Let's look at your two examples (and how they work in reality)through this prism...

And there are tons of competitors, even amongst the scalpers - it makes no difference, if anything it makes sure the scalpers prices reflect the true market value.

Ticket scalping... even if 99% of the tickets are purchased by regular people, there're 1% out in the hands of scalpers. There are probably (almost certainly, since scalpers don't scalp tickets to local bar bands, they do it for Nine Inch Nails and Hannah Montana) more than the total tickets left available of people that got the night off from work unexpectedly, or found a babysitter, or moved some things around in the budget. So, let's say, 100 customers, 20 tickets left, in the hands of 3 independent scalpers. Who do you think is really in control of the price? Are you going to say the richest people in the group? No, the scalper decides how much money he will take for the ticket, whether he leaves it at 500 percent of the original price, or, due to some moral reasoning, "only" 200 percent. Either way, artificially inflated prices because, if the scalper wasn't there, the box office would still sell them for the original price to the first people to get there. Their prices practically HAVE to be guaranteed through law because they are a guaranteed monopoly (only Ticketmaster sells tickets to these bands, etc.) Just because a market will bear a certain price doesn't mean that it's justified in being charged.

Maybe not justified in being charged - but that would be the true market price, wouldn't it. And if it was charged - there would be no scalpers, which was my entire point.

Housing... right now has the opposite problem. Too many sellers competing for not enough buyers. So, just like the ticket scalping, the opposing forces are too out of whack to acheive a true equilibrium, and people are literally losing their houses over it. Ever heard of "buyer's market," because that's exactly what it is. Problem is, every seller is trying to undercut each other so badly that now (thanks to your free market) it's taking EVERYBODY down with it.

I love the free market - and the problem we have in the US now, is not the cause of the FREE MARKET, its the cause of forces acting to counteract it, specificially with regard to lending. If homes hadn't become so overvalued during the bubble years leading up to this, it would not be the huge problem that it is.

OK, but that doesn't has any relevance on MSRP because it's no longer available at retail.

It has all the relevance in the world - if MSRP had been priced higher - there would be no incentive for people to scalp it, hence no scalping, and hence its value wouldn't be jumping after retail. Its value only jumps after retail, because it was underpriced to begin with, thus creating the secondary after-market price increase. If it was priced at less than retail or even at retail, once its no longer available at retail - people wouldn't be complaining.

Finally, I'd just like to denounce those who think this practice is "smart". Sure, you can make a fair bit of money on retired LEGO sets, but on average you can only recoup about 5 or 6 times the retail price. There are far more lucrative "investment" opportunities out there, so scalping/investing in something with such a low kick-back doesn't seem very smart to me. . .

How old are you, and how rich are you that you think a measly 500-600% return on investment isn't a lucrative investment opportunity? In actuallity, after taking into account storage overhead - you can expect maybe a 100-200% return on investment (selling for 2-3 times initial cost) for some of the better deals. Usually, its closer to 50% ROI. And it often involves very short time-tables - i.e. buying up hundreds of boxes of the straight track for less than $5 from LEGO, holding onto it for 3 months, then reselling them all for $25 a box on eBay. Doesn't sound like alot of money on a small scale - but you start getting into the point where you are spending hundreds, or thousands of dollars a month, and its easy enough to make a full-time job just flipping LEGO. Even better, that you can do it just in spare time, as its not terribly time consuming.

But that's alot more work than sticking it in a CD (maybe 3% ROI), an average mutual fund (8-12% yearly ROI, if you are lucky) or being super-aggressive in the stock market (25% + ROI, but with a boat-load of risk). Reselling SW sets has virtually NO risk, if you pay attention to market trends, and easily offers double (or more) the ROI you can get being aggressive in the stock market, while not having to spend anywhere near as much time doing research.

OK, but that doesn't has any relevance on MSRP because it's no longer available at retail.

You're not being clear here by mixing the two markets. MSRP only applies to sets at retail. Hence the R. Once you toss in a middleman, MSRP goes out the window and the price settles at what people are willing to pay the scalpers. They're not underpriced for the aftermarket because the aftermarket price is already set by whoever is stepping in as the middleman.

Sorry - missed your edit - They both apply, as if the MSRP had been set appropriately to match its true value, there wouldn't be a drastic after-market increase, and thus no middlemen to step in and scalp. Everyone would be able to buy it at retail, or at least at very, very, very close to retail price. The fact that extra, non-retail middleman factor into the equation, just reinforces that the set is underpriced.

[Solo]

if MSRP had been priced higher - there would be no incentive for people to scalp it, hence no scalping, and hence its value wouldn't be jumping after retail. Its value only jumps after retail, because it was underpriced to begin with, thus creating the secondary after-market price increase. If it was priced at less than retail or even at retail, once its no longer available at retail - people wouldn't be complaining.

You don't have to be paying more than retail to be scalping. Here's how a higher MSRP would pan out: Fewer people would buy it when launched, most of the ones available would hit clearance before people touched them, those would sell out, and people would again stock up and sell it for more than what they paid, possibly even more than the higher MSRP depending on demand after the fact. Meanwhile the company would realize it was either priced too high or that interest was too low - so the subsequent runs would be adjusted by either lowering the cost or cutting the production numbers. Products have a limited shelf life and can't be available indefinitely. MSRP is calculated to make a profit and move the boxes in a balance as careful as possible. You can't possibly think jacking up the price would sell more sets would you?

Also, please, just edit your last post instead of replying consecutively. There's no need to draw this out more than it already has been.

[tamuhockey]

if MSRP had been priced higher - there would be no incentive for people to scalp it, hence no scalping, and hence its value wouldn't be jumping after retail. Its value only jumps after retail, because it was underpriced to begin with, thus creating the secondary after-market price increase. If it was priced at less than retail or even at retail, once its no longer available at retail - people wouldn't be complaining.

You don't have to be paying more than retail to be scalping. Here's how a higher MSRP would pan out: Fewer people would buy it when launched, most of the ones available would hit clearance before people touched them, those would sell out, and people would again stock up and sell it for more than what they paid, possibly even more than the higher MSRP depending on demand after the fact. Meanwhile the company would realize it was either priced too high or that interest was too low - so the subsequent runs would be adjusted by either lowering the cost or cutting the production numbers. Products have a limited shelf life and can't be available indefinitely. MSRP is calculated to make a profit and move the boxes in a balance as careful as possible. You can't possibly think jacking up the price would sell more sets would you?

Also, please, just edit your last post instead of replying consecutively. There's no need to draw this out more than it already has been.

No, of course raising the price isn't going to sell more sets - but it would sell more sets at a price reflecting its true market value (both at retail and afterwards in the secondary market) - and in the long run, allows everyone who wants to purchase one at true market value to do so - something the current situation doesn't allow.

If scalping is just selling for more than you paid for it - then every retailer is a scalper, as is LEGO, for making a profit for making it in the first place. Scalping does not equal profiting.

[deco_droid]

The LEGO sets in question are just underpriced for the market, and the "scalping" corrects it.

i don't even know where to begin to comment on this.

it makes sense to me... look at our newest entry, the at-ot/dropship combo. as many here have already pointed out, the two vehicles contain a couple hundred parts less than the standard gunship and similar at-te from the latest clone wars line. yet lego is pricing it a good $50 higher than those two, with no special minifigs or unique molds to justify the increase.

it seems to me that lego is experimenting with supply and demand by overpricing this item for the market, which will lower the number of scalpers interested. i know a $250 set is not something i am planning to buy multiples of, store, and hope to double my money in a couple years. now if amazon gets them and works some of their discount wizardry, all bets are off.

[bigospedros]

i'm confused, we're suggesting here that the basic RRP for a set should be raised so that it's the same as the set sells for years later when it's no longer in production?! Firstly, how on earth would they know what a set might sell for years down the line when it's not available and secondly, why would they do that anyway given that a lot of people complain about the prices as they are now?!

Items only go up in "value" or rather, average selling price, because they are limited in quantities and have the added variable of condition which will increase the value of items said to be in mint condition. It's very hard to predict what will increase in value and what won't.

Also, the actual number of people who will pay massively over the odds for a mint item is a teeny tiny percentage of the overall market. So I'm not sure why anyone would want to pander to such a small element of their target audience?!

Perhaps, for the clarity of this thread, we need to come up with an agreed defintion of "scalping" ... although whether we can actually do that, based on the varying views in this thread, I doubt ?!

[Solo]

I'm can pretty much guarantee you the higher cost on that set is a reflection of the times, and not an attempt to adjust for aftermarket price gouging. the trend seems to be things are getting more expensive for us in general, but that was a whole 'nother discussion.

Also, since the comparison has popped up a few times (by myslef included), I want to point out the difference between scalpers ans retail stores. I know I'm stating the obvious, but scalpers buy sets at retail and add their markup on top of whatever anyone else would have paid. Actual stores - online or off - buy direct from the manufacturer at a reduced cost so that when they price the set at around MSRP they are still making a profit. If someone really wanted to make a business out of this, they would go through the proper avenues and set up an online shop of their own to turn a profit. Scalpers rely on the convince of their local stores and online shops and take advantage of not only the collectors, but the existing retail system to circumvent the extra cost of running a legitimate business.

Edit to respond to Pete: Exactly. Aftermarket price is driven by the limited availability. Don't make me break out my crayons and start drawing charts, because I so will. Scalping has already been defined in here several times: Purchasing a set at retail to sell for profit later. It hasn't been said like that verbatim, but that's the simple agreed upon explanation. At least, for the people that don't think it's just made up.

[ufjason]

I definitely have seen Lego experimenting with pricing. Star Wars and IJ sets were slightly higher than non licensed sets. There are sets like the dwarves' mine selling for 10 dollars more than their original release. What Tamu is talking about regarding pricing are basic microeconomics and macroeconomics principals. I've linked a wiki on the subject so you can better understand what he's explaining. These concepts apply to EVERYTHING in the marketplace. MSRP is what keeps pricing lower than true market value in some cases. TRU typically prices higher than msrp, but I think that is what they should do. They are a specialty retailer and in order to compete, they sell a complete line as opposed to big box discounters like target and walmart. To charge a slight premium for this makes a lot of sense in order for them to survive in a highly competitive market place.

http://en.wikipedia.org/wiki/Economic_equilibrium

[onions]

The LEGO sets in question are just underpriced for the market, and the "scalping" corrects it.

i don't even know where to begin to comment on this.

it makes sense to me... look at our newest entry, the at-ot/dropship combo. as many here have already pointed out, the two vehicles contain a couple hundred parts less than the standard gunship and similar at-te from the latest clone wars line. yet lego is pricing it a good $50 higher than those two, with no special minifigs or unique molds to justify the increase.

it seems to me that lego is experimenting with supply and demand by overpricing this item for the market, which will lower the number of scalpers interested. i know a $250 set is not something i am planning to buy multiples of, store, and hope to double my money in a couple years. now if amazon gets them and works some of their discount wizardry, all bets are off.

unless you work for lego, you can't tell me that the price of 10195 is overpriced. that observation is simply an opinion and at best an educated guess until we hear it from someone on the inside.

also, tamu, your reasoning is still flawed because A) like i said before, the aftermarket value has no bearing on MSRP, B) MSRP has no bearing on what the aftermarket price should be, will be, or might potentially be, and C) you're assuming, and this is a big one, that the majority of consumers that purchase LEGO are doing it in the aftermarket. the aftermarket sales is so MINISCULE compared to the numbers from retail channel sales. LEGO, and pretty much most companies selling goods, are in the business to make their products affordable to the widest possible customer base as possible. They do not see their products as "collectible", just a product that they need to sell. The collectible mentality is purely driven by the consumer and has no relation to the pricing models used by LEGO.

MrCRskater's post reminded me of a point that i wanted to make but never ended up typing up. I think what really makes people's blood boil when it comes to scalping is that I think for the most part people are decent people. and when someone else acts in a way that is outside their norm or definition of decency, it makes them angry. in terms of the various scenarios, when people go out and buy all of the 1 per case figure from a particular line in a 50 mile radius just to make a quick buck, it goes against what someone might do which is to buy the one figure they want to own and leave the rest so that others who can appreciate the figure has a chance at owning one. maybe that person will buy an extra to help out a fellow collector friend. there's a conflict of social mores here; depending on which side of the line you're on, you can either think "i made a few bucks" and "sucks to be you" or "crap, who the eff is buying all the figures" or "crap, i have to go to evilbay and find it". of course in the offchance that all the figures in the area were bought by collectors who will appreciate it, then hooray. but the chances of that happening are pretty slim. this last point has little to do with LEGO for all the reasons outlined before; but they can't be excluded from this scenario altogether. Yes sets are available at retail for months at a time, yes you can buy them from Shop@Home. But that doesn't help the mom or grandma or aunt or uncle or whoever who is trying to buy set number xxxx for their son's/daughter's/nephew's birthday/graduation/special day present.

I'm totally going off here, but how many of you remember the big star wars day at toys r us last summer to celebrate the 30 yr anniversary? i was at san diego comic con that day and we went to the local TRU. once we were let inside, one guy took his cart and loaded up on 7666, took every single set he could find. 10 minutes later, i see a little boy and his grandma, no joke, looking through the lego stuff. I asked what they were looking for and they said 7666. i told them to ask one of the workers for more and told them that there are no more on the shelf (since they wouldn't restock until there was room). a few seconds later, the kid happy as a clam walked up to the cashier. the mom thanked me cause i had the foresight to know how those stupid midnight releases worked. had i not been there, he would have gone home disappointed. just because there were other means of getting it, it wouldn't have been as much fun for that boy. slurping up all the available stock can make you a rich man for sure, but at the cost of affecting others negatively.

bottom line: scalping is selfish.

[bigospedros]

Scalping has already been defined in here several times: Purchasing a set at retail to sell for profit later. It hasn't been said like that verbatim, but that's the simple agreed upon explanation. At least, for the people that don't think it's just made up.

I'm not sure I agree with that definition though ... to me, that definition is just one of investing in a product in the hope of a gain over a period of time (set by the investor).

In my opinion, "scalping" needs to include the element of targetting specific items and buying in bulk to maximise profit and potentially, limit the supply (at least locally) to push up demand. It has to include a selfish element in a way, otherwise, as I said, it's just pure investment.