So inflation is so far the word of 2022, and even here in our little LEGO enclave, it looks like we no longer can hide from it.
Unless you live under a rock, you will notice that the cost of living has skyrocketed in the past few months, due to the War in Ukraine, supply chain issues, labour cost increases and rising interest rates.
LEGO have officially come out with an statement that there will be some increases to LEGO sets, taking in effect in August and September 2022
See below for an official statement from LEGO.
Update (10/7): Thanks to a US-retailer, we now have a partial list of sets that will be going up in price in the US.
Official Statement from LEGO on price updates
The current global economic challenges of increased raw material and operating costs are impacting many businesses.
Putting consumers first is at the heart of what we do as a company, and for some time, we have absorbed these costs to keep pricing stable. However, as these costs have continued to rapidly rise, we have taken the decision to increase the price on some of our sets. This increase will come into effect in August and September.
The increase will differ depending on the set and prices will change on around a quarter of the portfolio. On some sets we will not alter price, on others there will be a single digit increase and on larger, more complex sets the percentage increase will be higher.
We will continue to work to ensure our products offer great value and full recognise how important this is to our fans and everyone who love our products.
In the LEGO Ambassador Network where this statement was shared, I did ask on the types of products, and whether sets at the lower end of the portfolio, catered to budget shoppers, families, and children would be impacted, and received this response
Prices will be changed on between 150-190 products out of a total portfolio of around 600 products depending on the country. (Prices will not change on approx. 75% of the portfolio).
We have tried to ensure that our kids’ ranges have the minimal impact from price rises. The rises range from set to set, and the prices of our larger, more complex adult sets will have slightly higher percentage increase.
So it does look like it’s mostly the larger and adult-focused sets that will be impacted.
At this stage, it’s not clear exactly what sets are impacted, although German news site Stonewars has a partial list that will impact the German market. I highly recommend checking their article out to see the impact of the LEGO price increases.
From their article, it seems like it’ll be a mixture of both old sets, and new sets as well, with LEGO Icons/Adult-focused lines seeing the biggest increases.
Of course this is already starting to become apparent – if you look at all the new second half (2HY) of 2022 sets which just released yesterday, you’ll notice that some prices are completely out of whack, even for previously “affordable” lines like LEGO City.
An example is the larger LEGO City sets, which cost as much as a Modular Bookshop, which is insane when you think about it. The Double Loop Stunt Arena pricing is especially egregious, but do keep in mind that the Modular Bookshop was from 2020.
So what can you do?
In my professional life, I’ve had to also grapple with this issue as costs are going up across the board, and announcing price increases is never fun. For those that work in business, or companies where price increases have impacted the bottom line hard, this should be no surprise at all to see how a multi-billion dollar brand like LEGO responds.
Another option is to pull forward purchases before the price increase happens, which I think most people will do.
Personally, while no one wants to see the price of what they love increase, I feel like it’s unavoidable, and LEGO has done an okay job pushing it out this far, and hopefully trying to resist increasing the price of budget/affordable sets so that families aren’t impacted.
Unfortunately, because LEGO is made out of ABS plastic, and freight is expensive for large bulky sets, the increase in petrol/oil prices would definitely eat into LEGO’s margins.
Which brings me to my next point – despite having a blockbuster financial result in 2021 with record profits, fans will wonder whether this is appropriate.
LEGO is a business, and profit is its main motivator, and its easy to look at it in totality like that, however, because of LEGO’s close shave with bankruptcy in the 2000s, financial controls have been put in place, and I think margins on their products are extremely important – so if the cost of inputs go up, LEGO does have no choice but to increase the RRPs to defend some of their margins.
Update: for more context on LEGO’s financial systems, here’s an excerpt (sorry for the smartphone photos), from Brick by Brick, one of the key pieces of literature that’s given us a peek into how LEGO operates and thinks as a brand.
This section highlights LEGO’s Consumer Product Profitability (CPP) system, devised by designed by Jesper Oveson who was Jørgen Vig Knudstorp’s numbers guy, and was instrumental from saving LEGO from bankruptcy.
It’s a little old, but will shed some light on how LEGO looks at product profitability, and lessons its learned since almost going bust. I can almost assure you that these lessons remain part of LEGO’s DNA.
It’ll remain to see how consumers respond, and if there’ll be a reduction in demand as a result of this price increase. LEGO is still selling out constantly, but if LEGO is too aggressive with this, we may see decreased demand, and retailers will then have to discount more to move product, again, putting pressure on their margins.
What do you think of LEGO’s price increase?
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