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Prices in a downward spiral?
Is it only me, or have the six-months average prices of Lego parts been falling steadily? What's even worse – for sellers anyway – this trend seems to be continuing, despite worldwide inflation rates. We adjusted our prices downwards to the six-months average only a few months ago and now it's the same thing all over again. What's your experience, your thoughts, your reactions?
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In order to get some sales, lots of sellers (me included) basically price everything a percentage below the average sales. Those are cheaper and sell faster, which brings down the average sales price.
The impact of this competition should mainly be on a national level, but if sellers price everything looking at the global sales prices, I guess prices will go down slowly on a global level.
So I guess you are right, and prices are decreasing depending on where you are. I do think newer or smaller stores have to operate this way, if they are planning to grow, unless they have a good piggy bank. Once a store grows to a certain size, and have a trusty customer base, then the prices will go up again for that store, slowing down the decreasing total average sales prices in the last 6 months.
Lego investing is a trend these days, so I expect the prices to keep decreasing slowly for a while. At some point though, the feed of new sellers or smaller stores giving up will result in a steady price. At least for parts that are not discontinued. Obviously discontinued parts will slowly increase in value, as they become rarer.
Not all parts though, I have seen quite a few increase as well as drop, and minifigs and accessories are increasing in value.
(1) Low prices
(2) Lots of variety
(3) Lots of stock
You could go (2) and (3) and still get a reasonable amount of sales.
A store could have just one of those three things and still do pretty well, but would probably have to stand out within that single criteria - so extremely low prices, a huge variety or a massive amount of stock. The store in Portugal that many sellers whine about is a good example of this - they excel at (2) and are pretty good with (3) also, so despite their very high prices and minimum order threshold, they still get sales.
(4) Customer service
Is also very important in order to get repeat sales, but completely irrelevant when it comes to getting the first sale to begin with - unless you've been so bad that your feedback has suffered of course.
In my case I haven't bothered with (1) for a couple of years now, and I still get plenty orders. Don't get me wrong, I have thousands of lots at rock bottom prices, the slow movers, the less popular colours, etc., but I've found it's possible to maintain my sales even though 'fast moving' parts are priced higher than the 6-month average.
What the solution is I am unsure, but Callum & I discussed this last weekend, and one thing we thought was maybe a minimum stock holding of say 10k to open a store and be restricted to selling at no less that 6ma for the first six months and not be allowed to run sales for this "probationary" period.
I know there are issues when a store is primarily a miniminifig or set store , but maybe this could be part of the assessment by Admin when the request to open the store is submitted.
Incidentally we opened out first store only when we had listed around 20k parts.
Well yes, but in my experience, only a modest amount are making it to BO or BL. Some people do not want used, and will only buy new.
I also agree the get-rich-quick-oops-bad-idea seller is a probable cause. Not sure how many new stores have opened on BO/BL in the last few months, though, so no idea how much of an impact that really is...?
But has anybody who is running the shop as a full time job like we do ever thought about calculations? I think so, but it's quite difficult.
For example, the labor cost for partially hired people (so called Minijob) is at the moment 15 € (including taxes). For sorting parts, washing them, counting them and putting into stock, pick them for orders and ship the orders we have some efforts - just time. This time must be paid. If we have now a single item with 1.5 cents a labor has only 3.6 seconds for the complete process. (15€ for 3,600 seconds work = 2,4 Seconds per Euro Cent). This is a time which is absolutely unrealistic for the overall process. Oh, and we forgot that we have to pay taxes of 19% VAT for the 1.5 cents - at the end we get only 1.26 Cents for the item. Uups, only 3 seconds for the overall process left. And for sure we forgot that we have to buy the bulks with unsorted items - not yet considered in the 1.5 cents.
For sure, we have to take a look also for the big quantities in our stock - they run well and the small prices are compensated if we count into our stock 100s of parts and pick for orders 20, 50 or more items. But still the problem that people need single items for spare parts, for reaching the store limits, etc.
Why is LEGO selling single items for 20 cents? Because they want to earn a lot of money? Because of offering new parts? Because of beeing LEGO? Because of just having a calculation in the background? Many questions with much more answers.
As I said before, we have to earn money for our family with 5 members, paying salaries, paying rental fee for the stock, paying taxes, etc.
We make so much brain storming how to make the process more efficient, reducing time / labor cost, etc. At the end we always stand infront of result that the single item prices of 1.5 cents (or like this) is to less to run a successful business. For all our work we have a lot of analysis because we track all our work. We know how much time we need per each kg sorting of lots, counting different categories, picking for orders, etc.
Now we will try something new for us with the prices. We will quickly see if we have still the same amount of orders or if the buyers will ignore us. For both results we can either continue with our new price system or we have to go back and think about some new ways.
So, this was now a long text and hopefully not to much confusion for you - it's not always easy to bring your thoughts into written words.
Best regards,
Oliver.
I have a fulltime job, and probably will not be able to go full time based on those averages sales prices. I'd have to excel at other points like Hoddie mentioned, or at least have the customer base and/or branding, in order to be comfortable (or knowledgeable (!) enough) to price the pieces correctly.
Touching upon being knowledgeable, the average 6 months sales is the most constructive data that is accessible to everyone, but clearance and undercutting for slow-moving parts messes everything up too. The longer you are in the game, the more you can build upon your own experience.
With that said, I too have noticed the steady decline and have been gradually repricing my stock to stay in what we consider a sweet spot (we like to show up around the middle of the listings, which is frequently unrelated to average price). Some of our stock is decreasing, some is increasing in cost - though we're seeing far more decrease then increase this year. :-(
The number of new sellers on this platform the past couple of years has exponentially jumped, perhaps due to COVID or other reasons. But with new sellers and new stocks also comes new customers!
With that mindset, I don't view it as a race to the bottom - it's only a race to the bottom if we ALL drop our prices and attempt to compete with the hobby sellers (which in the United States - from a Federal tax perspective - there is no such thing as a "hobby seller". If you're selling items with the intent to make money beyond a garage sale capped at a certain price, you are supposed to collect and file taxes as a full business).
Honestly, in my humble opinion, what hurts our business more than the price fluctuations (which I see as a symptom vs. the problem) are the volume of sellers NOT running their stores as a legal businesses, placing us and others on an uncompetitive footing.
"Hobby sellers" have waaaaaaaaaay lower overhead (e.g., not having to calculate and track MyCost, collect taxes, keep paperwork, and so on). So their profit and labor investment is far lower than our store and others that run legally - thus, they can afford to race to the bottom. So - to me at least, crazy-low prices are a symptom vs. the root cause, in many (though not all) cases.
Ultimately, this uncompetitive footing could be what really hurts the LEGO aftermarket (businesses following the rules, including teeny tiny stores like ours) and has a significant effect on lowball pricing - just my humble, respectful opinion! :-)
If the comment was not directed at me... I totally agree with you! :-)
> You're essentially saying that's the max price for an item
To place an order, you have to overcome the 'total cost'. So while some parts might look very cheap, that price has to be absorbed into the total cost of placing the order.
To say this differently, when I order packing supplies, the individual cost of a box misrepresents what my in-the-door cost is. I have to take the line totals of all the boxes in an order, add to that the haulage in getting it here, plus the state sales tax. Then, and only then, can I calculate the real cost of that box. The real cost has to absorbed into each and every order.
A given seller (assuming they are astute) should know this, and should be setting up their pricing structure to offset it. As to those sellers that seem to have extremely high prices, they may have those to offset the overhead for buyers who only want one or two parts, and not 100 or a 1000. For their larger (most favored) customers, they may be silently sharing discount codes that bring the prices back down to reality.