If like me you’ve ever struggled with the temptation that having a closet or room stuffed with shiny new Lego sets for investment presents in terms of building and playing or displaying them, this short blog may help! Rarely have I succumbed to this temptation. I tend to try and keep my collecting hobby side of the Lego game separate from the investing side. There is occasion where I have dipped in to the investment pool to provide a last minute gift for a young lad or lass, or when I really just had to build the Lone Ranger Train. One thing that helps me do this is looking at the decision to open an investment set with a clear approach involving the true cost of doing so. Often I hear talk on the forums of “Buy what you like, so you can open it if investment growth isn’t as strong as you’d hoped” or “I only paid 50% of retail for it so I might just open and build it…” The decision to open a set should be made with as much information as possible when you are a profit maximising investor.
When you open a set the price you paid for it should have almost zero consequence on that decision. This is a very important mind shift for most people. The trade off you make when opening the set does not relate to the price paid, instead it is: When you open a set the true cost of doing so is the opportunity cost you forgo. This is mainly related to the current secondary market price minus a few other factors. If you have a set in hand the trade off you make when “consuming” it is the price you could currently sell it for. This can be approximated using the Brickpicker current market price for new sets, or you can estimate that cost yourself if you could sell it locally for a different amount. Basically you take what the maximum is you think you could successfully sell it for right now. Now from that there are a few deductions to take into account:The listing and selling fees if applicableTime to set up the sales listingPackaging and postageTime to post or meet the sellerTax from any profits remaining if applicableIf you can estimate those costs you’ll have a pretty good idea of the expected gross revenue you would have from selling the set.
This is you opportunity cost. Now there are a few other things to take into account as well. Firstly when you open a Lego set to build you don’t “consume” it. A Lego set is not like a candy bar or loaf of bread, after using it you are still left with a tangible asset – the used set. This used set still has a value. The used value of sets are tracked by Brickpicker as well and you can estimate just like as above for a new set. So if you plan on keeping your opened set indefinitely then you can’t discount your opportunity cost by this used set value. But if you don’t and you just want to have the build experience, take a few photos, and maybe display it for a few weeks you can subtract the used set value to determine what the act of opening has cost you. Things get more complicated if your intentions are to build the set and display it for a longer term, or if you think you’ll keep it forever but change your mind later on and decide to sell it. To work out the cost here you’ll need two estimates.
The future value of a used set and the future value of the set if it is still new and sealed. This can obviously be pretty hard to determine. My advice would be to look at the current prices for similar sets to the one in question. Check out similar sized sets and sets from the same theme and look for the price difference between a sealed set and a used one. That should give you a bit of a guide to the future opportunity cost. So in conclusion, if you want to open a set go ahead, but remember the price for doing so is not the cash you paid at the retail counter but the opportunity cost incurred by not being able to sell a new sealed set. Sign in to follow this This is my NextThe U.S. Capitol Lego set includes over 1,000 pieces(Credit: Lego)Lego has unveiled another product in its popular architecture series. The U.S. Capitol kit will allow you to recreate the seat of the United States Congress, brick-by-brick. It's available on September 1 and will set you back US$99.99.President George Washington laid the cornerstone of the Capitol back in September 18, 1793, and while the neoclassical building has seen many architectural changes over the intervening centuries, it has remained one of the country's most iconic buildings.
The U.S. Capitol Lego set includes over 1,000 pieces and rises to a modest height of 6 in (16 cm), with width and depth coming in at 17 in (44 cm) and 5 in (14 cm), respectively. Lego made an effort to get the detailing right, and the kit includes everything required to build the facade, dome, steps, north and south wings, colonnades, and lawns. In a nice touch, the dome is removable and lifting it reveals a peek of the National Statuary Hall rotunda, complete with tiled floor, columns, and eight statue pieces. A booklet is included detailing information about the design, architecture and history of the Capitol.In 1998 the Lego Group entered into a licensing agreement with Lucasfilm, the company founded by "Star Wars" creator George Lucas. It allowed Lego to manufacture sets based on the movies, with instructions showing builders how to turn 2,000 tiny plastic bricks into the Death Star. Fourteen years later the Walt Disney Company bought Lucasfilm for $4 billion, with the licensing deal still very much in place.
Countless Lego products tied in with the franchise followed, and the Lego Group went on to manufacture sets based on other popular movie franchises, such as "Harry Potter" and "The Avengers." Licensing is part of an overall strategy that's made the Lego Group wildly successful. According to its 2015 annual report, Lego Group made $1.4 billion in net profit, more than double what it made just four years earlier. But while this is good news for Lego, it's created a tough situation for some consumers. The Lego Group still creates sets priced well within the modest reach of a child's allowance, but parents who have taken their kids to the toy store know perfectly well that there is no appetite for a 30-piece set that can be built in five minutes. Kids want one of the high-end sets with thousands of pieces, and those can retail for hundreds of dollars. If that were a one-time expense, parents might be willing to make an exception, but it rarely is. Often, the child will just want another set seconds after finishing the last one and putting it on the shelf to be forever ignored.
If the parent relents and buys another such set in the same month, the expense can become equal to that of a car lease payment. Luckily, parents of Lego-obsessed youngsters can breathe a sigh of relief. Netbricks, a company based in Elk Grove Village, Illinois, offers the opportunity to rent Lego sets for a monthly fee. There are several tiers, such as the Master plan, which allows 60-day rentals of $400 worth of Lego sets for $49 a month. At the end of the 60-day period, the sets are shipped back free of charge and new sets are shipped to the subscriber. Company president Rick Weil founded it after experiencing the same thing that so many other parents do. In other words, he was hemorrhaging money on Legos for his kids and wondered if there was a way to slow the bleeding. "It seemed like a problem that a lot of people had," he said. "I figured if there's a big enough problem, then there's probably a market there. Licensing adds a fair amount to the price of a set, and the expense of the product lent itself to the rental business."
Netbricks started selling to the public in 2015 and at launch a Groupon promotion led to an initial enroll of 5,000 people, far outpacing expectations. He said that requests for the now-discontinued Death Star set accounted for fully 12 percent of his initial customer requests, with the $240 Tower Bridge set taking second place. "These are people who buy at a lower price point," he said. "Something like the Death Star is a once-a-year purchase for these families." (Pictured: The world-famous Tower Bridge features iconic towers, working drawbridge and a red double-decker bus. It also includes 4,295 pieces and costs $240.) Netbricks currently employs eight people, including Weil. Each employee has a dedicated job, right down to the person who does the all-important cleaning of the returned sets, using a medical-grade technique that's absolutely necessary for anyone who considers the term "used Legos." Weil said that parents are actually far less concerned about cooties than they are about penalty fees for lost pieces.
Netbricks assesses no charge for those. "Part of our service is no charge for normal piece loss," Weil said, citing a range of 15 to 20 lost pieces for regular sets or 20 to 30 for larger ones. He added that the company's real concern is the malicious actor who "harvests" Lego sets with the intention of selling rare pieces to desperate builders who need that special brick to finish their creation. Weil would not disclose his company's financial information, but he said that it's profitable on a gross margin basis, and he expects it to be cash-flow positive in six months' time. He added that he's in no rush to see the company get ahead of itself by expanding too quickly. "We made a decision early on that although there's more demand out there that we can get, we didn't want to take on a huge volume of customers until operations are ready to scale," he said. "If you don't have customer service and structure where you can field all calls, that's not a great way to grow a business."
Netbricks currently boasts 215 "fully active" members, which it defines as members who have rented and returned sets for more than one cycle. The current total is well below the 5,000 customers who signed up at launch, but Weil said that was to be expected because of the one-time impact of the Groupon promotion. The lower number of repeat customers is a more accurate reflection of Lego diehards. And Weil said that Netbricks has been successful in retaining repeat customers, so they must be doing something right. , because Lego is trying to discourage resellers. Netbricks buys its entire inventory from retailers (Walmart, Target, Toys-R-Us, etc.). "Lego is aware of what we're doing and we've had a handful of communications with them," Weil said. "It was nothing atypical of how a top five worldwide brand would work to protect their brand and trademark. Anytime anybody pops up and is using the word 'Lego' in a commercial sense, the Lego company sends out information and notification as to how they would like you to use their trademarks, and that's been the extent of our business to business communication with Lego."