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    How a LEGO Set can Flood the Market: Lessons from History


    "Should I invest in the Fire Brigade?"

    "Yes."

    "No."

    "Maybe so."

    "It has been available for way to long.  Collectors and investors already have all that they need.  You will have to wait a LONG time before the set appreciates."

    "It is a modular. That alone will make the set a winner.

    " I have seen this conversation take place in the Brickpicker forums many times.  The most common reply that I saw said something like "Everybody's brother (and dog and cat and pet gold fish) has one of these.  Don't risk your money."

    While very knowledgeable people took both sides, it is clear that the Fire Brigade has been a winner - but why didn't this set fail?  The Fire Brigade was available for five years, wasn't it?  Most importantly, is a repeat possible?  

    The Orc Forge was a steady investment.  People loaded up on these sets and bought more whenever possible.  What made it better was that if you spend $75 dollars or more, you got free shipping and (depending on the time) a free polybag or minifig.

    We have not seen the predicted value surge.  The set can still be bought at $60 dollars - the price that it was hovering around right before it retired.  This set has a bright future, but the results have not been as expected.

    These are two very different examples.  One had very low expectations and performed remarkably.  The other had very high expectations.  Even though the Orc Forge is still appreciating, the Fire Brigade was the better investment.  Both sets were bought in large quantities by investors.

    Now before everyone jumps on me in the comments telling me "The Orc Forge is still appreciating," I would like to clarify that I do not think that the Orc Forge is a bad investment, but that it is appreciating slowly.  I am suggesting that the reason for this slow growth could be because it has flooded the market.

    In this article we will discuss whether a set can "flood the market" or not using past examples.  What can a market flood do to the value of a set?

    Part I:  The bubble

    Oh boy.  Here we go again.  While the bubble is talked about a lot in the forums and is quite a controversial issue, there are a few things we can learn from this concept.

    As more people become LEGO investors, there will be an increased demand and availability for certain sets.  Most likely, the market will not crash in one big explosion.  It will start with cracks at the foundation, that creep up to the top, eventually destroying the secondary market for LEGO (if there is such a thing as a bubble.)

    Some of the cracks could be caused by flooding the market.  We should start paying attention to how many sets flood the market compared to how many are good investments.

    What I am trying to point out is that IF there is a bubble, we will continue to see a rise in the numbers of sets bought which could lead to a flood in the market.  Not something to spend much time fretting over, but something to consider when buying a set.

    My personal opinion is that IF the market is flooded, the following buying frenzy will pick the market up from the dust, and we will continue to live happily ever after buying and selling toys.

    Part II: What is the effect?

    I will use the Orc Forge as an example in this part.  We can all see that the Orc Forge has not been a failure, however, this set has not lived up to its positive predictions.

    I believe that the Orc Forge could be worth $70 to $80 dollars if so many people had not bought it.  The Orc Forge, although with a positive appreciation at about 150% of its retail price, can be found in large amounts on eBay.  This was a popular product with investors - maybe a bit to popular.

    Minecraft: The First Night is not retired yet, but its popularity went down a bit when it became widely available.  When considering a set to flip, resale value can be inversely proportional to the availability of a set.  This can also be true when considering a set that you think is flooding the market.

    I do not believe that a set can become a complete failure because it has been widely available and distributed.  When a set is bought in large amounts, it tells us that it is popular.  There are always new LEGO fans and buyers that will be interested in old sets, no matter how available they were.  As more are bought, the availability will go down, and the set will grow in value.

    If a set does flood the market, it might slow its growth down a little bit, but I think that that is the most that it will do.

    Part III: How does this happen?

    A set can flood the market when someone predicts early retirement and people buy lots of the item, expecting it to no longer be available at retail price.  Here is where I would like to point out a few facts:

    The Orc Forge hung around for a while, allowing many people to buy lots of them.  The Fire Brigade did not wait before it retired.  It sold out, and then it was retired.

    This is an important fact that we should notice.  From this, I have drawn the conclusion that a set does not flood the market in its life time, but in its last few days when the buying frenzy occurs.

    Part IV: The Fire Brigade

    True, lots of people had the Fire Brigade, but it had a quick retirement, putting people who did not have this set into panic mode.  The Fire Brigade is also a modular.  People new to the LEGO hobby that love the modulars will want to complete their collection, and it will not take much time before this set becomes known as one of the well-perfoming sets of the past.

    Part V: How do I get Fire Brigades instead of Orc Forges?

    It is always better to invest sooner than later.  Sets like the Fire Brigade disappeared quickly.  As sets get older, retirement becomes inevitable, and you have the recipe for another Fire Brigade.

    Sets like the Orc Forge, however, stay around longer than expected.  They can be a good investment, but they take more time to appreciate.

    Sets like the Orc Forge are easy to predict, but sets like the Fire Brigade are almost impossible to predict.  Again, the only way to end up with a better set is to buy sooner than later.

    Part VI: Summing it up

    Even though it is very possible for a set to flood the market, we must realize that a flood of the market alone cannot make a set fail.  Do not let one aspect alone keep you from buying a good investment.

    I hope you have enjoyed this article.  Even though it was short, I tried to include helpful and interesting information.  If you disagree with me or have your own opinion about this subject, please share it in the comments.  Thanks for reading!

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    The flooding of the market only changes to time frame for scarcity.... unless and this is the big unless.... If TLG starts producing a large amount of sets to satisfy both the end user and the reseller market, then the actual demand for the set may be sated with the regular production run, leaving very little organic demand after retirement in comparison to a large number of sets in investor's collections - and thus a very low price. Scarcity may take a long time to develop under such conditions.. and eventually could become irrelevant. New intact sets from 20 years ago are scarce, but they are also so old that they really aren't in demand either.

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    The Fire Brigade is showing a 10.5% Cagr, the Orc Forge is showing a 26.5% Cagr......isn't the Forge the better investment by that standard? If you bought a Fire Brigade RIGHT before it retired, its certainly the better performer, but if we're looking at CAGR, its not.

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    "It is always better to invest sooner than later" This contradicts the thinking of a few people around these parts. Given that if you invest in a set the day it comes out, you will be holding it a long time until it retires. The argument goes that you could have invested the money on that same day in a set that was closer to retirement. For example, how much fuss is being made over buying up Parisian Restaurants at the moment? None! Anyone thinking of buying one for investment purposes could buy a Grand Emporium instead, and hopefully sell it for double what they paid for it BEFORE the Parisian Restaurant retires. So then they could afford 2 Parisian Restaurants for the same initial outlay "sets like the Fire Brigade are almost impossible to predict" So far every modular Lego has released has been a success for investors, as far as i have seen To quote from one of the comments: "New intact sets from 20 years ago are scarce, but they are also so old that they really aren’t in demand either." But, i would suggest that there were no sets specifically aimed at AFOLS and TFOLS like there are in the current and recent set ranges e.g. no modulars, no architecture (i know the latter isn't strictly true) no "expert" sets

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    I LOL'ed at this quote: "Sets like the Fire Brigade disappeared quickly." I know what your intent was, but it gave me a chuckle. Anyways, nice article. I like your analysis of how sets go OOS at S@H to determine if it will flood the market or now.

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    I think there are two reasons for this (maybe more): 1. Fire Brigade is simply a nicer set. Modular, enough said. The investment appeal of the Orc Forge was mainly that it was an exclusive (in the U.S. anyway, not in Europe. All toy stores had them). The set itself is okay, just not something really special. 2. I don't think the Fire Brigade is really flooding the market (yet). Everyone that is sitting on this set for 2-3 years already, won't immediately sell now that it is finally starting to rise in value. And the people that are willing to sell, probably won't drop below what they consider a good price, otherwise they will hang on to it. So right now the only sets that are being sold is to those people that are willing to pay that. The big question is: will we find those buyers for EVERY set tucked away in our basements? In any case, I think it is too early to draw definitive conclusions. I personally have faith in the Fire Brigade. Yes it has been around for a long time, but there are people coming out of their dark ages every day and this set I would certainly be willing to pay extra for to have it in my collection. (Fortunately I already do).

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    CAGR is not everything. Also with the ORC Forge & Fire Brigade in comparing their CAGR figures you are not really comparing like for like. FB's CAGR is calculated from 2009, OF's from 2012.

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    While i agree with the main point of the aerticle being that even if the market is flooded with a set doesnt mean it is destine to fail. However, I dont fully agree with some of the main points made in the article. FB did not "disappear quickly" it was for sale for nearly half a decade! OF on the other hand was for sale for what, a little over a year? As far as return on investment goes.... FB MSRP was $150, now selling for $250 about 67% growth OF MSRP was $40, now selling for $65 about 62% growth A good return considering both sets have been retired for less than 1 year and and by today's standards i would be satisfied. People need to stop expecting sets to triple or quadruple in price, those types of returns just are not going to happen like they did 10 years ago. For some reason there is a bias towards LOTR sets, its almost as if some people want them to fail and try to portray them as a bad investment. Why? i dont know, maybe they are jealous they missed out on what is actually was a good investment or as i stated earlier if a set doesnt instantly double after being retired they declare it a failure, such a standard that would make almost every LEGO investment a failure.

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    What I meant by the FB disappearing quickly was that it sold out and then retired. There were no "Temporarily out of stock" or "Retiring soon" tags on S@H. Even though it had a long lifetime, it retired quickly and was unexpected by most investors. The Orc Forge did not have as long of a lifetime, but its retirement was very expected. It had both "Retiring soon" tags and "Temporarily out of stock" tags - both signs of impending retirement. Even though the FB and OF have a similar growth percentage, shipping can eat up some of those profits. If I sold an OF on eBay right now for $65 dollars, then approximately $10 of that would go to shipping, and $6.50 would go to eBay. That would be like making $8 bucks. Not worth the time spent. If you sold a FB now on eBay for $250, approximately $20 of that would go to shipping and $25 of that would go to eBay. Subtract MSRP and you have made about $55 dollars. I know that there are other methods of selling sets (e.g. craigslist, Amazon, etc.) but eBay is most widely used. Personally, I do not have any bias toward LOTR. It makes up a good portion of my investing collection, and I think that it will do great. Castle/Medieval themes have done very well in the past, and I expect LOTR to follow the same trail.

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    Very well written and very helpful to all readers. I myself invested in an orc forge (1) but missed my chance on the fire brigade, thinking that it would not preform well. This incident and the article helped me figure out my errors and told me what too look out for in the future.

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    Haha. You're not the only one that learns from errors! Believe it or not, I also missed out on the FB but invested in about four Orc Forges. I learned my lesson well, so I decided to write an article about it! :)

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