Brokering Bricks: The World of Lego Investing

By Ben Lowell

Investors looking to diversify their holdings have historically turned to many sources: foreign markets, real estate, cryptocurrencies, tulips, or even art. Sometimes, trendy new investments backfire, as the notorious Beanie Baby bubble did. Other times, your niche market of high-end Magic: The Gathering cards might attract the attention of Martin Shkreli. And then there are LEGOs, the plastic brick building sets that have been the scourge of many unprotected feet for over 80 years.

Consider the following: In 2000, you, enterprising investor, might have bought some index funds from the S&P 500 and, financial meltdown and all, ended up doubling your money by today. By contrast, if you invested in one (or several) collector’s edition LEGO Imperial Star Destroyers for $270, you would have made quintupled your money. Today, the same factory-sealed set can fetch over $1,500.

Huw Millington is the founder and creator of Brickset.com, an online community dedicated to the buying, selling, collecting, and discussion of all things LEGO. The website currently boasts over 210,000 registered users and crossed 100 million annual page views in 2016.

“Even though there’s a saying that you can never have too much LEGO, I think probably you can,” Millington said.

Millington built LEGO sets as a child, but cast aside the hobby as he got older, as most kids do. But after taking out his old bricks for his daughter to play with, he rediscovered his old passion and dove in headfirst.

Searching on AltaVista, Millington started to piece together an online LEGO community for adults. “Prior to that you would have been an adult playing with Lego in isolation. They might’ve thought it was a bit weird, but when you find out that there are other people out there with a similar interest doing the same thing as you, it obviously spurs you on a bit.”

Already a web developer, he launched an early form of Brickset in 1995, originally meant to track promotional LEGO sets that weren’t cataloged anywhere else on the Internet. But it quickly became a database of sorts, a definitive compendium of every LEGO set ever produced.

There are many websites that mirror Brickset’s purpose, offering a wide range of tools to track LEGO data: part inventories, historical sales, quotes from different retailers, even a live price ticker.

When LEGO fans stumble on a site like Brickset, they will quickly uncover the massive financial market built by their beloved bricks in recent years. But most children relying on their allowance don’t have thousands to spend on toys, so who is?

AFOLs (adult fans of LEGO) represent a large chunk of the purchasing power in the LEGO aftermarket, supported by fan-curated websites and in-person meetups and conventions all around the world. In an age where nostalgia dominates entertainment, this trend might not be all that surprising. Toys, after all, are the number one collectible category across all age groups, as Eric Bradley writes in his book Toys: How to Pick Antiques Like a Pro. Repurchasing a long-lost toy can bring back some of those warm and fuzzy feelings from childhood.

LEGO is an expensive hobby, and some AFOLs will buy and sell to each other in order to fund their own collections. However, there are also dedicated LEGO “flippers,” people who aren’t necessarily fans of the product but see an opportunity to take advantage of a niche marketplace. You can even take an online course on how to turn a brick-based profit.

Even though LEGO purists and opportunists may philosophically differ, Millington doesn’t think that matters. “Resellers get a bit of a bad press. [They do] provide a useful service. If you are after the Cafe Corner, if there weren’t resellers, you wouldn’t be able to get one at all. At least now, if you’ve got the money, you can actually go and buy one.”

When released, Lego pricing is fairly consistent. Sets usually cost around 10 cents per brick, 36,000 of which are molded every second at the LEGO factory in Billund, Denmark. LEGO sets can be priced at anywhere from a few dollars to hundreds, and attract buyers of all ages and backgrounds. A modest version of the Star Wars Millennium Falcon released in 2018 was priced at $9.99 for 92 pieces, while the larger-scale Falcon released in 2007 contains 5197 bricks, priced at $499.99.

LEGO sets only remain in production for one or two years before entering “retirement.” And as soon as a LEGO set leaves store shelves, its value will often skyrocket. This is where collectors and investors swoop in.

That $499.99 Millennium Falcon from 2007? It currently sells for around $1500, a 200% return.

With such high stakes, the habits of collectors and flippers can get a little intense. Online forums are filled with stories of those going to great lengths to get the perfect deal. On Brickset, you can find a discussion chain with over 5,000 responses by collectors bragging about their travels to every big box store and garage sale to snag the best deal. To store these massive inventories, some retrofit and redesign entire rooms in their homes. In one scenario, a 650-pound LEGO collection threatened the survival of a Swedish couple’s marriage. The passion for LEGO can even have legal consequences.

In 2012, financial executive Thomas Langenbach was arrested while buying a LEGO X-Wing Starfighter at his local Target. In a hare-brained scheme of fraudulent arbitrage, Langenbach was printing his own, low-price UPC stickers at home and sticking them onto LEGO sets in stores before checkout, sometimes paying less than one-fifth the actual price. He earned more than $30,000 reselling the sets on eBay, but Langenbach was both a flipper and a fan; the Santa Clara County District Attorney’s Office described his home as a “mini Legoland.”

If you ask Millington, his most extreme collecting habits came around the same time as Langenbach’s, but those days are in the past. “I think probably 2012 was the peak year for buying Lego for me, and I probably bought … a third of the total product selection that year. Which was probably far too many.”

And as of now? “It’s around the 3,000 set mark.”

from Hacker News https://ift.tt/2ptw467