The Building Blocks of a Commercial Empire: Lego set to open 120 new stores

September 17, 2020

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2 min read

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What's going on here?

The Danish toy manufacturer Lego has announced that it will open 120 new stores despite the effect of the coronavirus pandemic on high-street stores.

What does this mean?

Lego has fared well during the pandemic, seeing its sales rise 14% in the first six months of 2020 as more families bought the toys to entertain their children during the lockdown. The company’s profits increased to £466m but revenue only increased by 7%. This was due to the use of existing stock to meet the surge in demand. But the news that Lego would open more stores comes as a surprise. This goes against the general trend of the coronavirus’ impact on brick-and-mortar retailers where global lockdowns forced shops to close. Lego has 612 stores across the globe including 46 of the new 120 stores which have already launched. The UK has 14 stores, but the biggest market will be in China which is set to have 80. CEO Niels Christiansen said, “when our stores reopened after lockdown there have been queues…We give people the brand experience in our shops.”

What's the big picture effect?

Lego is certainly a unique brand. It is, in fact, one of the world’s most powerful brands and the world’s largest toymaker. Most of us at some point during our childhood have bought or been gifted a Lego product. Or for any readers who are parents, stepped on one and been in agony. As well as its infamous bricks and mini-figures, there are movies, games, theme parks under the brand. Therefore, it is not surprising it has had a profit surge, driven by a strong online presence with a website that attracts 100m visitors. 

However, one distinct change which Lego says it has seen is more than 1m adults signing up to the website and buying Lego sets. This is because as well as sets for children, Lego has developed more complex, not to mention more expensive sets for adults. Buying a Lamborghini Sian FKP Lego Technic set would set you back £350. For fans who like their Lego Star Wars themed, an Imperial Star Destroyer would set you back £650. 

But the announcement that the company will be opening 120 new physical stores when many of its rivals like Hasbro and Mattel are closing them because of the pandemic seems odd. So why is Lego committed to opening these stores? The answer is the fact Lego stores are “important for the Lego brand experience” as its CEO stated. This is certainly true; each shop has unique features made from Lego based on the stores’ location which draws in visitors. In 2019, Mr Christiansen claimed “It’s never just about the physical products” going on to say “Kids want to play with what they have seen.” For now, Lego is committed to its stores, but opening so many has risks. Physical stores already have large overhead costs and in many countries, like the UK, have to pay a business rate tax as they are non-domestic properties. The stores could be the blocks for an expanding retail empire. But equally, you could simply order online. Only time will tell if this bet will pay off.

Report written by Michael Johnson

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