Author Topic: Hasbro profit question for you guys  (Read 1776 times)

Offline Daigo-Bah

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Hasbro profit question for you guys
« on: June 21, 2008, 05:22 PM »
Hey fellas- I recently had a talk/debate with the wife about the exorbitant price for a toy (the BMF Falcon), and we ended up discussing the cost and profit for toys in general.  What I wanted to ask you guys is: what do you think the cost to profit ratio is for the BMF Falcon, and compare it to a figure.  For example, would a figure cost 50% of it's selling price to make, and the BMF more like 75%?  What do you think in dollars each BMF costs to make?
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Offline JediJman

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Re: Hasbro profit question for you guys
« Reply #1 on: June 22, 2008, 12:25 AM »
I actually work in a field where we evaluate return on investment of consumer goods.  Not really toys, but I have picked up some toy knowledge over the years.  Retailer margins on most action figures are around 100% or greater.  Manufacturers most often operate at a similar rate and their products do not differ greatly in terms of profit margin. 

As such, I would estimated that a $7 figure costs Target $3.50 and they make $3.50 per sale.  Likewise, Hasbro probably makes them for $2 or less (including design fees, new molds, production costs, etc.).  If the Falcon is going to sell for $150, Target is probably paying about $75 for it.  That means Hasbro probably incurred about $40 or less in cost to make.
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Offline Jesse James

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Re: Hasbro profit question for you guys
« Reply #2 on: June 22, 2008, 01:42 AM »
That seems to fall somewhat in line with the theory among retail knowledge that if someone's running a bogo sale, or a b2g1 sale, they're usually still profiting pretty decently.

This though also varies greatly depending on what we're talking about...  Put VOTC Han out now, and he's almost pure profit to Hasbro.  Repaint the E3 Jedi Fighter, and the same...  The fixed costs are in, so those items are just gravy.  That's kind of what's irksome on the Previews TIE Fighter...  No way it should cost more than the original big wing TIE. 

Likewise, Hasbro's been pretty open (sometimes subtlely) that things like Legends, or the only partial retools/re-used parts, have fueled some of the less financially popular choices.  The upcoming Cantina Monsters rock...  but staring at those Clones you may (or may not) loathe on the pegs is possibly what paid for that obscure alien you never thought you'd get, or Senator #13 in the 3rd row to the left of the Wookiees, or whatever.  And again, that 8th Jedi Fighter maybe paid for that Sith Infiltrator (*gag* I hate it) people wanted.
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Offline Darth_Anton

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Re: Hasbro profit question for you guys
« Reply #3 on: June 22, 2008, 10:02 AM »
My brief experience in co-ordinating overseas production supports JediJman's post. One might argue that  production costs are a little less, but I'd say he's spot on.
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Offline Daigo-Bah

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Re: Hasbro profit question for you guys
« Reply #4 on: June 22, 2008, 10:31 AM »
Thanks for the answers guys- I wouldn't have guessed that a store's cost is 50% the retail for toys, but I do remember working at GNC with a similar margin.  So we're estimating that Hasbro profits by somewhere around $30 to $40 per Falcon sold to the retailers.  The reason that we had this discussion is that she thinks Lucas and Hasbro basically together roll around naked in cash while we buy anything they make for any price, and I was trying to explain how risky it is for Hasbro to make a toy like the BMF.  I guess I'm more right than her  ;D
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Offline JediJman

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Re: Hasbro profit question for you guys
« Reply #5 on: June 22, 2008, 02:43 PM »
This though also varies greatly depending on what we're talking about...  Put VOTC Han out now, and he's almost pure profit to Hasbro.  Repaint the E3 Jedi Fighter, and the same...  The fixed costs are in, so those items are just gravy. 

That's a really good point.  All depends on how you calc your return on investment.  If they still consider development costs of an older figure as part of the total cost to make a new figure, then ROI wouldn't be that much better.  But to JJ's point, a lot of this is already sunk cost.  In cases like this, they should be making much more profit on re-issues than anything new.  Funny to think that the new TAC stormtrooper was likely less profitable than the reissued shadow stormie.
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Offline Darth_Anton

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Re: Hasbro profit question for you guys
« Reply #6 on: June 23, 2008, 10:02 AM »
Another thing to consider that really helps with profits is that all costs, - materials, labor, freight - aren't itemized just via SW. Hasbro has a contracts with all those vendors for all their products, so lets say they spend a million bucks per year on manufacturing (generic number,) that's spread out to all Hasbro lines, SW, Gi-Joe, IJ, Transformers, and so-on... The only added cost SW has is the license (which, realistically, all the other lines pay for as well.)
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Offline JACKOFTRADZE

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Re: Hasbro profit question for you guys
« Reply #7 on: June 23, 2008, 11:10 AM »
I have been working in the Toy industry for over 8 years and I can tell you how to break it down in a general format across the board by dividing by 4. There are always varying factors that add/subtract from actual costs like TV promoted vs. Non-TV promoted. Individual store to store profit models are a factor as well.

With the utmost respect to all, I have the most direct experience in designing and manufacturing toys on the JD boards unless there is some other Toy designers here. I still work in the toy industry and I can tell you for a fact that no retailer has a 100% or greater margins on toys. I have worked at Mattel, the biggest Toy manufacturer in the world, they cannot even offer that. Retailer margins on items range from 40%-65% on avg. Sometimes very low priced items (Hot Wheels cars for example) have less margins. They drive foot traffic and are considered loss leaders, but they drive sales for higher priced items like their play sets. I can tell you as of 2005 it cost Mattel an avg of $0.33 to make a Hot Wheel car. Mattel sold them to retailers for $.65. Retailers sold them for $.99.

To get a very close ball park of what it actually costs Hasbro to make the $150.00 Falcon, divide that number by 4. You end up with $38 (rounded up). Hasbro has to also pay Lucasfilm a royalty so that will bump the price up more. I will guesstimate a 18% royalty (LFL has very high royalty rates) so that would have to be built into their cost and would put it in around $45 just to manufacture the toy.

Now Hasbro has to make an actual profit and the retailer has to make a profit. For a non-promoted item like this one the profit margin for the retailer is usually greater because the retailer is taking more of a risk since there is no advertising behind the item. (Star Wars is so iconic that it's well known ,so I am sure that is also taken into account to offset a slightly lower margin) Hasbro has to make a profit too so there is a lot of risk on their part as well. Here is where the compromise comes into play.

In my professional opinion Hasbro is probably selling this to the retailer for $87-$95 a pop. Hasbro should be making 46%-53% on their investment. In turn, the retailer should at least have a 50%-55% margin to make it worthwhile stocking and taking a big risk on a $150 ticket item.

The reality is the Store is the middleman, if you cut out the store you would pay a hell of a lot less but without the store, the company would not take the risk of making the goods. It's the product cycle food chain, you the consumer are the most important part but you are also last in the line. You take the brunt of the cost.

Make sense?
« Last Edit: June 23, 2008, 11:39 AM by JACKOFTRADZE »
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Offline superleia

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Re: Hasbro profit question for you guys
« Reply #8 on: June 23, 2008, 11:15 AM »
I've actually seen several articles interviewing people in the toy industry that suggests that retailer margins on toys are more like 30-40% rather than 50%+. And that's only at the big box level. On a recent Smodcast (Kevin Smith's podcast) they talked about running a specialty toy/comic store, and referred to 25% margins. And that's on what gets sold, never mind the items that languish on shelves and end up in bargain bins.

The reason there isn't an amazon for toys (ie toys.com) anymore was that the margins were actually too slim for it to be profitable, even with advanced warehousing and just in time inventory.

Certainly, both Hasbro and Target are strong, profitable companies, and their stocks are both buys at present, so that's a good indicator of who "wins" in these situations.  However, I'd never call something like the BMF Falcon a "risk"....we Star Wars fans are too rabid about our collections to ever let that one slide past...it will sell out within a week and dissapear before showing up again as a re-issue a few years later.

Offline JACKOFTRADZE

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Re: Hasbro profit question for you guys
« Reply #9 on: June 23, 2008, 11:32 AM »
I've actually seen several articles interviewing people in the toy industry that suggests that retailer margins on toys are more like 30-40% rather than 50%+. And that's only at the big box level. On a recent Smodcast (Kevin Smith's podcast) they talked about running a specialty toy/comic store, and referred to 25% margins. And that's on what gets sold, never mind the items that languish on shelves and end up in bargain bins.

If stores were only making 30-40% across the board on toys they would not carry them. The specialty toy/comic stores that you reference buy their goods from companies like Diamond which erodes their profit margins bringing it down to the numbers they spoke of (25%-40%). To have a direct Hasbro account you have to open it with a minimum order of $5,000.00 worth of goods, then each time you reorder it has to be $2,500.00 worth of merchandise each time. Comic/Specialty cannot afford that upfront commitment so the buy from companies like Diamond Distributors.

However, I'd never call something like the BMF Falcon a "risk"....we Star Wars fans are too rabid about our collections to ever let that one slide past...it will sell out within a week and dissapear before showing up again as a re-issue a few years later.

Any $150.00 item is a risk. Star War fans make up only 25% of all sales for the line. (Yes, that's a fact) These are the same collectors that gripe about the $35 Lars homestead when that is an item geared solely for collectors. Collectors do not always come with cash in hand. While yes, the Falcon is about the safest SW bet you can make, the high price tag in a soft economy for a toy is a risk regardless if it's SW or not. They still have to sell this to parents to make their investment back. They have to pay for the massive tooling/development on top of the rest of their costs. Is every collector going to buy two of these? I am sure kids will want this but you will be surprised how many parents may not shell out the cash for Johnny come Xmas. The economy has everyone unnerved.

It's a risk.
« Last Edit: June 23, 2008, 11:40 AM by JACKOFTRADZE »
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Offline JediJman

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Re: Hasbro profit question for you guys
« Reply #10 on: June 23, 2008, 01:14 PM »
I've actually seen several articles interviewing people in the toy industry that suggests that retailer margins on toys are more like 30-40% rather than 50%+. And that's only at the big box level. On a recent Smodcast (Kevin Smith's podcast) they talked about running a specialty toy/comic store, and referred to 25% margins. And that's on what gets sold, never mind the items that languish on shelves and end up in bargain bins.

The reason there isn't an amazon for toys (ie toys.com) anymore was that the margins were actually too slim for it to be profitable, even with advanced warehousing and just in time inventory.

Certainly, both Hasbro and Target are strong, profitable companies, and their stocks are both buys at present, so that's a good indicator of who "wins" in these situations.  However, I'd never call something like the BMF Falcon a "risk"....we Star Wars fans are too rabid about our collections to ever let that one slide past...it will sell out within a week and dissapear before showing up again as a re-issue a few years later.


No offense, but I don't buy any of this.  Would love to see the "several articles" stating retailer margins on toys are that low.  If anything, comic book shops take a 25% margin on stuff they buy at other retailers!   ::)
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Offline Jesse James

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Re: Hasbro profit question for you guys
« Reply #11 on: June 23, 2008, 10:24 PM »
Quote
Make sense?

Pretty much JOT...  It's jiving with what I think the rest of us were talking about above you.  The %'s were anyway it seems.  From the retailer's perspective, where I got any of my experience with all this, you could almost always gauge the profit margins by the sale price.  It worked differently with different products of course (Jeans, Toys, Toiletries, Food, etc.), but ultimately the principles were the same.  I recall externing with Penneys that we had the exclusive Greedo 12" figure at the time, and looking up the exact margins in the computers just for fun...  It was surprising at the time, but they could've sold it for half off and still made something (though getting pretty close to breaking even) on that item.  Ironically that was when 12" exclusives didn't sit at all though, and wound up moving quickly.

And when you factor in Hasbro's admitted methods of justifying such and such figure at a smaller production run because of repaints, repacks, and such helping push that figure's specific "budget" through, it adds to it I think, as far as the line's overall profitability to Hasbro.

I think that's why I've come to not always mind repacks, repaints, etc.  It's Hasbro's way of financially justifying Yarna?  Cool...  I dont' even really want her, but cool if it means it's helping push that figure along because her budget is tighter (no pun) than another figure.
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Offline speedermike

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Re: Hasbro profit question for you guys
« Reply #12 on: June 24, 2008, 12:07 AM »
I think the 50% mark-up makes sense. Look at the Order 66 figures that were blown out for 6.99, after being about 11.00.  I would make sense that Target still made a little, even on the blow-out price.
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Offline jedi_master_sal

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Re: Hasbro profit question for you guys
« Reply #13 on: June 24, 2008, 10:03 AM »
I think the 50% mark-up makes sense. Look at the Order 66 figures that were blown out for 6.99, after being about 11.00.  I would make sense that Target still made a little, even on the blow-out price.

How about the ultra blowout price of $2.49. I got several of the first wave of O66 sets for that price. I can't believe Target was still making a profit off of that. Maybe just breaking even or even a slight loss, figuring on the foot traffic to buy other things to make up for and exceeds the minimal loss.
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Offline JACKOFTRADZE

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Re: Hasbro profit question for you guys
« Reply #14 on: June 24, 2008, 10:58 AM »
How about the ultra blowout price of $2.49. I got several of the first wave of O66 sets for that price. I can't believe Target was still making a profit off of that. Maybe just breaking even or even a slight loss, figuring on the foot traffic to buy other things to make up for and exceeds the minimal loss.

The majority of manufacturers sell goods with a chargeback/markdown money allowance to their retail partners. Basically the company gives the retailer a credit towards stuff that does not sell. It's finite so there are times the retailer takes a slight loss as well. It's up to the retailer to allocate how it's spent.

Quote
Make sense?

Pretty much JOT...  It's jiving with what I think the rest of us were talking about above you.  The %'s were anyway it seems.  From the retailer's perspective, where I got any of my experience with all this, you could almost always gauge the profit margins by the sale price.  It worked differently with different products of course (Jeans, Toys, Toiletries, Food, etc.), but ultimately the principles were the same.  I recall externing with Penneys that we had the exclusive Greedo 12" figure at the time, and looking up the exact margins in the computers just for fun...  It was surprising at the time, but they could've sold it for half off and still made something (though getting pretty close to breaking even) on that item.  Ironically that was when 12" exclusives didn't sit at all though, and wound up moving quickly.

And when you factor in Hasbro's admitted methods of justifying such and such figure at a smaller production run because of repaints, repacks, and such helping push that figure's specific "budget" through, it adds to it I think, as far as the line's overall profitability to Hasbro.

I think that's why I've come to not always mind repacks, repaints, etc.  It's Hasbro's way of financially justifying Yarna?  Cool...  I dont' even really want her, but cool if it means it's helping push that figure along because her budget is tighter (no pun) than another figure.

Thanks Jesse.
You are in the correct frame of mind when you do not mind the occasional repack, it's the lifeblood of almost any line to stay profitable to produce more of the characters we love. The Lars Homestead is the perfect example of this kind of situation. To tool 2 old people figures and the Homestead would be impossible or rather a quite risky item to produce. Hasbro would have to pay for new tooling on two figures and a house. Then they have to try and make that cost up on it's initial release. Lets be realistic, the Lars are not the most in demand figures to warrant paying $50 for the set. Some old fogies that have no weapons harassed by Sandtroopers who then get smoked like jerky. Not very kid appealing or exciting.

Hasbro went the route of making something that was never made before knowing that the chances of getting a new Owen or Beru later on stands a much better chance than passing on the opportunity to do the homestead now. It's a tough item to slot in, single figures have a much easier time than a house. We will get a new Owen/Beru....maybe in the Evolution of the Old featuring young and old version of the Lars. Hopefully those repacks will get better paint jobs than before. If they do I will gladly welcome them into my collection and hack the old ones up for customs.

Keep that in mind guys when the repack griping begins. I am not saying to always love it, just understand it's the nature of the beast. There are times when better figures can be repacked so I will not defend that at all.
« Last Edit: June 24, 2008, 11:03 AM by JACKOFTRADZE »
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