Toy Bender

The other day Yo Go Re of OAFE.net (and frequent ToyBender commenter) and I got into a friendly discussion about “price gouging” and “scalping” when it comes to online toy retailers. I have some strong opinions on the matter and so do a lot of other toy collecting types, but mine usually differ from the “let’s grab the pitchforks and torches” mentality that a lot of other collectors have.

Instead of pointlessly discussing why online retailers charge more for toys than say Wal-Mart or Target without any input from an online retailer, I turned to Brian of the online toy shop Brian’s Toys* to get to the bottom of things.

ToyBender: Please give us a little background about yourself if you could. How did you come to start Brian’s Toys?

Brian: While I was in high school I started collecting Star Wars toys (it was 1992) after watching Return of the Jedi on tv at a friend’s house. After watching the Star Wars movie I hadn’t seen in many years, I was very excited about Star Wars again. At the same time, my friend had a gigantic collection of Masters of the Universe toys that we took a look at that evening. He had twice as many items as I had even known existed at the time. It led me to think about all of the Star Wars toys that I had sold off at garage sales around the age of 10 (only about 5 years earlier). Shortly after, I began collecting vintage Star Wars toys. I was shocked to realize that there were many other collectors and an entire market for Star Wars toys. I picked up a Toy Shop magazine that year and began putting together a vintage Star Wars collection by mail order.

After a couple of years of collecting vintage Star Wars toys, in 1994, I started Brian’s Toys to retail collectible toys. We started very small, with just a few thousand dollars, and the help of my parents and brother in the basement of my parents’ house. It didn’t take long and the house was overtaken by toys! After about 5 years, we built a nearby office/warehouse.

ToyBender: The question that everyone is dying to know is: “Why do new toys cost more at online retail stores than they do at stores like Target and Wal-Mart?”

Brian: Target and Wal-Mart are set up with very different business models than online retailers that cater to collectors. Target and Wal-Mart sell large volumes of merchandise and can even afford to lose money on certain items to bring you in the store. You will often notice that the selection of figures sitting on the shelves at Target and Wal-Mart are often older or less desirable figures. To Wal-Mart and Target, action figures are just a few pegs on the racks in the toy section. To the online retailer, action figures and toys are their business. They will do what they can to stock the products customers want, and they do their best to meet the demands of their customers. The online retailers will often provide a much higher level of customer service and convenience than you can expect from a Target or Wal-Mart.

ToyBender: Do you think that an online toy store could be successful if they only sold new items at “retail price”?

Brian: You won’t find too many retailers in any industry that are successful at competing with Wal-Mart based solely on price. The bottom line is that an online store could not exist for long selling toys at Wal-Mart prices. Online toy stores (like anyone else competing with Wal-Mart) need to differentiate themselves and add value in other ways. A specialty retailer, whether online or off, will need to focus on customer service, providing the selection of products its customers really want, and adding value in creative ways.

On a related note, I suspect online toy stores are often not credited for selling less desirable figures or more common figures for cheaper prices than Wal-Mart. Using Brian’s Toys as an example, until our inventory level recently ran low, we were selling Clone Wars Clone Troopers for $4.99 each. While there are sure to be rare examples of Clone Troopers turning up at Wal-Mart for $4.99 or less, I do not believe that generally you would have been able to find Clone Troopers at $4.99. However, to compensate for losing money on the Clone Troopers at $4.99, which were re-issued in many Clone Wars cases last year, we needed to charge more for the “newest” and “hottest” figures at that time.

ToyBender: If someone were to consider an online toy store a “scalper” because they thought that the store’s prices were too high, what would be your response to that? Is it fair for them to think something like that?

Brian: Each person is entitled to his own opinion. And each customer needs to decide how much value each retailer is adding. For example, Brian’s Toys offers a Star Wars One of Each Figure Club at $8.99 each. This is a very convenient service to be assured of each new Star Wars figure without the hassle of having to spend time, gas, effort, and often times frustration (when only some or none of the figures you are looking for can be found at Wal-Mart or Target). The price is still higher than the Wal-Mart/Target price, but typically only by about $1-$1.50 per figure. Usually, though not always, we will have the figures and ship them before most stores have received them or put them on the shelves. So for a bit more money, our customer receives the figures relatively early with no stress or work. Ultimately, each customer has to decide how much he/she likes going to different retail stores to search for the figures, how that person values his/her time, along with other costs like gas/vehicle costs, etc. If an individual enjoys the “hunt” of finding figures at retail from Wal-Mart or Target, then our service may not be the best fit. For a busy individual who is pressed for time, our service makes for a good fit.

Of course, many new figures are priced higher than $8.99. I would again go back to the example of the Clone Wars Clone Trooper at $4.99 in my previous answer. The retailer needs to maximize its revenue on the few “hot” figures to make up for all of the figures that may sit in the warehouse for a year or two (or more) only to be sold at a loss.

ToyBender: What are your feelings on “scalpers”? For this question, the definition of a “scalper” is someone who buys toys at retail and sells them on eBay for a quick buck.

Brian: We live in an entrepreneurial society that allows (and even encourages) individuals to take advantage of inefficiencies in the marketplace. If an individual finds items at a store that he/she perceives to be underpriced, and invests in the item with hopes of a profit, he/she has the right to do that. Of course, the customer also has the right to decide not to do business with this individual.

ToyBender: In your opinion, is it possible to “price gouge” on non-essential consumer items such as toys? For instance, if “Toy Store X” is charging 50 dollars for a toy that’s “worth” 20, is that price gouging in your opinion?

Brian: In a free market, an item is worth what a buyer is willing to pay and what a seller is willing to sell for. If the buyer and seller agree to a price, then ultimately that is what the item is worth. If a seller is not willing to sell for less than $50, and the buyer is willing to pay $50, then the value of the item is $50 not $20.

ToyBender: How does the secondary market affect the prices at Brian’s toys?

Brian: Once an item is no longer available from Hasbro, we have to source the product from other businesses and individuals. If we have to pay more to purchase certain items that tend to be more popular or in demand, then that will necessarily be reflected in the prices that we charge.

ToyBender: How has the current situation with the economy affected the business of selling toys?

Brian: Demand has been down over the last 12 months, as consumers have been frightened, and in many cases lost their jobs, they have spent less on almost anything they don’t absolutely need. Toys are no exception to this. We have seen a sharp pullback in spending the last 12 months. Like in most other retail industries, this has forced us to reduce overhead, including staffing and advertising.

ToyBender: In your opinion, what makes Brian’s Toys better than other retailers and do you have any insight why someone buys at Brian’s Toys rather than retail or a site like eBay?

Brian: We carry the world’s largest selection of Star Wars and G.I. Joe toys from 1977 to the present day. Many of the items you find at Brian’s Toys will not be available at retail or on ebay. We strive to deliver excellent customer service and set a goal to ship orders placed by 10 am the same business day. We have been in business sine 1994, and customers know that they can trust us. They can trust that they will receive their order, and if there are any problems that they will be resolved. We are in business to serve the toy collector; and we strive to make the experience convenient and fun!

Thanks again to Brian for providing his input. Now it’s your turn. I want to hear what you think in the comments below!

*One of the sponsors of last year’s Joes for Tots contest!