Did you know that what’s in your budget in one location may not be affordable in another? Let’s say, for example, that you want a certain LEGO set. If you live in Belgium, the set we're tracking would cost about $269, according to a report from thetoyzone.com. But if you shop for it in Argentina, prepare to spend a whopping $2,270 for the same set.
Say what?! Why does this happen?
It’s due to the combined factors of cost of goods, market demand and supply, currency value, and taxes. All those can shift from one nation to another.
Cost of goods is a term for the amount of money a developer must invest to create a product. That varies with geography because some businesses have easy access to raw materials, labor, energy, packaging, and delivery methods. But others must pay more to produce and deliver those goods.
Sometimes prices increase because of market demand. Demand is a measure of how popular something is among consumers. If a lot of people want that LEGO set, then the price may go up to keep it from selling out its supply (the number of sets available) too quickly. Say you and four friends all want the same LEGO set. But the nearest store has only one on the shelf. Scarcity (lack of supply) could make the price increase.
On top of all that, not all currency is equal in value around the world. This variation in currency value can also cause spikes and drops in prices when money is converted. For instance, Kuwait’s currency, the dinar, is the most valued in the world. One dinar has the purchasing power of about $3.25 U.S. The Swiss Franc ($1.06 U.S.) and European Union Euro ($1.04) are similarly valued to the U.S. dollar. In recent years, the Argentinian peso has lost value. Big value. In 2021, it was the world’s second most-devalued currency when compared against the U.S. dollar.
In the United States, that LEGO set that we tried to purchase in Belgium and Argentina above would cost $349. But it wasn’t always like that.
LEGOs used to be cheaper in the United States than anywhere else. According to LEGO’s management, the price increase is due to a more competitive market. Suffice it to say, in the United States, LEGO is hot.
But buying LEGO sets is still cheaper in the United States than in much of Europe and Asia. That’s because there are more sellers (stores, online retailers) with a broader customer reach in America than those around Europe. While people throng to buy their LEGOs, it’s relatively easy to deliver on those orders.
Customers in Argentina pay more mainly due to low currency value and high cost of goods. LEGO sets sold in Argentina come from other countries far away. Delivery, handling (the cost to pay people to move goods), import fees, and tariffs are just some of the additional costs related to getting those popular toys delivered across international boundaries.
This differs vastly from LEGO purchases for customers living in Denmark. That’s where LEGO originated. Brick-building fans there don’t have to pay extra for those fees and transport costs. Our selected set in Denmark runs about $287.
Why? Understanding the costs associated with producing and delivering goods is essential to conducting business. This information affects global abilities to participate in commerce and meet people’s wants and needs.