Reimagining Retail: How Lego Became the World’s Largest Toymaker

Summary

Behind the Numbers: Reimagining Retail – How LEGO Became the World’s Largest Toymaker

Episode Release Date: February 19, 2025
Hosted by Sara Lebo
Guests: Zach Stambor and Sky Canaves

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Introduction

In this episode of EMARKETER’s "Behind the Numbers" podcast, host Sara Lebo delves into the remarkable journey of LEGO, exploring how the iconic toy company ascended to become the world’s largest toymaker. Joined by marketing experts Zach Stambor and Sky Canaves, Sara navigates through LEGO’s strategies that have sustained its relevance across diverse demographics, its innovative business flywheel, competitive challenges, and the lessons other retailers can glean from LEGO’s success.

LEGO’s Cross-Demographic Relevance

Sara initiates the discussion by highlighting LEGO’s unique ability to maintain relevance among various age groups. Both guests, who are parents, share personal anecdotes about integrating LEGO into their families’ lives.

Sky Canaves emphasizes, “LEGO can grow with the consumer through different stages of their lives, starting very young with Duplo blocks and evolving into sophisticated sets for adults seeking relaxation and creativity” (01:39).

Zach Stambor adds, “There’s the educational component, the creative aspect that fosters family bonding, making LEGO a go-to gift for both kids and adults” (02:15).

The LEGO Flywheel: Integrating Retail and Entertainment

Sara identifies the components of LEGO’s business flywheel, which includes an exceptional in-store experience, robust entertainment ventures, extensive IP partnerships, and international expansion.

Zach Stambor elaborates on this integration, stating, “Everything about LEGO is centered around the LEGO brick, which is extremely powerful and creates a consistent flow in their business model” (05:14).

Sara Lebo outlines the elements:

• In-Store Experience: Engaging environments that inspire customers.
• Entertainment: Productions like "The LEGO Movie" and TV shows such as "LEGO Masters".
• IP Partnerships: Collaborations with brands like Star Wars, Harry Potter, and Nintendo.
• International Expansion: Physical stores and theme parks that offer immersive experiences.

Brick and Mortar Success

The conversation transitions to LEGO’s brick-and-mortar strategy, where Sara praises LEGO stores for being “easy to navigate and fun to visit” (06:37).

Zach Stambor highlights the inspirational setup of LEGO stores, from showcasing big sets to allowing customer interaction with minifigures and sculptures. He points out that LEGO stores not only sell products but also serve as community hubs where enthusiasts can engage and find suitable sets.

Sky Canaves shares an observation from London, noting how LEGO transformed a store for Valentine’s Day by creating a flower shop aesthetic with their botanical sets, enhancing visual appeal and customer engagement (07:51). She also underscores the importance of events and workshops that cater to both children and adults, fostering a sense of community and brand loyalty.

Balancing Direct-to-Consumer and Wholesale Channels

Sara probes into how LEGO manages to balance its direct-to-consumer (D2C) LEGO stores with wholesale distribution through retailers like Target and Walmart without cannibalizing its own sales.

Sky Canaves explains, “The selection is much different. LEGO stores reserve the latest and greatest sets for their D2C channels, while wholesale retailers offer more standard selections” (09:24).

Zach Stambor reinforces this by mentioning LEGO’s vast product range allows for effective segmentation, ensuring that exclusive products are available through specific channels without overlap.

Competitive Landscape and Protection Against Duplication

A critical part of the discussion revolves around the threat of competitors and aftermarket duplicates (“dupes”) attempting to mimic LEGO’s success.

Zach Stambor acknowledges the impending competition from Mattel’s upcoming “Mattel Brick Shop,” projecting, “It's coming. It'll be interesting to see how Mattel leverages this because LEGO has such a strong core identity” (11:15).

Sky Canaves points out the quality and interoperability of LEGO bricks as significant barriers to successful duplication. She shares a personal experience, “The non-LEGO bricks were harder to put together and didn’t match the quality, which was frustrating” (11:54).

Sara Lebo notes LEGO’s strong brand equity, comparing it to household names like Kleenex and Jello, which exemplifies LEGO’s dominance and recognition in the market (12:43).

Lessons for Other Retailers

Sara shifts the focus to what other retailers can learn from LEGO’s strategies. She highlights LEGO’s DIY-style media partnerships and successful collaborations with creators on platforms like social media.

Zach Stambor emphasizes LEGO’s “laser-sharp focus” on its core product, the brick, and how returning to this focus after diversifying led to a resurgence in sales (14:18).

Sky Canaves adds that LEGO’s discipline and responsiveness to customer feedback have been crucial in turning customers into loyal brand fans, sustaining continual engagement and loyalty (14:49).

Sara draws parallels to other brands, citing examples like Sephora’s collaboration with Hulu for content creation, likening it to LEGO’s "LEGO Masters" for effective product-creator-streamer partnerships.

Sky Canaves also mentions Crocs as another brand that successfully maintains focus on a core product while refreshing it through collaborations, ensuring multi-generational appeal (15:24).

Sustainability Initiatives

Towards the end, the conversation touches upon LEGO’s efforts toward sustainability.

Sky Canaves notes, “They’ve been working on finding sustainable sources for resins and recycled materials. Last year, they launched a take-back program to recycle used LEGO pieces” (16:22).

This initiative not only reflects LEGO’s commitment to environmental responsibility but also enhances its brand image among increasingly eco-conscious consumers.

Personal Experiences and Final Thoughts

The episode concludes with personal reflections from the guests about their LEGO projects:

Zach Stambor humorously admits, “We’re past the LEGO phase” (16:46), indicating a temporary lull in his family’s LEGO activities.

Sky Canaves shares enthusiasm for the botanicals collection, stating, “We have flowers to work on. Loads and loads of flowers” (16:58).

Sara Lebo echoes a long-term personal loyalty to complementary brands, mentioning her enduring relationship with Crocs since fifth grade, paralleling LEGO’s timeless appeal.

Conclusion

Sara wraps up the episode by thanking her guests and listeners, reinforcing the key takeaways from LEGO’s sustained success:

• Consistent Focus: Maintaining a clear focus on core products while allowing for expansion within that framework.
• Innovative Engagement: Creating immersive retail experiences and leveraging media partnerships to engage diverse audiences.
• Quality and Brand Equity: Upholding high-quality standards and fostering strong brand recognition to guard against competitors.
• Sustainability and Responsiveness: Embracing sustainable practices and actively listening to customer feedback to build loyalty.

LEGO’s journey offers a blueprint for retailers aiming to achieve long-term success through strategic focus, innovation, and unwavering commitment to quality and customer engagement.

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Notable Quotes with Timestamps

• Sky Canaves: “LEGO can grow with the consumer through different stages of their lives... it's a screen-free toy.” (01:39)
• Zach Stambor: “There’s the educational component, the creative aspect that fosters family bonding…” (02:15)
• Zach Stambor: “Everything about LEGO is centered around the LEGO brick...” (05:14)
• Sky Canaves: “They create events and a sense of community in their stores...” (07:51)
• Zach Stambor: “LEGO is so innovative in the products that they roll out...” (04:25)
• Sky Canaves: “It’s really hard to just copy the product because there is something to the product and its quality...” (11:54)
• Zach Stambor: “LEGO has such a strong core identity...” (11:46)
• Zach Stambor: “LEGO got into trouble... when it ventured into clothing and dolls...” (14:18)
• Sky Canaves: “They take customer feedback very seriously...” (14:49)
• Sky Canaves: “They’ve been working on finding sustainable sources...” (16:22)

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Timestamps Reference

• [01:39] - LEGO’s relevance across demographics
• [02:15] - Educational and creative aspects of LEGO
• [04:25] - LEGO’s innovative product rollout
• [05:14] - LEGO’s business flywheel centered on the brick
• [07:51] - LEGO store experiences and community events
• [09:24] - Balancing D2C and wholesale channels
• [11:15] - Competition and potential dupe threats
• [11:54] - Quality and interoperability issues with dupes
• [12:43] - LEGO’s brand equity
• [14:18] - Focus on core product leading to sales resurgence
• [14:49] - Discipline and customer engagement
• [15:24] - Collaborations and multi-generational appeal
• [16:22] - Sustainability initiatives
• [16:46] - Personal LEGO project updates

Transcript

[Sara Lebo]

Do you know what it takes to transform marketing into a data driven profit center? Are you able to align the C suite around your AI vision and strategy? Zeta Global has the playbook to help you get started. Download Driving Growth in the AI era today. Find out more at the link in our show notes. Hello listeners. Today is Wednesday, February 19th. Welcome to behind the Reimagining Retail, an E marketer podcast made possible by Zeta Global. This is the show where we talk about how retail collides with every part of our lives. I'm your host, Sara Lebo. Today's episode topic is lego. Before we jump into that legacy brand, let's meet today's guests. Joining me for today's episode, we have Zach Stambor.

[Zach Stambor]

Hey Sarah.

[Sara Lebo]

Hey Zach. Also with us is Sky Canaves. Hey Sky.

[Sky Canaves]

Hi Sarah. Glad to be here.

[Sara Lebo]

Glad to have both of you here. Okay, so you guys have something in common. You both have kids, which I think means that you both have a lot of Legos in your homes. Am I correct in that?

[Zach Stambor]

So many. So, so, so many Legos.

[Sky Canaves]

We have a fair amount. I feel like we could definitely have more though.

[Zach Stambor]

Do you want some?

[Sara Lebo]

So something I wanted to start on with this topic is how LEGO has found a way to remain relevant across demographics. You both have Legos because you have kids, but LEGO is making a lot of adult products too. So can we talk about that? How has Lego remained relevant across different demographics?

[Sky Canaves]

I think because it's such a classic toy and it can grow with the consumer through different stages of their lives, starting very young as toddlers with those big Duplo blocks and then into childhood as we all know is a great educational and now screen free toy. And then teens and kidults like Gen Z and they've even started targeting adults to create, not just play, but create or use LEGO for relaxation and kind of a meditative process of putting the sets together.

[Zach Stambor]

Yeah, and there's just so many reasons that LEGO is appealing to consumers. Both adults who play with them as well as kids and adults playing with their kids with them. There's the educational component, there's the creative aspect to fosters family bonding in a way like similar to when you put together a puzzle. And so it just, it feels good as a toy to buy for your own kids and for yourself as well as to give as a birthday present. It's like my go to gift as a birthday present.

[Sky Canaves]

Same here. My daughter is seven and she likes Legos and I feel it's always a feel good kind of present. And I also Feel if, if somebody already has a particular set, it's easy for them to. But it's nice and it's a. There's such a big range of price points too. Like you can find a $10 Lego stocking stuffer or you can spend hundreds of dollars for a very special person in your life.

[Sara Lebo]

Sky, I can't believe your daughter's seven. I feel like you just had a toddler. Yeah. And there are products specifically made for adults too. Right. So it was just Valentine's Day. Did either of you receive or give any of those LEGO botanicals?

[Sky Canaves]

I would love to receive some, but I bought a heart botanical wreath from my daughter and we're also, we were visiting friends, so I also bought them like for their daughters, a flower present because the flowers are just really nice. That's been like one of their brilliant moves in terms of product innovation is creating a product that looks nice that you want to display. You don't have to think about, this is a LEGO set. Where do I put it? It looks like flowers. They don't die. They're very fun to put together and give and receive.

[Sara Lebo]

Yeah.

[Zach Stambor]

I mean, that's something we didn't touch upon a few minutes earlier. But like, LEGO is so innovative in the products that they roll out. They're constantly rolling new stuff out across a broad range of categories. And it's just, it's super fun, it's interesting. There's the botanicals, there's the Home Alone House, and there's everything in between.

[Sara Lebo]

Yeah. Lego has become the big toy company in the world, selling as much as Mattel and Hasbro combined. I want to talk about the flywheel of Lego and I've identified a few different pieces of this flywheel. Feel free to add or subtract. But LEGO has a great in store experience. They're combining that with their own entertainment that they're producing things like the LEGO movie or movies, as well as LEGO Masters, the show where people create things with Legos and creator content on social media in addition to stores and entertainment. They also have so many IP partnerships. Name a property and there are Legos for it. And they also have parks for in person experiences as well as wholesale in other stores.

[Zach Stambor]

Well, and everything about LEGO is centered around this one particular thing, the LEGO brick. And so that's extremely powerful that like other brands just don't have that, you know, that's sharp, sharp focus on what it is. And so everything flows from that. And that's where you get that flywheel.

[Sky Canaves]

Yeah. And I thought it was really interesting. I learned while I was researching this podcast one that they are the world's biggest toy company and have been for a while. And it's really interesting to think of that in the sense that they're a mono brand producer. Mono. They're under operating under a single brand while most of their competition is multi brand and feels like they have to serve a lot of different needs. But also they went through a lot of struggles in the years in the early 2000s after the patents on the bricks expired. I guess they thought they had to do something different and they got too much into different areas and lost their focus on the brick. And they since managed to return to a focus on what I think you could call thinking inside the brick. So everything is based on the brick, but there is so much possibility and diversity within that to appeal to a very broad range of consumer needs, from basically almost baby to adults.

[Sara Lebo]

Speaking of the brick, let's get into one of lego's strongest things, which is its brick and mortar presence. Did you like that segue? That was pretty good, right? It was good. What makes lego's brick and mortar formula work so well?

[Zach Stambor]

I think they're just a pretty good, easy to navigate store that's fun to visit. So to start, they have all of the big LEGO sets that you can just look at and get inspired by. So they serve as inspirational. Then because LEGO has such a powerful brand with such like brand enthusiasts, they very easily attract those people to work in their stores and so you can engage with those people. And if you need to ask what would be a good LEGO set for this sort of kid, I'm going to a birthday party. They can steer you right in that direction. Or if you just want to engage with them or your kid wants to engage with them, to explore like what might suit their needs or wants at the moment, they're great for that. And then there's also like all the other like little pieces where you can build your own minifig or grab a bucket of pieces or look at the, the sculptures. Is that what you would call it? This?

[Sara Lebo]

Yeah.

[Sky Canaves]

They create really interesting experiences in the stores. I saw that last year in London for Valentine's Day to promote the flower collection. They transformed the whole large store into a beautiful European sty flower shop. And it looked amazing. And so they create events and a sense of community in their stores as well. They host after hours build events for adults to come in as well as the workshops that are geared more towards kids. And it's been really important for them in their International expansion, because in countries like China, they're introducing parents who didn't grow up with Legos to the product. So they really want to be able to bring them in and have them see and feel how the product. I still don't think they have enough stores. I wanted to go to a LEGO store to look around and there's only one here in Austin and it's not anywhere near where I live, so it's a little out of the way. And they could definitely have another two or three stores around here.

[Zach Stambor]

I totally agree. They are a brand that could be in every mall and they just aren't.

[Sara Lebo]

Well, I'm curious about this because we talk a lot about the balance between D to C, which is kind of what a Lego. I mean, it is what a LEGO store is, right? Like it's one product vertical in a store and wholesale. And LEGO does both. They're in Target and Walmart and they're in the LEGO store. How are they not eating into their own margins in either place?

[Sky Canaves]

I think the selection is much different. So it's pretty limited in terms of what you can find at Walmart or Target or Amazon versus what you would find in a store. Because I wanted to look at the newest, latest sets, like the things that people are excited about now. And I don't think I find those on Amazon because they have a bit more of a standard selection, not the latest and greatest stuff. I think they reserve those for their D2C channels and for their fans.

[Zach Stambor]

And they have so many products that it's pretty easy for them to segment. We sell these things to this retailer and we save these things for our own stores.

[Sara Lebo]

Yeah, those things being like specific ip. Right. I mean, they managed to have all of these partnerships and I think one of the reasons for that is they don't necessarily overlap. There's not competition between LEGO and these other properties they have. I don't want to use the word synergy, symbiotic relationship. That was just as synergy.

[Zach Stambor]

Like, yeah, they're creative with their partnerships as well. I mean, having the friends coffee shop or having the various like Nintendo relationships or the Harry Potter stuff, it's all like. It's not what you would necessarily assume they would have, but they're just constantly rolling these things out and then they.

[Sky Canaves]

Can reach new audiences that way because they're not necessarily targeting the LEGO super fan, but they might be able to reach the Harry Potter super fan or the Star wars super fan.

[Sara Lebo]

Okay, so something I don't get about Lego is whenever we Talk about anything. On this podcast, we talk about dupes. Dupes are huge right now. Makeup dupes, clothing dupes. Why hasn't LEGO been duped by a new entrant or a Mattel?

[Zach Stambor]

Well, it's coming.

[Sara Lebo]

Or why haven't they been duped? Successfully, I think is a better question.

[Zach Stambor]

Yeah, I mean, it is coming. Mattel plans to roll out the Mattel Brick Shop, which. These pieces look exactly like Legos, I think, in May. So it'll be interesting to see what they do with that because LEGO has such a strong core identity of what it is and it has these relationships. What can Mattel offer? I don't quite know.

[Sara Lebo]

Zach, take a guess at what the first paid ad is on Google. When I search Mattel brickshop.

[Zach Stambor]

Is it lego?

[Sara Lebo]

It's Lego. They've bought that key word.

[Sky Canaves]

Yeah. I think it's really hard to just copy the product because I think there is something to the product and its quality and the fact that it's interoperable. So if you already have LEGO bricks, why would you buy something else that isn't going to work with them? But this past Christmas, my daughter received a set that was not Lego, but it was bricks for a specific, different IP character. And the pieces just didn't work as well as lego. They were much harder to put together, even for me, and that was very frustrating. So I think there might be quality control issues that other brick makers just don't take as seriously because they're not as big and they don't have the resources to really get those extra precise injection molds for their products.

[Sara Lebo]

Yeah, and LEGO also, like, they have such strong brand equity. They've been around for so long that they have a name that's synonymous with the product. Sort of like a Kleenex or Band Aid or an inline skate or a Jello. It's Legos. If you were to ask me what Mattel was making, I would say Legos.

[Zach Stambor]

Yeah, I agree. And it's. We talked about it last week with Sam's Club and Costco, but it's like there's no use in being a lesser version of lego. So in what way could Mattel zag? I don't know. I, like, I. It just is unimaginable to me and maybe it's a failure of imagination, but LEGO does so many things and in so many ways that I don't see the path for Mattel to find a path forward.

[Sara Lebo]

Can we expand this to other retailers? Like, what is the lesson Lego offers that you would apply to another retailer. I think for me it would be that them leaning into these DIY style media partnerships can work really well. So Lego Masters and then also working with creators on social media to create things with their products is something that I think makeup and beauty in particular, but other brands also can mimic. A good example of it is this Sephora and Hulu team up, where Sephora is making Get Ready with me style videos that will be on Hulu. So it's like LEGO Masters where you have the product, you have the creator, and then you have the streamer partnership.

[Zach Stambor]

Yeah. For me it's Lego's laser sharp focus on what makes Lego Lego. LEGO got into trouble, as sky mentioned, when it ventured into clothing and dolls and all these other things that were adjacent to the brick. And as soon as they like shifted gears and went right back to we do brick swell, so we're going to focus on everything centered around the brick. That's when they righted the ship and just saw their sales soar.

[Sky Canaves]

Yeah. I think it's that discipline coupled with the willingness to listen to their customers and they take that very seriously so that you can turn your customers into brand fans and have that continual engagement and drive. The loyalty.

[Sara Lebo]

Yeah. And then the last thing I would say is entertainment and media partnerships. Not every brand has those accessible to them. But if you can create a partnership with something like Star wars that might be kind of pie in the sky, but a piece of media, then you're also folding in those fans into your brand as well.

[Sky Canaves]

And collaborations always add freshness and excitement to brands. I think another one we've talked about a bit that collaborates a lot is Crocs. And it's a way of keeping a brand that's a very simple product and they remain very focused on that pretty straightforward single product, but they're able to expand and refresh it through collaborations.

[Sara Lebo]

Yeah. Crocs is another product that sticks with their original product, the Croc, but does a lot of different things with it.

[Sky Canaves]

And has the multi generational appeal as well.

[Sara Lebo]

Yeah. And I famously, as I've said on this podcast before, have owned the same Croc since fifth grade. So thank you, Crocs. Any final thoughts on LEGO before we wrap up?

[Zach Stambor]

Yeah, I mean, the thing that's that stands out with Lego is that, you know, so many toys, you get them, they fall apart, they go in the trash.

[Sara Lebo]

Yeah.

[Zach Stambor]

And the reason that I have a million Legos in my basement is because Legos last forever. They're a very high quality product.

[Sara Lebo]

They do last forever, but also Aren't they starting to make them for more sustainable products as well?

[Sky Canaves]

Yes, they've been working on finding sustainable sources for resins that they use as well as recycled materials. And last year they had launched a take back program where they were taking back use Legos as a pilot and they may bring that back or expand it further.

[Sara Lebo]

Zach, what LEGO project are you and your kids working on next?

[Zach Stambor]

You know, I don't have any.

[Sara Lebo]

Anything you've worked on recently?

[Zach Stambor]

No. Like, we're kind of past the.

[Sara Lebo]

We're past Lego.

[Zach Stambor]

Yeah.

[Sara Lebo]

Sky, anything from you?

[Sky Canaves]

We have flowers to work on. Loads and loads of flowers. And I'm a big fan of the botanicals collection now that I've seen more of it.

[Sara Lebo]

Yeah, I love those. Okay, well, that is all we have time for today. Thank you for being here, Sky.

[Sky Canaves]

Thanks for having me again.

[Sara Lebo]

Thank you, Zach.

[Zach Stambor]

Yeah, thanks for having me.

[Sara Lebo]

Thank you to our listeners and to our podcast team that edits the podcast. We'll be back next Wednesday with another episode of Reimagining Retail, an E marketer podcast made possible by Zeta Global. And on Friday, join Marcus for another episode of behind the Numbers.