The future of the auction houses.
oldgoldlover
Posts: 429 ✭✭✭
There are millions of coin collectors in the U.S. and coin collecting seems to be one of the last hobbies where the purchase and sale price are extremely different after the middle men get their bite. I predict in the future there will be dealers that will broker your coins for far less than Heritage or the other auction houses, probably around 5%.
The dealer takes no price risk, has no money tied up in the coins and can operate at a much lower margin. This and the internet will eventually get the high cost, HA.com, intermediary out of the rare coin market as 20% BP will not last. This relates to coins that sell in the four figures and more. Just like the travel agencies and full service insurance agents the intermediary will be tossed aside.
I used to know a few insurance salesmen but the Geicos put them out of business as they are no longer needed. I just retired to the hill country in Texas and got quotes from a couple of agents and Geico, which shops all the insures for you via a bid and no agent is involved. The difference in cost was amazing and this will be the direction of coin transactions.
I just don't see the value Heritage adds to get a 20% share in the sales price and frankly do not plan tp buy any expensive coins through them.
Comments
Is it even worth trying to debate with you? Clearly you are set in your ways. So set in your ways that even in light of another post discussing selling coins at auction, you had to create an entirely new thread. It's cute that you think Heritage is going somewhere. But it's not.
Also, that's great that you won't ever buy from Heritage. You are going to miss out on a whole range of amazing coins because you are being stubborn. Congratulations.
Successful transactions with: wondercoin, Tetromibi, PerryHall, PlatinumDuck, JohnMaben/Pegasus Coin & Jewelry, CoinFlip, and coinlieutenant.
There was one dealer on the circuit who set out to develop a business model based upon what you propose. Unfortunately he lost his focus and got waylaid on a number of other marketing projects.
Most any of the larger, well known dealers are willing to do what you have proposed via consignment. It can work as a model. The biggest problem with it comes when the consigner sets unrealistic minimums on what they want to sell. The ideal situation is where the buyer gets a better deal and the seller gets a little more money when the big auction house is not involved, but that’s hard to balance.
I think that most of the major rarities will always be sold largely in the public auction format. That is the best way to get the best or “runaway prices.” Still for a lot of run of the mill material, private sales might be the best road for many collectors because the auction transaction costs have gotten rather high.
I heard it said years ago that the consignor that auction houses want to see most is a dead one. This usually means that the heirs are now in charge of the collection and only want one thing ... fast cash. Consignment doesn't work when a group of heirs are at each other's throat and delays in selling that would occur through consignment will just make things worse.
The current auction fees are high because competition in the field has dropped off. Think of all the once major names in the auction field that have passed from the scene.
Short of bullion, it is difficult to broker anything coin related for 5%. 10% is more realistic but still tight.
Auction houses will probably consolidate and always handle the big ticket items. For the rest of the market, we will likely see changes due to the fees being charged. I have seen here, some are now 25%.... This will drive some entrepreneurs to develop another business model. Then the cycle will begin anew. Cheers, RickO
What do you call a coin dealer who operates on a 10% markup?
Bankrupt.
It takes at least cost plus 40 pct make it in the coin business. Coins are a retail hobby like model trains.
Well, there's no denying that the bigger auction houses have priced things such that the average collector who posts here will probably look somewhere else to sell coins. With a little effort, most of us could do better without too much trouble. Consigning with a dealer is a great option, but not without some risk.
That said, I don't think the big guys rely on types like us to keep their auctions full of material.
Actually, many B&M dealers have to do double time, handing collector coins and bullion, plus something else (jewelry, fossils, autographs, stamps, misc. collectibles). Dealers who want to do more than barely scrape by frequently have to do a lot of out of state travel. Dealers who don't mostly rely on walk-ins for new material around here (supplemented by what they can get from a single day at Long Beach shows). Tucson has a lot of B&M coin dealers for its size. During the last recession, a big uptick in bullion trading (plus buying up old jewelry) saved a bunch of them. When the next recession hits, I sure wouldn't want to be in their shoes.
RMR: 'Wer, wenn ich schriee, hörte mich denn aus der Engel Ordnungen?'
CJ: 'No one!' [Ain't no angels in the coin biz]
I can see fees coming down to some degree. That said, visit a major coin show and view the massive booth(s) Heritage sets up for display and examination of world-class material. Sorry, but you can't do that for 5%. Does not compute.
Dave
Auction houses will need to be competitive w ebay and GC stay in the game.
I believe this is only true if eBay and GC (especially the latter, since it is a true and strictly an auction company) produce comparable price results to Heritage, which I believe is still the price and eyeballs leader.
Kind regards,
George
Probably correct. I suspect most consignments come from dealers who are trying to unload "dead" product or from wealthy collectors or their estates who have important material with the latter being what the auction houses really want.
1st of all: coin margins are about the thinnest of any collectible or even retail product.
2nd: It's nice that you suggest that dealers will broker for 5%. That is the eBay model, 1st of all. eBay simply brokers transactions for a percentage. But beyond that, dealers have to eat and pay bills. Dealers have liability. Would you buy a coin from a dealer if the dealer had ZERO responsibility if the coin turned out to be altered or fake? No, you would not. And so if the dealer is going to have to take on liability for brokering all these transactions, that will add a risk premium as well. Unless you have a HUGE sales volume, 5% is not going to keep the door open and the lights on.
3rd: The other problem with a dealer brokering at 5% is that he has capped his margin at 5%. If you are APMEX and selling hundreds of millions in bullion, you can do it. But as soon as I start brokering deals at 5%, who is going to sell me coins? So I will not ever have a 10% or 20% margin sale. My volume better be HUGE...or see #2.
4th: You don't care when a grocery store buys a loaf of bread for 50 cents and sells it to you for $2. The only thing you care about, and SHOULD care about, is that you got bread for $2. What percentage of the sale goes to the house should not matter at all. The only thing that should matter is the price paid.
5th: AND MOST IMPORTANTLY: If Heritage went to 5% tomorrow, you would not be able to buy coins any more cheaply. People who want to pay $200 for a GSA will keep paying $200 for a GSA dollar. The SELLER of the GSA$ will get $190 instead of $160, but the sale price to you won't change.
6th: You have the right to do whatever you want with your money
In general, I agree with your basic thesis. But, I don't know any coin stores that operate on a 40% margin. Most of the dollar volume of most coin stores is bullion which has about a 5% margin on gold and maybe 10% on silver.
The only numismatic items that run on a 40% net are supplies.
LOL. Actually, the opposite joke would be: what do you call a coin dealer who sells gold on a 10% markup? A crook.
Much of the money flowing through a coin business has a 10% markup or less (gold). The retail/collector coins tend to be more. Supplies tend to be most at 40% or so.
My comment refers to numismatic coins, not bullion related material. Bullion is about the easiest thing to sell that there is.
Even worse, consignment through a dealer will lead to a whole lot of lawsuits. The OP may think he's a knowledgeable buyer and knows the "right price", but the reason people like auctions is because they believe that the price discovery of the auction gives them the "right price".
If someone consigns a coin to a dealer who sells it at a 5% commission, as soon as that coin sells for significantly more at auction, there will be trouble. If the seller stumbles across a "similar" coin on eBay or someplace for more money, there will be trouble. [And heirs often don't know "similar"]
Just recently, an estate dealer friend of mine had the police at his door. His "crime": he bought a commemorative rifle at an estate sale. The brother of the person he bought it from claimed it was sold too cheap and shouldn't have been in the sale to begin with and called the police on both his brother and my friend.
And since conflict of interest is my obsession du jour, since dealers do a lot of business with other dealers, don't you think that a second sale of the same coin by a dealer friend would raise the hackles of the original seller? He would assume that the dealer intentionally placed the coin with a friend to split the profits. [And he could be right.]
I know...and agree. I just wanted to clarify the bullion issue. Sometimes people think that coin dealers are all rich because of the pile of gold in their safe. They don't seem to understand that the $1300 gold coin cost $1250.
I HATE bullion, by the way, for that very reason. You have to shell out tens of thousands to make a few hundred bucks. And God forbid you accidentally buy even ONE fake Eagle. You only make $50-$75 per coin. One fake eagle wipes out the entire profit for 15 to 20 Eagles.
Actually, the fact that Heritage, Stack's, Spinks, etc. are still in business all but proves that they have sufficient value added.
[Not that that venue is right for every coin.]
I can think of one case involving an auction house and a 1799 Large cent that certainly raised my suspicions about what had gone on. (This was in 2007.) It was not my coin but was owned by a friend, who was a very minor consignor to the auction. The 1799 cent was sold very cheaply in the auction. I spotted the same coin in a new holder shortly thereafter priced at 10 times what it had sold for. I always wondered if there had been "quick hammer" on that lot. I will never know for sure. Sorry, since I don't know all the facts no names will be named.
ht.]
Yes, some of that goes on. Personally [see CAC thread], I think auction houses should refrain from purchasing coins for that reason. They could make money simply by buying the coin at a weekly auction and then repositioning it at one of the major shows. At least one of the major auction houses buys a lot of coins in their own auction.
sorry guys, this thread is ridiculous. Your conspiracy theories are not true. I think I know both sides of the auction equation very well and speak factually.
Average people do put their coins in auction because usually it can be a place where there are no left overs and they comfortable. ANY auction co is only as good as its last sale. I can tell you factually, the games that do go one are very minor compared to the wild west of years ago. The internet made most auctions (save for some internet sales were consignors are known to protect their own coins) transparent.
It is a fact the future buying trend of retail in the coin biz is auctions. You'll notice many internet or smaller dealers are going way. I was shocked at how many people we are now attracting with each sale. Its what people want.
I have not heard of any major auction house recently holding a value down so they could buy it and regrade it. Now, two major auction house do have crack out guys on staff and they do buy-BUT I KNOW FOR FACT they pay full price. I try NOT to compete with my customers, but since I do own Legend Numismatics if a coin I sold someone is about to sell too cheap-I'll buy it. Nothing wrong with that? I'm protecting my consignor, I pay full vig.
One thing I can say for sure, there is no such thing as a quick hammer anymore because so much comes from the internet. When that 1793 Chain MS66BN sold at a Heritage FUN sale 3 years ago, we knew we had it. If they had closed it normally, we would have won it. BUT they knew an out of this country bidder was playing and gave him along extra second and he beat us-depressing us for months.
Don't cry about any fees either. Go buy anything from Sothebys or Christies-you want to see fees?
please people get real
Hammers are a bit too quick. Million dollar coins auction in 60 seconds. $10,000 coins in ten or 15 seconds.
hammers are not too quick anywhere. The auctioneer can also see if there are any active internet bidders