How do coin dealers make money without ripping people off?
Petescorner
Posts: 1,220 ✭✭
I'm not sure I understand how a coin dealer can make an honest living.
If a dealer pays too little for his coins when he buys them, he's ripping people off.
If he asks too much for them when he sells, he's ripping people off.
(The spread between Bid & Ask hardly seems like enough to make a living off of. And of course, most of us "collectors" don't want to pay "Ask" price anyway)
If he takes a coin and trys to improve its appearence, he's a "coin doctor" and he's ripping people off.
If he buys coins and waits for the market to go up, he's a speculator and no different than the rest of us. (making sloooow money, if any)
Other than selling me cardboard 2X2s for 4 cents each, what does he make money on without ripping people off?
Come to think of it, I bet he only pays 3 cents each for those 2X2s
If a dealer pays too little for his coins when he buys them, he's ripping people off.
If he asks too much for them when he sells, he's ripping people off.
(The spread between Bid & Ask hardly seems like enough to make a living off of. And of course, most of us "collectors" don't want to pay "Ask" price anyway)
If he takes a coin and trys to improve its appearence, he's a "coin doctor" and he's ripping people off.
If he buys coins and waits for the market to go up, he's a speculator and no different than the rest of us. (making sloooow money, if any)
Other than selling me cardboard 2X2s for 4 cents each, what does he make money on without ripping people off?
Come to think of it, I bet he only pays 3 cents each for those 2X2s
6
Comments
Russ, NCNE
Is it ripping someone off to buy sweaters for $11 each and sell them for $25.95? If so, all department stores are ripping people off even when they have sales. Their mark-ups are huge!
Obscurum per obscurius
If the Dealer is offering too little (buying) or asking too much (selling) the informed Collector moves on.
I personally have NO problem with a Dealer "asking too much" on certain coins. I've learned on many of them you have to throw the sheet away as the coin rarely if ever presents itself on the market.
Monster Rainbow toned Morgans in MS66 or with DMPL surfaces come to mind.
No one will ever capture on paper the "value" of these coins. There are many other examples too.
peacockcoins
I understand, Russ. I just think it's got to be a tough way to make a living, constantly negotiating the price on both ends of a relatively static item. And to top it off, they often get criticized both ways.
My post was meant as a "jab" at those who criticize incessantly.
Please don't rat on the free enterprise system. It has worked very well for thousands of years. The Star Trek dream of a money-less society is impractical, and will never happen.
<< <i>I just think it's got to be a tough way to make a living >>
Any small business is a tough way to earn a living. If it were easy, everybody would be in business for themselves.
Russ, NCNE
Shiro, I believe most "retail" business is a primary or secondary result of production. Since most coins have been produced long ago, the number of middle men between producer (mints) and the end consumer (the most recent collector) has been stretched mighty thin. In most cases, the coin dealer is just the "next to last" middleman.
Btw, I'm not anti-dealer at all!!! Just trying to understand a seemingly tough business to be in.
There are many 9- 5 workers that would love to have that stress!
The Dealers I've seen appear to enjoy their work and everything that goes along with it.
peacockcoins
My experience has been that dealers offer absurdly low amounts when they are buying (and often not offering ANYTHING at all). Generally, they want your BEST more key date pieces, and offering little for them. Always, there is some excuse when they are buying (i.e. not enough lustre, too spotty, overgraded, not PQ, the series is cold, and the famous, "why don't you give it to me on consignment.") Try asking them to SELL you a coin "on consignment." It ain't gonna happen.
I no longer delude myself on the concept of a "dynamic" liquid market. Dealers (and numis newsletters) use such talk when YOU are BUYING! It is us buying Numismatists that CREATE the dynamic market of which they boast. When the time comes for us schlubs to sell, the so-called "efficient market theory" goes right out the window (or is proven to be exactly correct, depending on how you view that theory).
Last thought: Thank the LORD for Ebay. It is a reasonably decent and predictable indicator of how much we can SELL our coins for. It is NOT perfect, but it does liberate us to a great degree from the utter tyrany of the Sell to a "coin dealer" transaction.
matteproof
I'm sorry Mark. I think you missed my (tongue in cheek) point. Maybe I should have included more smiley faces!
BTW, I'd take the Coin Dealer life if I could any day!
Shiroh: You haven't got to 20,000 posts yet? What have you been doing?
Pete: I know people who would have posted what you did and would be serious! Glad to know this was tongue in cheek. (The smilies DO help.)
There are many 9- 5 workers that would love to have that stress!"
Baddick: Come on - is there really any "stress" when you engage in a high speed chase or a "shootout".
Really though, the spreads are thin at times (so volume becomes very important) and the risks are there. You can wear the sweater you just overpaid for, but the coin (with hidden hairlines you just bought) is essentially of little use other than a paperweight.
Camelot
TRUTH
am
An open mind will support transformation.
Recognize life is full of change
and celebrate the opportunity.
"There is always a way to collect,Never surrender the hobby"
But the above "stress" doesn't add or subtract from my paycheck.
I know my family will be provided for, week in and week out.
The real "stress" comes in owning a business where there is no guaranteed payout. It's by your own wits and gumption you make it (or not).
Plus, I'm a Collector, I know: We can be an awfull picky group to have to "deal" with!
peacockcoins
I've been involved directly or indirectly in a number of businesses, and coin dealing ranks very poorly in the effort/reward ratio.
On top of the high capital requirements and laughably low (in comparison to many retail businesses) margins, it is very difficult to leverage your success. If I'm having good luck selling MS66 Ikes, I can't just order up a bunch of new ones from the wholesaler.
For the most part, every single coin is unique, and has significant labor costs attached to it -- both buying, and selling.
So if you've got a dealer you respect and works hard for you... don't try to chisel that extra $5 out of him, ok?
I get the sardonic humor, and would only like to add the following:
1 - I don't care what a seller paid for the coin I'm buying. I don't care if their cost is zero (inherited,
found, etc.). I only care that I get what I pay for, and I get a fair price.
2 - I don't expect a dealer to be non-profit, and I expect to pay a little more to a dealer to cover
his/her overhead. I buy from a dealer when I can't find an item privately.
3 - You (the dealer) don't owe me an education, a guarantee of the market, or investment advice.
What I do expect is honest grading, courteous service, and fair treatment.
4 - Honor your word, and so will I.
5 - Don't tell me what my coins are worth if I'm selling them to you. Just tell me what you'll pay.
I'll shop them myself and make a decision.
and it sets us apart from practitioners and consultants. Gregor
Rip can be a subjective term. Frankie expressed - “One dolt thinks anything priced over 5 pct cost is excessive. How on earth does that person believe the costs of being in the business are less than 5 pct?” A dealer nearby said “I don’t owe them coming in the bourse room anything but the item they paid for or payment for what I purchased from them.”
I hear courtesy and honesty has its advantages.
I used to think that, but I dont any longer. I try to be as fair buying and selling as I can, and it can be tough to make a dollar at times. But ive seen too many times where certain dealers just flat out blow somebody away, and they move in for the kill on the next deal. But yet they continue stay in business and people keep going too them routinely.
Just yesterday, a dealer in this area got a rather big deal, and they absolutely cremated the family. The family lost out, the dealer keeps getting richer and richer, and sleeps fine and even braggs about it
Karma. I hope.
Courtesy post - 20+ year old thread alert.
"Got a flaming heart, can't get my fill"
Don't you find GC and HA better for our hobby ?
You're asking a guy who hasn't been on this forum in 14 years.
I think what Pete is wondering about is something myself and others have asked, especially after I learned that most of the dealer activity at big shows (or small ones, maybe) is done dealer-to-dealer BEFORE the official show starts. Or at least I have been told that several times.
Let me use a coin I am familiar with, Saints. Let's deal with a pretty good grade for a common coin to escape pure-bullion pricing; let's say MS-66 and say the coin RETAILS for $2,500 (if I'm off price-wise, ignore that
). Let's say normally a LCS (local coin shop) or dealer at a show would buy from me/retail for $2,350 (bid) and be willing to sell at $2,500 for about a 6% mark-up. You can adjust the bid price if you think that is too high (or maybe too low).
Now....from what I was told with dealer activity at coin shows....if most dealers get their inventory from OTHER dealers...how is that possible ? If Dealer A wants to buy from Dealer B, doesn't "B" want to sell his Saints that he has to Retail Buyers at $2,500 ? If he has coins, why (aside from professional courtesy and expectations that he will reciprocate in the future) would he sell his inventory at $2,350 per coin to another dealer ? Or does he "split the difference" and maybe sell at ~ $2,400 or so ?
I guess what I and Pete might be asking is: when we see prices quoted online (except for actual auctions) or in a price guide....are those RETAIL or WHOLESALE ? And for that matter, do you guys think GC/HA/auction sites are higher/lower than quoted price guides like the Greysheet and other print/online price lists ?
Jeez, I didn't even know that !!
That's why I added the giant annoyed skeleton.
Depends on the price guide. Any respectable price guide (greysheet, for example) explains how their prices are determined.
Auction sites are higher, lower and identical to price guides. Coin prices are a range, not a single value.
Took me a minute to figure this was a resurrected thread...I realized it when I saw Bears avatar.
If the buyer buys at a predetermined price, the buyer agreed on that price, they are not being "ripped off"...imo.
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1 have you sold or bought a car at a dealership? wholesale/retail certain mark-up or mark-down both are not the same sure we would love to get retail for or trade-in and get our new car at wholesale but things just do not work out that way. you just have to live with what you are comfortable with some you win and some you lose. I have already paid some big prices for certain coins and took a hit, and some I made out on, you have to enjoy what you do. like they say "If it's Not fun, It's Not worth It. just enjoy unless you are thinking of becoming a Dealer. Don't look for more than just a small percentage up or down.
There are different types of dealers, some wholesale some retail. The wholsesalers are the guys you see at a show who may not necessarily have a booth, but they walk the floor with boxes of coins for the retailers to pick through. Wholesalers are focused on volume and turnover, they might be happy making $50 on a $2000 coin. They dont have the clientele to sell at retail prices, so in order to move inventory quickly they have to work on smaller margins.
Sometimes, dealer A might have tried to sell a coin for a retail price for a while with no luck. It could make more sense for him to free up that capital again and sell it to dealer B at his cost, slightly more, or maybe even slightly less in some situations. Dealer B might have a larger customer base for that type of material, and in the future dealer B might sell coins to dealer A at his cost, when the roles are reversed.
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If you pay someone a dime for a nickel, you got ripped off. See U.S. Mint for details. Just because we are dumb doesn't mean anyone is getting ripped off.
Click on a name and you'll see when they made their last visit here, when they joined, and other information.
Worry is the interest you pay on a debt you may not owe.
"Paper money eventually returns to its intrinsic value---zero."----Voltaire
"Everything you say should be true, but not everything true should be said."----Voltaire
Forget markup. Think margin. Let me explain the difference to you. A dealer buys a coin at wholesale for $1 and sells it at retail for $2. That's a 100% markup, but a 50% margin. The markup is the difference related to the wholesale price while the margin is the difference related to the retail price. The markup is meaningless. The only meaningful number is the third line down on that dealer's Income Statement, which is the Cost of Goods Sold, or COGS line. That line is otherwise referred to as his Gross Margin on Sales. It has to hit a number that covers his operating costs while leaving him with a reasonable Gross Profit for him to stay in business. In most brick-and-mortar businesses, you can figure him, give or take a little, for 40%, leaving 60% to cover the aforesaid. When I was a kid, that formula was like gold to us, as it enabled us to figure the prices. If we were selling into him, the wholesale price, if we were buying from him, the retail price. Sometime we'd come across a stupid dealer, but that was far and few between, because most of them knew their numbers, just like we did, and that if they didn't deal, the next one would, unless the next one was as much a dope. You don't want to get ripped, learn some basic accounting. Dealers are earning a living, they're not in your coin club. Respect that when you're dealing with them. Know their numbers, that's how you don't get ripped.
I guess I will stick to just buying coins and never become a dealer !!
NVM old thread.
The substantial truth doctrine is an important defense in defamation law that allows individuals to avoid liability if the gist of their statement was true.
How is McDonald's not ripping the customer off? How is Walmart not ripping the customer off? How is any business not ripping the customer off.... talk about beating a dead horse to pulp.
Paper money eventually returns to its intrinsic value. Zero. Voltaire. Ebay coinbowlllc
I used to work with a Jack in the box accountant who would brag about how cheap the $0.99 two tacos was to produce. acted like each taco cost them $0.01 and they made a killing on the margin.
The substantial truth doctrine is an important defense in defamation law that allows individuals to avoid liability if the gist of their statement was true.
In the coin business yes margin is everything. If expenses exceed gross margin your ship is sunk. You could be even be getting a great markup.
Example
Harry is going over the qtr results for his numismatic business.
Sales 100k - 60 k cos = GM 40. GM 40-30 Opex = 10k net income.
Another factor is the time value of money other investments vs coins as coins do not earn interest or dividends. Larry bought a currency collection from a young couple - husbands collector father deceased, hundreds of pieces for $1250. Over 10 years it realized $2800 in retail sales. Looks impressive but inflation, etc eroded the real return vs stocks and bonds. Many here like deer in headlights (or some troll w own agenda) on the reality of what it takes make it in the coin business.
This is completely different than Walmart, because they ain't making old coins anymore. they have to be bought from someone who already owns them.
My personal experience, I think coin dealers make their living when people like us die. We leave our vast and carefully curated stash to unknowing heirs, who cart our precious down to the local dealer and take whatever is offered. My sibling/cousins and I inhereited a bunch of coins and some of us did just that. I was shocked and saddened to hear what they got - example - a tube of 100 decent morgans for $800, and NGC slabbed pre 33 gold coins for 75% spot. I told the rest, please talk to me first if you want to sell your bundle.
That's how.
@Cougar1978, why did you resurrect a 22 year-old thread?
In general, dealers act to facilitate the transfer of coins from one person to another. Random thoughts:
You must be one of those trolls with your own agenda!
A 22 year old thread, enough said.
Dealers make money on very low margin but liquid items. You only make 3 to 5% on a $2000 double eagle, but they are so liquid that it is a quick flip.
Markup, did someone say MARKUP?
I have only one thing to say……..JEWLERY.
A: The year they spend more on their library than their coin collection.
A numismatist is judged more on the content of their library than the content of their cabinet.
I feel ripped off simply reading this crazy thread.
Dave