A dealer's God given right to make a profit
Iwog
Posts: 1,089 ✭✭✭
Okay I admit it. I've caught the silver bug again which doesn't make sense since I was infected in the 1980s. Doesn't the body's immune system prevent a reoccurrence like with chickenpox? Needless to say I've implemented an accumulation program to buy a few hundred ounces a month.
Aware that one must pay a spread when buying and selling silver bullion, I decided to give my local coin dealers a chance. I've been hard on them in the past few years so what better way to hold out an olive branch. I started by calling every coin dealer in the Sacramento yellow pages and polling their buy/sell price for a 100 ounce Engelhard silver bar.
I called the dealers on Monday when the New York spot price on silver was $665. The dealers quoted me buy prices between $550 (no lie) to a high of $605. The least expensive sell price was $710 however one was willing to part with his precious silver bar for $725.
Now a stupid silver bar is not like your PCGS MS66 key date Morgan dollar. There is a very liquid market for silver, and any dealer at any time can sell to a wholesale broker for a few percent below spot. This apparently doesn't matter when the public is willing to pay a 20% markup on a pure liquid commodity.
Anyway, here's the kicker. I got annoyed with the guy who was offering $550 and asked him why I would sell to him when I could easily get $650 + shipping by listing it on ebay. He got very agitated and started mouthing off at how people on ebay don't have overhead and how was he supposed to make a living with a 5% markup. It occurred to me that the only logical position that any dealer could take with such an argument is that they had a god given right to buy and sell coins with a 20% spread and anyone who disagreed with this position was a blasphemer.
All I can say to this is God bless ebay. Dealers have NO RIGHT to make a living buying and selling coins. If a coin dealer can find opportunity offering pennies to orphans and widows and selling for a profit, then they have the right to take advantage of it. But don't for one minute think that as a dealer you're any more deserving of a spread than the people you deal with. Funny how almost all coin dealers get downright nasty when people point that out.
Aware that one must pay a spread when buying and selling silver bullion, I decided to give my local coin dealers a chance. I've been hard on them in the past few years so what better way to hold out an olive branch. I started by calling every coin dealer in the Sacramento yellow pages and polling their buy/sell price for a 100 ounce Engelhard silver bar.
I called the dealers on Monday when the New York spot price on silver was $665. The dealers quoted me buy prices between $550 (no lie) to a high of $605. The least expensive sell price was $710 however one was willing to part with his precious silver bar for $725.
Now a stupid silver bar is not like your PCGS MS66 key date Morgan dollar. There is a very liquid market for silver, and any dealer at any time can sell to a wholesale broker for a few percent below spot. This apparently doesn't matter when the public is willing to pay a 20% markup on a pure liquid commodity.
Anyway, here's the kicker. I got annoyed with the guy who was offering $550 and asked him why I would sell to him when I could easily get $650 + shipping by listing it on ebay. He got very agitated and started mouthing off at how people on ebay don't have overhead and how was he supposed to make a living with a 5% markup. It occurred to me that the only logical position that any dealer could take with such an argument is that they had a god given right to buy and sell coins with a 20% spread and anyone who disagreed with this position was a blasphemer.
All I can say to this is God bless ebay. Dealers have NO RIGHT to make a living buying and selling coins. If a coin dealer can find opportunity offering pennies to orphans and widows and selling for a profit, then they have the right to take advantage of it. But don't for one minute think that as a dealer you're any more deserving of a spread than the people you deal with. Funny how almost all coin dealers get downright nasty when people point that out.
"...reality has a well-known liberal bias." -- Stephen Colbert
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Comments
The better point would be not to point it out at all.
Joe.
Translation: Most coin shops don't do a very substantial volume and therefore MUST rely on very high buy-sell spreads, bordering on downright criminal in some instances. It's been my experience that many of the smaller coin shops typically rely on people walking in and selling to them for pennies on the dollar, the dealer usually then simply wholesales it off somewhere and waits for his next 'mark' to walk in.
I can usually buy 10 oz at 20 cents over, and 100's at 10 cents over...........
If he has bought a sizeable amount lately and silver has moved up within 3-5 days of his purchase, he will sometimes sell it to me for spot !!!
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God has only instilled me with the right to make a profit. Everyone else must fend for themselves
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Rent a table if you have a lot to sell or one can usually talk a table holder into sharing some space for a few dollars. Put up a sign which shows the price of silver per ounce. You will be able to sell for at least ten cents more per ounce than the current price of silver. Recommend that you price the silver for more than you are willing to sell it for and be willing to negotiate the price as many flea market goers feel haggling is an essential part of a flea market purchase.
Presently gold coins are very much in demand at flea markets and sell for more than can be sold for (net) on eBay.
Take security precautions.
Most stores have 50% as a typical markup.
The automobile markups are a closely guarded secret. But I suspect they are 50% too.
5% over is a great deal to me.
You're right, that's a great way to hold out the old olive branch. Waste everyone's time asking for quotes and then get angry at them when you don't like what you hear.
For the record, my buy is at spot and I sell at spot + $.25. I can make a whole 3% on your lovely 100 oz bar and I'll pay about $10 to ship it to my wholesaler. Please, please call me next time you're shopping around. I really need a piece of that action and I'll bend over backwards to get get it.
Mind you, I'm not complaining about working on a spread like that. I am happy to do it and could choose not to obviously. It's a service that is needed and appreciated by most. But when someone starts complaining about my fees then I have no problem telling them they'll surely be happier by taking that business somewhere else.
Very typical reaction of a small-minded small-timer. Ever get any dealers of any COINS to quote you a 2-way market?
<< <i>I got annoyed with the guy who was offering $550 and asked him why I would sell to him when I could easily get $650 + shipping by listing it on ebay. He got very agitated and started mouthing off at how people on ebay don't have overhead and how was he supposed to make a living with a 5% markup. >>
GREAT thread! the bottom line is, those quack-jobs offering ridiculously low values are NOT dealers, they are dealer-wannabe's. the more of them that fall to the wayside, the better far as i'm concerned, & i'm glad ebay does it's part by making a wider-ranging market available.
K S
most people dont understand the difference between margin and mark-up.
anybody know what a dealer's price is,to make 63% on a coin that he paid 100 bucks for ?
<< <i>Radio Shack has a 60% markup on items in their store. Then they have the sales.
Most stores have 50% as a typical markup.
The automobile markups are a closely guarded secret. But I suspect they are 50% too.
5% over is a great deal to me. >>
Wal-Mart tries to maintain a 28% gross but the actual net after expenses will surprise you (of course, they make mega $$$ because of their volume).
Car dealers actually work with slim margins on new cars (used cars are a different story). All automobile manufacturers give dealers a holdback...usually a 2 - 3% discount off of invoice. You can look up the invoice price on the internet and deduct their holdback and calculate their actual cost of the vehicle. Often they have factory dealer incentives (usually $400 - $1000) which would add to the dealers profit. I have a friend who is a F&I guy for a major dealership in our area. They will go all the way down to $600. profit to undercut another dealer. That amount would look very small as a percentage!
We have one old coin shop and one new dealer in our area. Although I purchase most of my certified coins on the internet, I still try to support these guys, especially the new dealer.
True, but the mark-up from the manufacturer is actually 100%.
100 % mark-up is mathematically impossible !
<< <i>Dealers have NO RIGHT to make a living buying and selling coins. >>
Uh..excuse me????
Jeez get a life,Iwog how do you think we support our families?I know that some dealers like Littleton Coin Co.
However I am a reputable dealer and I can honestly tell you that we make a heck of alot less then Walmart. take department stores for an example those people make a killing!!!
As for silver it's a waste of time
Why do you guys complain about a coin dealer markup of 10% or 20% .....do you think a dealer can support a brick storefront...pay all expenses.... on 3% sometimes I shake my head and wonder
<< <i>100 % mark-up is mathematically impossible ! >>
<< <i>100 % mark-up is mathematically impossible ! >>
It is????
Let see, I make something at a cost of $1 and sell it for $3.
That's a $2 markup which is 200% more than the manufactured cost.
Sure seems mathematically possible to me.
<< <i>100 % mark-up is mathematically impossible ! >>
No, it's not. 100% margin is impossible -- unless a dealer's cost is zero.
Markup is the percentage above cost you're selling an item for. Buy an item for $100, sell it for $130, and your *markup* is 30%. Sell if for $250, and your *markup* is 150%.
MARGIN is the percentage of the sales price which is "profit" (before deducting taxes, expenses, salaries, etc.). So if you buy an item for $100 and sell it for $150, your *margin* is 33% while your *markup* is 50%.
100% markup is simply selling something at double your cost -- which is the same as a 50% margin.
NO ONE HAS AN ABSOLUTE RIGHT TO MAKE A PROFIT! You're allowed to make money if you can find a market and you have a right to conduct business. However if you cannot make money selling coins then too friggin bad. Try working for a living and get a real job.
And for the record, lets examine who was doing the complaining! I was simply getting quotes and asking a dealer why his buy price was $100 less than I could get on ebay with minimal effort. He went off!!!!! Dealers are miserable on this point and take their rage out on collectors at shows all the time. How DARE a potential customer present him with a competitor's price. The funny thing is when I get a customer come into MY place of business with a competitor's price, I match it or beat it and thank him for giving me a shot at his business. NO EXCEPTIONS, this is how most legitimate businesses conduct themselves.
And now for the usual disclaimer. There are a few in this business who respect their customers. 5% at the most.
While a dealer may not have a RIGHT to a profit there is nothing that says you have to try and torture the dealer or that he even has to explain how he came to his price. Shop, deal or don't deal and be done with it.
This reminds me when I was involved in retail and a customer would tell me that Company A rents their equipment for $20 when my price was $30. I would politely say that he should rent the equipment from Company A. But then he would say that they were out of equipment at which I would reply "when I am out of equipment my price is $10."
Joe.
I know many small dealers around here make their money on selling moderns, proof sets, average collector coins, and don't want to be bothered with things like silver. If it's just more work with little payoff, why would they bother to offer you a great deal? However, some of these guys don't have the social skills to really explain this in a relaxed, non-defensive way........
Telling a dealer that the same product is sold for $100 more (or bought at $100 less) is not "torturing the dealer". Some of you crack me up. In a real business environment we call this information "market research". In the widows and orphans fleecing market however, they call this "rocking the boat".
Well, I just looked at him and asked him why it was my responcibility to pay for his light bill. Boy, that didnt help a volitile situation.... The irony is that he and I were really good friends (which just goes to show you ho strong his feelings were about the situation.)
Point blank, there will come a day when the mom&pop joint coin shops close up. They just cant compeat with the thousands of no-over head dealers on-line, and tens of thousands of collectors who choose to cut out the middle man. There's no denigning that a dealer has a RIGHT to TRY to make a profit, but it's not your responcibility to pay his bills. It is a free market system, and he see's the writing on the wall.
David
When you walk into a dealer's shop looking to get liquid, darn tootin' he has a God given right to make a profit!
First of all, since when did giving quotes become a waste of a dealers time? I missed that memo. Does that apply to just silver, or to all coins? Do most dealers with Yello Page adds feel that phone calls are a waste of time?
Secondly, how many hundreds of dollars per hour does a dealer "need" to make? Should a 100 oz bar even sell for spot minus $30? Does it take a full hour to sell a bar of silver and package it in a box to the wholesaler? That would be $30 per hour. I bet I could do it in less than 1 hour, unless I had to find the tape.......
Those supporting dealers keep repeating the costs of maintaining "brick and mortar". It's irrelevant. In order for a dealer to survive while charging higher prices for the same merchandise is to provide an added-value service (knowledge, networking, wantlists, grading etc.). All he's saying is that a dealer shouldn't expect to make higher margins JUST because he has higher expenses than the folks selling on Ebay.
Screw ebay. IMHO people who like to nickel and dime think ebay is always the answer. Well, its NOT!
In this scenario, Ebay would be a great alternative. Silver bullion is silver bullion. Buy it in bulk on Ebay and eliminate the dealer spread. Now of course if you're buying only a few ounces, the dealer and his high markup is probably your best bet.
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As a side note, I can’t tell you the number of times I’ve heard dealers (large and small) totally trash talk eBay.
“It’s full of sharks” is a comment I’ve heard several times at coin shows.
Hearing them speak, you would think 75% of the transactions on eBay “go bad”. I always chuckle --- they obviously see eBay as a serious threat to their livelihood (which of course, it is).
On the other hand, I enjoy my local coin shops, and I don’t want them to go out of business. That would be very sad. Given that, I expect to pay more at shops, due to their overhead.
Of course, should the spread get too dang big, I will have to walk…
Dave
By the way, I didn't get in the dealer's face. I simply mentioned ebay as part of the price negotiation the same way as EVERYONE finds comparables when buying a house. In fact, some corporations go overboard and advertise "bring in the competition's ad, and we'll beat it!" because they realize they aren't the only ones selling a product. That's the way it works in the legitimate business world.
In the illegitimate business world mentioning the competition or trying to determine a fair price is taboo and often results in cussing on the part of the dealer. A coin dealer isn't interested in what the market is because he's not part of the market. He's neither a buyer or a seller, he's functionally a BROKER. The coin dealer makes a living by positioning himself BETWEEN the buyer and the seller and charging a toll. In almost all other industries such as real estate, stocks and bonds, futures and commodities, etc. a broker (and read this carefully) is HEAVILY REGULATED AND SUPERVISED BY THE GOVERNMENT. I guess coin dealers are exempted because our hobby is too small and dealers have perpetuated the fraud that they are "professionals". (gag)
Anyway, that's kind of off the topic. I happen to be a small time coin dealer and have 30 years experience of coin dealer practices that would make most people wretch.
100 % markup is possible
100 % gross profit margin is not possible,even if your cost is 0,a computer biz program will not give back a figure of 100 %,i suppose its possible if you have a negative net cost
buy it for 1.00 and sell it for 3.00,gp margin is 67.1 %
<< <i>100 % gross profit margin is not possible,even if your cost is 0,a computer biz program will not give back a figure of 100 %,i suppose its possible if you have a negative net cost >>
It absolutely is possible.
Profit margin is:
(Sale price - cost) / Sale price
It's the percentage of the sale price that represents profit to the seller. When the cost is zero -- no matter WHAT the sale price, unless the dealer gives it away (in which case it's undefined) -- the margin is ALWAYS 100%.
1) One guy didn't get his coin, the seller took his $ & isn't responding to correspondence about this.
2) Another doesn't get the coin in the condition the seller claimed it was in (sorry to end w a preposition).
3) A seller doesn't honor his return policy or doesn't have one (surprise, surprise, surprise).
4) Buyer didn't read the seller's return policy and is mad because he waited too long to return a coin & the seller won't accept it.
5) Seller said "no returns," buyer makes a purchase, doesn't like it, and is mad when seller won't accept the return.
6) Buyer makes a purchase for a coin & the seller doesn't get paid.
7) Buyer thinks he 'rips' a raw coin, gets an equivalent of a numismatic turd in the mail and then is mad at seller, claiming the coin was misrepresented.
8) Seller claims a raw coin is from an estate, won't vouch re its authenticity and that there are no returns. Some guy buys the coin anyway, complains about the grade & wants to return it.
Do you want to talk about Paypal?
I'm with Laura on this. If you don't like seller #1's price, keep looking.
"Seu cabra da peste,
"Sou Mangueira......."
Paying attention to feedback and a careful reading of the auction eliminates all of these problems. Sure there will be an occasional case of pure fraud, but how is that different from coin dealers? I've seen a $30,000 gold coin called counterfeit by a dealer trying to buy the coin for melt. It happened right here in Sacramento and a dealer got sued. Unfortunately the dealer is still doing business.
So let me understand you very clearly. You think I should return the 100 ounce Engelhard bars I purchaed for melt + 0% and do what............buy them from a dealer and get hosed? I want to be sure I understand your point...........
i dont think a computer will ever spit back that 100 % number
99.99 ? perhaps
if you talked to somebody about the item you have a cost involved that = time !
this need not go on !
99.9 or 100
WHO CARES !
the poor frickin dealer cant live on 20 %
<< <i>Ziggy,
i dont think a computer will ever spit back that 100 % number
99.99 ? >>
Well, this is a minor point not worth arguing, but my last word on the subject is this: as long as the denominator (the sale price) ain't zero, a computer can spit out a calculation for profit margin.
it can,but it wont !
LOL
every business computer i have ever used will not show 100 %
i Link
If the silver bullion biz is so lucrative for dealers, then I suggest you become a dealer. Please report back after you've been on the other side for awhile and tell us how much dough you are making.
EVP
How does one get a hater to stop hating?
I can be reached at evillageprowler@gmail.com
I am a dealer but I'd never sell my soul and do the things necessary to deal in coins full time. I do need to sleep at night you know.
Coinosaurus, the entire point of this thread is that dealers are arrogant and think they have a God given right to buy and sell at a given price even if the market says that price is nonsense. Don't ever try pointing this out to a coin dealer however unless you want your head bitten off.