What would it take for a brand new grading service to succeed and be respected as much as PCGS?

Woodwind

I thought I’d ask this question to ask what a new third-party grading and slabbing service would need to do be as good as, and as generally respected as PCGS and NGC.

To me, this sounds like an almost impossible task. Given the highly respected and highly paid experts and graders at PCGS and NGC trying to recruit them away from these companies or hiring other noted experts would be very costly. They would also need to provide solid, consistent ANA-based grading for at least 5-6 years and not do something dumb or “gimmicky” like grade every modern proof PR-70. Considering the high overhead and time involved, it would take a few years to turn a profit, something not popular in this society that demands almost immediate profitability.

If such a company were to stick to their integrity and continue to grade conservatively according to ANA standards many collectors and dealers will simply dismiss them as being “too tough” and will just use other services for the grades they want. Thus, fewer people submitting and less market penetration. If they loosen things up and grade more generously, they would be accused of over grading and would lose any chance of being in the same tier as PCGS of NGC.

It seems that whenever a new service comes out, there is almost immediate sarcasm, and a reluctance to accept them as new legitimate grading company. “Just another fly-by-night grading company trying to hock over graded junk.” I think the same way too. Given the reputation of these third tier services, I certainly would not want to buy an MS-66 Morgan Dollar from E-bay for a full MS-66 price slabbed by a company I’ve never heard of.

Thanks for reading this far. As usual, I look forward to your insight.

ziggy29

That's the tough thing. It's hard to imagine, if a service had grading "on par" with PCGS and NGC, that anyone would have incentive to use them unless they were MUCH less expensive. And even then, given the likely difference in market perception (and marketability) between a PCGS/NGC coin and a new slabber, the cost is a non-factor.

Right now it seems like the only reason new entrants come into the TPG marketplace is to grab the people who would rather see their coins in overgraded slabs. I don't think anyone would have any incentive to go use a new service if they gave the same results as an already trusted, respected TPG.

dollardude

GREAT question!

With all due respect to PCGS and NGC, I think there is definitely room in the market for another respected TPG service, since the current leaders, PCGS and NGC, are expensive and time-consuming. However, it would be difficult and time consuming to establish credibility in this marketplace, which is overwhelmed with fraud (I won't mention any names. ). Here is what a potential new TPG service would need to do:

1. Find and hire subject matter experts
2. Build a reputation over time
3. Undercut the pricing of PCGS and NGC by, say, half
4. Simplify service levels to, say two: (1) standard (2 weeks for coins under $500), and (2) premium (1 week and all coins over $500)
5. Offer a guarantee
6. Improve the materials used in slabs so you don't need to add outer protection (like I do now, i.e., Intercept Shield(TM) holders)
7. Offer a useful web site

Edited to add: I'd like to note that MANY TPGs have tried to overtake PCGS and NGC, without success. Now, we are left with way too many TPGs in the marketplace.

UncleWiggly

I think allot of people would like to know the answer. Why hasn't ICG been fully accepted? How's the success rate for crossing an ICG to NGC or PCGS? I'd start by learning why ICG has hit the stalemate of acceptance on PAR with NGC and PCGS.


Jerry

msch1man

I think the main thing that it would take is industry connections. For example, if Legend and Pinnacle and some of the other nationally known and highly respected dealers started certifying all of their coins in this new company's slabs and touted them as "on par" with PCGS and NGC, I think it would just be a matter of time and marketing execution before "the market" as a whole began to see them this way.
Obviously, many other things would have to go into it (e.g. consistent grading, excellent turnaround time, etc), but as far as getting the perception of being a top tier grading company, I think connections are the most important.
Interesting thread.
Mark

Woodwind

<< <i>Why hasn't ICG been fully accepted? >>



I think the answer to that is because at least for a while, they overgraded modern coins and "gave" a boatload of MS-70 and PR-70s.

I like ICG though. IMHO they are tough, but reasonable on classic coins.

itsnotjustme

Very tough....

I think it would really take mistakes on the part of PCGS and NGC to allow a competitor to get in. (And the competitor would have to successfully do much of what is listed above already)

ER

It's like a new soft drink company trying to knock Coke and Pepsi off their top spots. It 's tough.

mrearlygold

A bazillion dollars +++ to compete with the P's and N's.


It's not going to happen.


Tom

tmot99

What if they provided onsite grading at shows with enough graders that they could provide fast accurate grading in a nice quality slab at or just below PCGS or NGC?

mgoodm3

Money to survive the lean times. Coins that cross successfully to PCGS and NGC.

edsondl

Consistency,
fast turn around,
a highly respected market insider at the helm,
slabs that fit in other people's boxes,
consistency,
a guarentee,
lower cost,
and the staying power to wait out several years to be established.

And maybe a new hook, like free professional photography of the coin graded, or no finger prints in the slab

Peaceman

I've said it before, all a company would need to do is undergrade 80% of it's coins it slabs. A CURRENT company now (such as ANACS who is view NOW as somewhat soft) could see a huge perception change if they went to, say a different color and undergraded everything by a point.....

Over a year, people would look for that kind of slab because it would be known to have undergraded coins in them.... ANACS would change it's public perception, and in turn, make more moeny by being "accepted" as equal to PCGS.

Face it, we like PCGS because the coins in their slabs are mostly undergraded and can be viewed well. Not very often do you say... "wow, PCGS really overgraded that coin..." Maybe 1 in 100 for PCGS while SEGS is likely 60 in 100.... NTC 90 in 100.... ACG....

291fifth

The new service would need to develop a nitch. To some extent ICG has done this with ancients. In the case of ancients authentication is probably more important than the stated grade. In the case of US coins any new service that attempted to be conservative would probably fail since most submitters really want "their" grade and not a correct, conservative grade. When the market is soft, as it is right now, the low end of grade slabbed coins become impossible to sell for the stated grade. If you doubt this, take some of your low end of grade "major holder" coins and try to sell them for cash. You'll learn what the market is like very quickly.

MS68

PCGS and NGC have both been around since 1986 and 1987 respectively and have proven that they are without a doubt the preeminent coin grading services out there. Aside from both California falling into the ocean and Florida being wiped out by a major hurricane, I don't see how a startup operation would have a chance competing with these two behemoths.

tradedollarnut

What would it take for a brand new grading service to succeed and be respected as much as PCGS?

A joint venture between David Hall and Mark Salzberg.

EagleEye

I think the only way to compete in getting the submissions would be slightly more generous in the grades given. This will not make you the best grading service though.

Here's the plan. Make tons of money in real estate, buy CLCT stock and take over the company. Hopefully you won't take down the entire coin industry while you do it.

BigMoose

Great question! In all honesty, I think it would take a miracle at this point in time. TomT.

ddink

Obtain market share by a simple test. Take 100 NGC coins and 100 PCGS coins, have someone cover the labels, and have the company grade them right there, on the spot, at some show. Then take off the labels and see how close they are. This would quickly prove that their standards are similar. Or do it in reverse--take 100 coins that X company graded, crack them, and send them to PCGS. Either way, the results would lend credibility to the new service.

mintluster

Nothing. It will never happen IMO.

Just trying to be realistic for you.....

relayer

Enough time to build trust with the customer base and enough money to stay in business long enough to do that.

morgannut2

The only way is if Bill Gates takes up the hobby and gets a few body bags on coins from rolls his dad saved in the 50's. A nice hostile takeover of PCGS (C.U.) followed by a merger with NGC. If he'd fix the mess, Congress will exempt the new company from the anti-trust laws. Of course a merger followed by a Hall- Salzberg dual would be nice too. The loser goes on the $10 bill like Hamilton did.

robertpr

Market acceptability is, IMHO, all about what slabs bring the strongest money. If a new service came out and was very harsh on everything submitted, sure they would piss off a few people but when the marketplace gets wind of this, everybody will be falling over themselves to get these slabs and it would raise their value. After their value increased people would be falling over themselves to get their coins into the new slab. At the correct grade of course, which means re$ubmi$$ion$. After a short time the upstart would have gained enough traction to relax their grading to "normal" levels on par w/ the big P & N.

Remember the NGC *black core* slabs? This sounds very much like their early strategy now that I think about it.

DHeath

Charge $50 per coin, seal the coin in inert gas, and undergrade PCGS by ½ point.

wayneherndon

I think the most likely way for such a venture to survive and grow to PCGS/NGC comparable levels is to have a name brand numismatist attached to it. Someone who instantly brought credibility to the service. Someone who already had trusting relationships with large dealer submitters. Someone that could get it accepted immediately with Heritage, Teletrade, CDN, etc. Someone who was highly respected by the hobby. Think someone like QDB (not that he'd want to do it, but someone with his level of recognition and respect).

The company would need to use grading standards somewhere along the line of NGC and PCGS. Don't try some gimmick with grading (computer, new system, etc.) or looser or tougher. Do what the market expects and respects. Want a gimmick? Then do something creative with the slab. Maybe make it airtight for instance or a color that works well with all types of coins (black?). Or do something along the line of SEGS being able to read the label from the top as well as the side. But, keep the slab standard sized and don't go too outrageous like those TPGs that show the rim too.

Don't try to undercharge for the service but don't overcharge either. Turn coins around quickly. The cheapest tier should have coins returned in about a month. That is plenty of time to grade them and no one really wants to wait longer than that even to save a few bucks. Have a great customer service staff. Don't be afraid to err on the side of the customer on customer service issues (except don't compromise on the grading standards when challenged by a customer). Stand behind the grade and buyback the mistakes without hassle.

Provide a brief explanation for coins that did not cross over or are bodybagged. Make the population report available on the internet for free. Have a vigilant program for return of certificates for crackouts (bounty, sweepstakes, or ??).

That should be a good start on a business plan.

WH

CramptonMotorsports

wayne's about got it.

all it really takes is one or a few disgruntled key players and financial backing. and obviously it would have to be at or above par in grading caliber with PCGS and NGC.

Coinosaurus

The more important question is, what VALUE could another grading service bring to the market that isn't already there?

1) There is NO way another player could make it unless they "market grade". Right there, you lose a lot of distinction.

2) The best graders are already working at the big two. What additional value do you add if you move them to another company?

FrattLaw

<< <i>wayne's about got it. >>



Yep, and if you could get Mark Feld to run it. He's about as honest as a person as you will ever meet. I think the credibility he would bring to the table would be HHHUUUUGGGGEEEE!

Hey Wayne -- wanna give it a shot?

Michael

foodude

What would it take for a brand new grading service to succeed and be respected as much as PCGS? A lot of luck, including a significant mistep by PCGS or NGC ....


someone like QDB Wasn't that "Hallmark"?

sliderider

<< <i>I think allot of people would like to know the answer. Why hasn't ICG been fully accepted? How's the success rate for crossing an ICG to NGC or PCGS? I'd start by learning why ICG has hit the stalemate of acceptance on PAR with NGC and PCGS.


Jerry >>



I agree with Uncle Wiggly. I think of all the third tier grading services out there, ICG is trying really hard not to be perceived in the same light as the rest of the pack and I have started buying coins in ICG slabs for crossover purposes because I think they are more consistent and conservative in their grading than the others. If I didn't need PCGS serial numbers for my registry set, I'd be happy to leave them in the ICG slabs. SEGS seems to be making strides, as well, especially in their attributions of varieties and errors, not to mention having the most indestructible slab on the market. If their grades were a bit more accurate, they might have a shot at closing with the leaders, as well. Everything else I have seen out there is pretty much overgraded junk (PCI, NTC, ACG, SGS, and scores of others) although once in a rare while they do get one right and you can cherrypick it cheap for a PCGS/NGC slab.

I think it's a shame that Hallmark wasn't able to stay around. A lot of people have said that they have had great success crossing Hallmark coins, so I would guess that their grading was at least as conservative as the leaders.

mrearlygold

major auction house such as Heritage. >>





You mean like NCI?


I think not

Tom