Why are so many coins being sold in auctions rather than to Dealers for re-sale?

TahoeDale

We have just witnessed the largest sales of coins at auction since I have been collecting--over 90 million dollars. Let's see why this phenomenom has occurred at this time in history and decide if it will continue, perhaps to the detriment of the dealer industry.

We are in the middle( 2nd or 3rd quarter) of the best coin market I have seen.(I have been a serious collector since 1993, but understand the earlier booms from my older and wiser friends). What has caused the sellers of coins(including dealers) to use the auction medium for the best shot at the highest price result?

1. Dealers used to buy from collectors as the number one source for their inventories. They paid reasonable prices, maybe 20% back of bid, and re-sold those coins at or near bid, or more, if the coin was special. Collectors did not have many other sources for their collections, or were not knowledgeable in the auction scene.

2. Auctions were attended by dealers, looking for inventory. The first auction I attended in 1996 was 90% dealers, and though in place to bid if I wished, my dealer bid for me.

3. But with the increasing access provided by the internet, and the larger number of collectors active in buying and selling(rather than just holding), auction consignment and purchases are going to more collectors, in person or via the net. The dealers aren't the only ones buying, but when they do, they are competing directly with their ultimate end user- the collector.

4. A successful auction will take purchasing dollars from the collector who might otherwise buy coins on the floor, or from the dealer when the dealer gets home and calls the client with his new purchases. The collector may have already spent his current budget.

5. Dealers are reluctant to pay a collector market value for his nice coins, so the collector consigns to an auction house with a proven record for good results. Where dealers used to buy at a nice % under bid, today the collector has options for his sale of coins. And the same is true for the dealer who has extra inventory that has not sold. Instead of reducing prices to make it attractive to a buyer, the dealer consigns, and gets a needed advance. (If he is credit worthy, or not?)

How can this situation change, and is a return to more collector dealer transactions likely?

Let's hear your take on the present marketing and sale of coins.

DennisH

Auctions pay more.

jpkinla

Your observations are correct. I watched with great interest the coins which were in my area of interest and tried to buy several but was beat out by an aggressive dealer. I also watched a coin which I thought was worth $50k bring $75k and another which I thought was worth $100k bring $150 all because two collectors or dealers wanted the same piece. You can't get that in a one person transaction.

I know your coins will be sold in auction some day as will mine. Why go through any other venue? Competition for good coins is good for the seller as well as the buyers.

My $10 Indian Gold Registry Set

sumdunce

I think it is safe to say that nobody wants a catalog named after me (not even me).

Could you imagine... The Sumdunce Collection

IrishMike

I could relay some conversations I've overheard on bourse floors when a collection comes up for auction and the collection is handed off to the auction company without any intermediate participation by a dealer but I reckon most of you have heard some of these same conversations and you understand why it happened. If I had to boil it down to one reason I lay the fault at the dealers feet. One of the toughest concepts to inculcate into your business selling or thinking mentality is that you are not sellling a coin or a mortgage you are selling service. It follows then that before you as a dealer start quoting prices to these high end folks as we bankers call them, first find out what their goal really is. Are they for a one hit coin because they like, do they want to build a collection and if so how much of one and what kind of budget. What plans do they have for the future of the collection or of their investments. I could on but what you really need to do is assess what services the client really needs and wants and be there to offer a broad program for him/her.

You might end suggesting a completely different direction, grade levels, timing, purchasing habits etc. I guess what I am saying is try to get enough information to look for opportunities to really help them. You are more likely to retain them in the future if they walk away not only with the coin at a good price but with the feeling that you have their well being in mind and took the time to show a real interest in what their goals were.

It took me more years than it should have to buy into this. I just wanted to move onto the next deal. Well I found out that if I switched selling techniques, more often than not the next deal came from a repeat client or best of all from a referral from that client. For those of you who think this is corny I have to tell you clients come to me now instead of me to them. I work half the amount of time for twice the amount of money and reaps ten times more satisfaction. Obviously you have to tailor this somewhat to each type of business.

I don't need to tell dealers that they are competing with auction houses for future income, but I would suggest that they need to figure out how to lessen that impact on their bottom line.

INXS

<< <i>Auctions pay more. >>



This is the only reason. Everyone gets their share Auction Houses, dealers that are buying for a collector(s) as middle men and the owner of the set being auctioned.

IrishMike

While there is a lot of truth in what you say there are ways a good business oriented dealer can counteract that. They just need to think some on that.

keets

IrishMike makes sense. i've been of the opinion for quite a while that many dealers are just poor businessmen and it hurts them, though they probably seldom see it that way. it's easier to blame the collector community and make excuses while attempting to malign the Auctioneers. we never see/hear that, do we??

there's always talk from some members about where the best prices are to be had and why one approach is better along with the reasons. in the end, i think collectors make decisions based on their personal experience and not that of another. depending on what the item(s) are to be sold, a dealer might be better or an Major Auction might be better. i figure that as much as anything, the advent of the internet has hurt dealers and benefitted places like Heritage and Superior. the cream of dealers and Auction Houses know this and have changed to take advantage of it. the others, well, they're probably the ones who think collectors are the enemy. as for collectors...............................

al h.

morgannut2

The number one problem is collectors know they DON'T know the value of many coins. There is a certain confidence that an auction brings if there are 1000's of potential buyers evaluating their coin. Ultimately the question is whether a dealer's offer is 15% less than what the coin will likely bring (minus time/aggrevation) and frankly I'm not sure most collectors really can answer this. Unfortunately, I suspect that more than 50% of the coins in most poorly pictured auctions are bought at the wholesale level anyway, and the seller loses another 15% at a minimum. The big auctions will continue to crush many dealers partly due to the internet, and partly due to their inability to develop strong customer relationships.

ThatImpalaDude

I know this is speculative as we don't have enough information, but I'm curious what you all think. Less then a year ago the famous Walker GBW set was sold off by Pinnacle. I don't know if it was consigned or outright sale to Pinnacle. Set had nine pop 1's including the classic 19-D and 21-S, and many other pop 2,3,4,and 5's. Would GBW have been better off putting this set (DH called it the best 20thCentury set he had ever seen) in auction with all the resulting publicity? If you had such a set, would you auction, sell to dealer, or consign to dealer? Maybe Coinguy1 could weigh in as he was with Pinnacle, I believe, when the set was marketed by them.

Steve

tradedollarnut

Yawn. SSDD.

MrEureka

Auction companies reach more customers than ever before and charge lower commissions than ever before. Of course they're getting more consignments than ever before.

Assuming you can negotiate the right deal with an auction house, it only pays to sell to a dealer if the market for the coins is very thin (in which case a strong underbidder would not be assured) or "generic" (in which case the market price is so well defined that auction commissions cannot be justified).

BTW, it's not a coincidence that I specialize in thin markets like patterns, pioneer gold, errors, colonials and world coins. Hey, puppy chow ain't cheap!

ThatImpalaDude

Coinguy1 said "Steve, I do not know the precise details regarding the selling arrangement of the GBW set. Even if I did, however, I would not feel right disclosing information such as that, since I am no longer with Pinnacle.

Please know, I have no fault, whatsoever, with your question. In fact, I think it is a very good one. I just wanted to let you know why I can't answer it."



Mark,

I totally understand, and respect your ethics. I wasn't asking for confidential information, but the way I phrased my request may have given that impression.


Steve

Sunnywood

Andy - auctions companies charge lower commissions than ever before? Really? Sellers aren't being charged consignment fees, but the buyer's fee is stubbornly stuck at 15% despite plenty of healthy competition. How come they all have a 15% buyer's fee? Tacit collusion? Federal scrutiny led to an admission that Sotheby's and Christie's fixed their buyer's fees at 15% ... you do have to wonder why none of the auction houses tries to gain an edge by going to 10% (which used to be the standard fee in the old days).

Sunnywood

tradedollarnut

Sunnywood: there's no grounds for collusion on price fixing because they all will negotiate with good consignors a percentage of hammer. And each is different what they will do.

Sunnywood

TDN, I still find it bizarre that nobody tries to gain a competitive advantage by lowering commission rates publicly, across the board. I understand your point about offering select consignors a premium, e.g. 105% or 107% of hammer, which effectively reduces the commission charged by the auction house to below 15%, but the "etched in stone" practice of adding 15% to hammer seems overly resistant to competition.

Sunnywood

MrEureka

the "etched in stone" practice of adding 15% to hammer seems overly resistant to competition.

If an auctioneer eliminated the buyer's premium completely and charged all sellers 30%, I doubt the competition would lose much sleep over it.

Sunnywood

Andy, that is obviously NOT what I meant !!

Sunnywood

tradedollarnut

It seems to me that a consignor might like gettting 105% of hammer rather than selling his coins to a buyer who only has to pay 110%. Plus, having a 15% buyer's fee gives the auction house a bit more flexibility in attracting that really big deal. And my understanding is that the auction companies need to average a bit over 10% to make a long term profit .... dropping their regular fee to 10% would be cutting their own throat.

COINDOG

I am not trying to be sarcastic, but the day of the horse and buggy are past, so is the dealer-collector- deals that you describe.
There will continue to be dealers, but the internet has changed the focus of this relationship !!!