I didn't notice this thread (how did I miss it?). I need to take a closer read through it.
Always took candy from strangers Didn't wanna get me no trade Never want to be like papa Working for the boss every night and day --"Happy", by the Rolling Stones (1972)
The coin is what it is, worth what it is worth to me, and if the price is not in that range of what I feel it is worth, the dealer can tell me all about all of his expenses until he is blue in the face and it will not influence me one bit.
Bingo! This is the way most buyers think, and this is why I, as a dealer, completely ignore my costs and expenses. I price my coins based on what the market will bear. If I do my job well, my gross profits will cover my expenses and leave me enough to pay the vet bills. And if I can't cover my expenses, adios coin business!
Andy Lustig
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Good thoughts and a lot of truth throughout these posts. I don't find the article in question all that controversial, but it is pretty educational, particularly for someone not conversant with the economics at hand. In buying at retail through the years, you get to know pretty well it's what you bought something for that's more relevant than what someone's offering you for it later. Without being a dealer derek "roaring down the rare coin highway", it's hard for a collector (who's not trying to be a collector/dealer) to buy at retail and find they can later sell it back to a dealer and have beaten the buy-sell spread for a profit. It's happened to me in the case of my '77 Indian, for example, but that's an exception and the potential profit on this one item isn't setting me up for retirement.
Better that the pursuit of coins, for MOST collectors, remain a disposable-income pursuit for enjoyment - let what coins you buy, be dictated by whatever is your discretionary income level. If, on the other hand, you wanna be a dealer (but not a wannabe!) that would be something I'd pursue by learning the ropes under a respected numismatic firm or individual. A few members here seem to have done just that, at one time or another.
Thanks for the initial post! If only Derek would chime in...
Andy's words ring true - I've never had a dealer justify a price to me by singing me a song and dance about how far he traveled that month, how expensive gas is these days, etc. Guess I've never done business with enough such dealers.
<< <i>The coin is what it is, worth what it is worth to me, and if the price is not in that range of what I feel it is worth, the dealer can tell me all about all of his expenses until he is blue in the face and it will not influence me one bit.
Bingo! This is the way most buyers think, and this is why I, as a dealer, completely ignore my costs and expenses. I price my coins based on what the market will bear. If I do my job well, my gross profits will cover my expenses and leave me enough to pay the vet bills. And if I can't cover my expenses, adios coin business! >>
Andy said it best.... When I buy a coin, I want to buy the coin, NOT a coin and a story...... Either it is worth the price to me, or it is NOT worth the price...... case closed.......
"In today’s market, it is reasonable to expect that if a coin dealer makes 10 – 20% profit(1) on each coin he sells, then he will have a viable and sustainable business, provided he has sufficient volume to produce enough cash to purchase new coins, and still support himself financially. "
If you take the example of the $1000 coin marked up to and sold at $1200 your expenses and profit should be recovered from the $200 markup. The $1000 coin cost that you got back is plowed into new inventory. You would have to sell quite a few coins at $200 markup to start generating enough profit so that you could plow profits back into inventory.
I would have to disagree with the methodology used to compute overhead or expenses as laid out here. Expenses cannot be effectively levied against an operation on a per coin basis. Or even a group of coins. It must be computed on a yearly basis much the same as your taxes are filed. Even if a dealer makes a 50% profit on a $50,000 deal,it will show up as a loss at the end of the year if his total gross profit for the year doesn't exceed his total expenses. Everything is based on gross yearly sales versus gross expenses including overhead. The result is net profit. At $1,000,000 in sales a 10% expense factor would make expenses $100,000 per year. A 10% gross markup on all sales simply won't work at this level of volume. Either the profit margin must increase(at the risk of a slowdown in sales) or the volume must increase. Doubling the volume to $2,000,000 per year will increase the expenses somewhat but certainly not double. Say 5%. This would leave a 5% net profit on $2,000,000 or $100,000 per year. With no change in the pricing structure, there is a dramatic change in the bottom line. Extrapolating this even further, $50 million in gross sales would enable the dealer to to sell at a more attractive price than the dealer doing $2,000,000,even with the added overhead.(Additional employees, more shows etc). Dave W
The priceless ingredient in any coin transaction is the integrity of the dealer. David J Weygant Rare Coins website: www.djwcoin.com
I don't really get the big concern about a dealer's mark-up. Who cares!?! If a dealer offers a coin to me for $500, it's none of my business whether or not he paid $5 or $450 for it. All I'm concerned with is it worth $500 to me. Also, I always have to laugh when I ask for a lower price and the dealer says "I can't sell it for less because my cost is $800". (when he is selling it to me for $850!!). As soon as a dealer says "my cost is...." it kind of turns me right off of the sale. I should know, I've been on the other side of the table in another profession and I must admit, I tried this too when selling and soon discovered it doesn't work. Best you stay clear of mentioning COST to a potential buyer. I could be wrong, but this is just my opinion.
"Gold is money, and nothing else" (JP Morgan, 1912)
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
The dealer should factor all expenses into his overall profit for his business, but I am not sure if it makes sense to allocate overhead costs to individual coins. From an expense tracking point of view, it is great if the dealer can somehow figure out the overhead that can be allocated to individual coins in order to generate a certain percentage margin on his sales. In reality, I don't think many dealers to this. Also, in order to be competitive, the dealer needs to price his coins near to what other dealers are charging.
At what point will dealers start to do like lawyers and charge for xerox copies, postage, and other miscellaneous items. I worked at a big firm in the past, and we used to add an "administrative surcharge" to every invoice. I cannot remember the percentage, but someone calculated the amount of overhead (more or less) and simply passed those costs to the client. The odd thing is that no one complained. After a while, I think people thought it was cheesy, so they just increased everyone's hourly rates and it made things a bit easier.
Always took candy from strangers Didn't wanna get me no trade Never want to be like papa Working for the boss every night and day --"Happy", by the Rolling Stones (1972)
<< <i>if you like the coin, if you really REALLY like it, then the price does not matter
DK - What if I really, really like two coins, but I can only afford both if I can get them at lower prices? Don't the prices matter then? >>
nope, what it means is, you really didn't like both coins.
think about it. if you wrap your mind around it, it really does make sense. what does it mean when you say you "can't afford" something? it means your unwilling to make the sacrifices necessary to afford it, which is a measure of how much you REALLY "want" it.
<< <i>if you like the coin, if you really REALLY like it, then the price does not matter
DK - What if I really, really like two coins, but I can only afford both if I can get them at lower prices? Don't the prices matter then? >>
nope, what it means is, you really didn't like both coins.
think about it. if you wrap your mind around it, it really does make sense. what does it mean when you say you "can't afford" something? it means your unwilling to make the sacrifices necessary to afford it, which is a measure of how much you REALLY "want" it.
I didn't read every post, but one thing I haven't seen is the modern, information-age concept that dealers, and there markups, really aren't necessary any more.
Collectors sell to collectors now via Ebay, BST forum, etc. The dealer is bypassed. There are some niche/specialty dealers that attract coins not available elsewhere. More power to them. I believe the generalist dealer will experience continuing price pressure and decreasing margins. It's similar to real estate, where for sale by owner is done (though not exactly the same as selling real estate for a living is a licensed, regulated business.)
<< <i>I didn't read every post, but one thing I haven't seen is the modern, information-age concept that dealers, and there markups, really aren't necessary any more.
Collectors sell to collectors now via Ebay, BST forum, etc. The dealer is bypassed. There are some niche/specialty dealers that attract coins not available elsewhere. More power to them. I believe the generalist dealer will experience continuing price pressure and decreasing margins. It's similar to real estate, where for sale by owner is done (though not exactly the same as selling real estate for a living is a licensed, regulated business.) >>
this is no different then the past. in the past, coin clubs were MUCH more active, so there was alot of person-to-person buying & selling.
yeah, technology gives today's collectors advantages to collectors of the past, but those same advantages apply to dealers just as well.
to me, modern technology has given no edge to collectors that they didn't already have in the past. if anything, i bet collector-to-collector trades & sales have DECLINED comomon today over say 40 years ago, because the internet has made it so much faster & easier for dealers to reach the wider market.
to me, modern technology has given no edge to collectors that they didn't already have in the past. if anything, i bet collector-to-collector trades & sales have DECLINED comomon today over say 40 years ago, because the internet has made it so much faster & easier for dealers to reach the wider market.
No way, Karl. Sure, you may have had 20-40 guys trading coins locally in clubs years ago, but the Internet has opened up a connection to every collector in the country. For dealers, they always had mail order, but mail order between collectors was virtually unheard of.
<< <i>I didn't read every post, but one thing I haven't seen is the modern, information-age concept that dealers, and there markups, really aren't necessary any more.
Collectors sell to collectors now via Ebay, BST forum, etc. The dealer is bypassed. There are some niche/specialty dealers that attract coins not available elsewhere. More power to them. I believe the generalist dealer will experience continuing price pressure and decreasing margins. It's similar to real estate, where for sale by owner is done (though not exactly the same as selling real estate for a living is a licensed, regulated business.) >>
Gosh! Are you saying collectors aren't marking their coins up when they sell to each other. Why wasn't I aware of this. No more paying other dealers a markup for me. From now on I buy only from collectors who operate on a non-profit basis. Now the next thing is.....how do I contact these great benefactors who will sell me their great coins at their cost? Dave W
The priceless ingredient in any coin transaction is the integrity of the dealer. David J Weygant Rare Coins website: www.djwcoin.com
A new collector named John wants to get into the rising gold market, and help his son with a state quarter collection. He visits a local coin shop and inquires about gold bullion. The dealer says "A better investment would be a 1924 St. Gaudens, they are an 83 year old coin with the most beautiful design ever created, produced in limited quantities, with most melted down during the 1930's." This makes sense to John. "This one is a real beauty, just got her in, she will be sold within a day. The PCGS MS63 holder is your assurance of quality." John buys the coin for $800. "Here is a free album for your son's state quarters. You know, nothing out of circulation is worth collecting." John proceeds to purchase state quarters with a large markup from face.
Two months go by, gold is up 10%. John visits the local shop, the dealer is all smiles, "How is your son doing? Gold is up 10%, but because you purchased a rare coin, your investment is up 15%! Johns buys another Saint, at $920.
Another two months go buy, and John needs some money for some unexpected expenses. But gold is up another 10%, surely his new friend will allow him to break even on the last purchase, and make a 15% profit on his wise investment with the first coin. John tells his friend he would like to sell the coins back. Suddenly, the dealer develops a scowl on his face. He speech becomes terse and blunt. He does not ask about his son. He blurts our "How much do you want?" "Well, I would be happy to break even on the second coin, but would expect a 15% profit on the first." The dealer examines the coins at length with a loupe, and whispers back and forth with his partner. He looks intently a some sheets. He motions John to come over and look at the coins under a light. "These coins have some distracting marks on them, they will be tough to sell." "But you didn't mention the marks when I bought them!" The dealer ignores his response. "I will give you $1400 for both" John is shocked. "You told on my last visit the value had gone up 15%!"That was the retail value." John wonders what to do. The next dealer is 40 miles away, and he might be worse.
John takes the $1400, losing $320 on his rare coin investment, even though gold is up 20%. He vows never to trust another coin dealer.
Robert Scot: Engraving Liberty - biography of US Mint's first chief engraver
<< <i>Gosh! Are you saying collectors aren't marking their coins up when they sell to each other. Why wasn't I aware of this. No more paying other dealers a markup for me. From now on I buy only from collectors who operate on a non-profit basis. Now the next thing is.....how do I contact these great benefactors who will sell me their great coins at their cost? Dave W >>
I will sell you my coins (most of them, anyway) at whatever cost the market will bear. Look at my Ebay listings. They all started at 99 cents. How many dealers do that?
Gotta love the story from Nysoto. BTW, I honestly have had the same story from a "Dealer" regarding trying to justify the high price of a coin. Same deal with only being able to buy two coins at a show. My response went something like this........ Pass, sorry you weren't able to buy more coins at the show. Hmmmm, This was probably at least a couple years ago. And I haven't looked at this "dealers" inventory since.
Please... Save The Stories, Just Answer My Questions, And Tell Me How Much!!!!!
<< <i>Gotta love the story from Nysoto. BTW, I honestly have had the same story from a "Dealer" regarding trying to justify the high price of a coin. Same deal with only being able to buy two coins at a show. My response went something like this........ Pass, sorry you weren't able to buy more coins at the show. Hmmmm, This was probably at least a couple years ago. And I haven't looked at this "dealers" inventory since. >>
You mean that the dealer declined to buy with the excuse that he limits himself to two purchases per show?
<< <i>Gotta love the story from Nysoto. BTW, I honestly have had the same story from a "Dealer" regarding trying to justify the high price of a coin. Same deal with only being able to buy two coins at a show. My response went something like this........ Pass, sorry you weren't able to buy more coins at the show. Hmmmm, This was probably at least a couple years ago. And I haven't looked at this "dealers" inventory since. >>
You mean that the dealer declined to buy with the excuse that he limits himself to two purchases per show? >>
No, I guess I didn't word my post very well. I have had a dealer selling that had a high price tag. Then told me that they were only able to buy a few coins at show. So they needed to factor their overhead in the coin since they weren't able to buy much.
Please... Save The Stories, Just Answer My Questions, And Tell Me How Much!!!!!
I have no problem paying a dealer a profit, and this is just business. But when they only buy a couple coins and want me to pay their expenses for it, not my problem. I also think it's a redundant sales tactic as well. They shouldn't bother with it and just see my SIG line.
Please... Save The Stories, Just Answer My Questions, And Tell Me How Much!!!!!
There is no set markup for all coins purchased. Coins are worth what they are worth. And there isn't some magic percentage that can be considered "fair" to all parties.
By calling it a business, profit is implied. The gist of the article is to point out that collectors need to realize a coin's cost is more that the amount the coin was purchased for.
I'm not sure where I'm going with this, but wanted to chime in on this one.
I guess to sum up what I want to put out here is, "To ignore a dealer costs of doing business would be ignorant. To use business expenses as an excuse to justify a mark-up would be rude."
I always find it curious to hear that dealers typical mark-ups are on the order of 10-20%. In my experience, they are higher.
Here is a concrete example:
This F-15 1804 large cent sold raw as Lot 175 in the March 2007 Brooklyn sale at Stacks for $4830. It is now in the inventory of noted dealer HLRC, slabbed as PCGS VF25 for $9500 with this description:
<< <i>1804 1C PCGS VF25 (A) | A very attractive and extremely undergraded coin. >>
.
Naturally, there is now no mention of the removed spot noted in Stack's description:
<< <i>Sharpness of Very Fine-20, but a spot was deftly removed from the right obverse field Nice glossy medium brown surfaces show no roughness or planchet flaws. The spot interrupts the color in such an insignificant fashion that the few little hairlines are only notable under scrutiny. Some minor hairlines behind the hair are also noted but are only significant under the lowest curl. The marks are minor and consistent with the grade. A very desirable example of this key date, far more attractive than typically encountered >>
Conclusion: When considering purchase of gasoline that appears surprisingly highly priced, consider factors other than the oil company's cost which may be contributing to the inflated price. An oil company's profit must take into account overhead costs, in addition to the actual cost of producing gasoline.
The major assumption with all of this analysis is that the selling dealer KNOWS what he's doing and marks up a coin reasonably in the ballpark to it's true value. This is a huge leap of faith in the coin biz. What good does it do for a knowledge-challenged seller (or a shot-taker) to mark up a $1000 coin by 20% when it's only worth $500-1000 retail. I run into this all the time. The seller's cost is irrelevant if he cannot assess grade/quality. Considering that I think 90% of the "deals" on the coin market are poor ones, then it follows that a majority of sellers significantly overprice their material. To those very knowledgeable dealers who know exactly what they have and price it accordingly to a fair level, I have no problem with figuring off their cost. If it makes sense, then play, otherwise pass.
_______________
John takes the $1400, losing $320 on his rare coin investment, even though gold is up 20%. He vows never to trust another coin dealer.
John should have picked up the phone and called Heritage or any other major gold seller and gotten 95% of retail for his slabbed $20 Saint. Had he bought the coin from most well known gold dealers his downside would have been at most 5-10%. And in a rising market of 20%, he should have made money.
Coins have a value, that value is whatever the market will tolerate, It has nothing to do with what a dealer paid for a coin. If he overpaid that does not mean I will over pay. If he ripped I don't expect he is going to pass that along to me. Research is up to the buyer, pay what you feel is fair or pass. I have no problem with any dealer making a profit and actually his profit is not my Buss, Research , know a coins value and buy or not. With the internet, finding out current values is very easy. The most important thing to me as a collector is feeling good about my purchase, and that I get from researching prices. I know some people get more joy out of thinking they ripped a coin then the joy of getting a particular coin. I am a collector not a dealer, I buy for my satisfaction and I am responsible for what I pay for a coin not a dealer. AL
With a very open secondary market (like ebay), the "coin dealer" is heading for extinction. I have purchased about 5 coins at coin shows and only one at brick and mortar dealer. All the rest (500+) have been on ebay, Teletrade, or other dealer websites. I buy competitively-priced pieces and never pay a markup over retail market price for anything. I just can't justify paying a markup if I can get it for less on the secondary market.
The local coin dealer I visited once and bought only one coin from told me he would buy any 1999 silver proof sets from me for $200. I said, "Are you kidding? I can sell them on ebay for $400." End of story. I just don't need a coin dealer to collect my coins and currency. And I don't need a dealer to buy them from me either. I just sell them on ebay when I upgrade or change what I collect. Most of the time I end up making a small profit (receive a bit more than I paid) but we're talking about a very small volume. I'm a pure hobbyist, not an investor. And I'm not making stupid ridiculous purchases for REGISTRY points either.
Bottom line....I don't need or use a dealer so it doesn't matter one bit what markups dealers are making.
Perhaps the dealer in the example should have bought more than 2 coins if they are calling themselves a dealer and expecting to charge their customers for their expenses?
Jonathan
I have been a collector for over mumbly-five years. I learn something new every day.
<< <i>All this time, I thought that the average mark up was...................... 300%. >>
Only when Fletcher or Dizzyfox walk through the door.
Russ, NCNE >>
"Post O' The Day" from another board regarding the insults quoted above ... "Then Russ insults Bidask who was only responding (in a civil manner) to a another post. His personality matches his photo."
My question: Russ, when are you going to stop being such a dick to everyone and realize that your incessant rudeness and lack of civility will never fill the void in your chest???
One way to think about it is that the minimum mark-up is 10-15%. If a dealer buys a coin at auction, and it does not upgrade or is forced to pay strong money to buy it back from a collector, 15% is a typical number. If the coin upgrades or the dealer buys it right, the sky is the limit.
<< <i>One way to think about it is that the minimum mark-up is 10-15%. If a dealer buys a coin at auction, and it does not upgrade or is forced to pay strong money to buy it back from a collector, 15% is a typical number. If the coin upgrades or the dealer buys it right, the sky is the limit. >>
I think this says it best. There is a 10-15% return that a dealer is a pretty good chance at achieving. There is somewhat limited downside risk generally on the coins (probably in the 10-15% range), but if the coin upgrades, there is a significant upside.
Always took candy from strangers Didn't wanna get me no trade Never want to be like papa Working for the boss every night and day --"Happy", by the Rolling Stones (1972)
I wounder how much has this changed since 2007 when it was posted. Now you can see easily how much a dealer paid on Heritage or Stack's (for instance). And clearly, less B&M stores and more on line sells than 15 years ago (the discussion centers on eBay but now you can find very much what every coin sold anywhere in the world).
@Abuelo said:
I wounder how much has this changed since 2007 when it was posted. Now you can see easily how much a dealer paid on Heritage or Stack's (for instance). And clearly, less B&M stores and more on line sells than 15 years ago (the discussion centers on eBay but now you can find very much what every coin sold anywhere in the world).
PCGS Cert Verification even has realized prices for Heritage, Stack's and eBay. This is significant since it's one place to capture prices on popular venues. One place that isn't listed yet is Great Collections.
@Abuelo said:
I wounder how much has this changed since 2007 when it was posted. Now you can see easily how much a dealer paid on Heritage or Stack's (for instance). And clearly, less B&M stores and more on line sells than 15 years ago (the discussion centers on eBay but now you can find very much what every coin sold anywhere in the world).
PCGS Cert Verification even has realized prices for Heritage, Stack's and eBay. This is significant since it's one place to capture prices on popular venues. One place that isn't listed yet is Great Collections.
Another thing that's happening is that it can be easier to tell if a collector is buried when coins are being shared!
Considering the downward market trend the past several years, I am surprised anybody makes money in the coin biz at all.
Great article, thanks for sharing. There are many factors besides cost of material which contribute to the costs of being in the business. Out of town shows one has a much bigger fixed overhead hole to get out of. If the people coming in bourse room broke or not retail buyers forget it, especially if they have nothing of interest to offer or unrealistic selling expectations.
Doing shows both before and post online there is no doubt online has overall been detrimental to shows both in sales volume and quality material offered by the public. My online store has continued to outperform shows. December was a very strong Sales month exceeding my outlook for it.
If your doing shows (taking table) practice good security (more thieves coming out of woodwork), don’t let players talk you down, find some wholesaler go to guys (retail material for show, shop or online store), and have fun buying. I love it when they have free doughnuts, coffee, and pizza.
I was going to say who figures their cost of driving a car only to the price of gas? Being a former owner of an over the road truck I can assure you the cost to travel to a show is probably 3-5 times the cost of the gas!
The reason why I resurrected this thread is because there is a coin I was browsing on eBay. I went to PCGS to check the certificate and saw how much it sold last year (2019) in auction, and how much the seller wanted (nearly 3 times the money). On top of that, had an offer option. And I spent some time thinking what would be a fair offer now that I think I know how much the dealer paid for the coin. I thought the sell price at 3x was excessive, but being conscious of the dealer's expense, ruined my capacity to come up with a fair price and would like to know how others deal with this...
Comments
roadrunner
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
Bingo! This is the way most buyers think, and this is why I, as a dealer, completely ignore my costs and expenses. I price my coins based on what the market will bear. If I do my job well, my gross profits will cover my expenses and leave me enough to pay the vet bills. And if I can't cover my expenses, adios coin business!
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Better that the pursuit of coins, for MOST collectors, remain a disposable-income pursuit for enjoyment - let what coins you buy, be dictated by whatever is your discretionary income level. If, on the other hand, you wanna be a dealer (but not a wannabe!) that would be something I'd pursue by learning the ropes under a respected numismatic firm or individual. A few members here seem to have done just that, at one time or another.
Thanks for the initial post! If only Derek would chime in...
Charity is too, but it doesn't put food on the table.
<< <i>The coin is what it is, worth what it is worth to me, and if the price is not in that range of what I feel it is worth, the dealer can tell me all about all of his expenses until he is blue in the face and it will not influence me one bit.
Bingo! This is the way most buyers think, and this is why I, as a dealer, completely ignore my costs and expenses. I price my coins based on what the market will bear. If I do my job well, my gross profits will cover my expenses and leave me enough to pay the vet bills. And if I can't cover my expenses, adios coin business! >>
Andy said it best.... When I buy a coin, I want to buy the coin, NOT a coin and a story...... Either it is worth the price to me, or it is NOT worth the price...... case closed.......
If you take the example of the $1000 coin marked up to and sold at $1200 your expenses and profit should be recovered from the $200 markup. The $1000 coin cost that you got back is plowed into new inventory. You would have to sell quite a few coins at $200 markup to start generating enough profit so that you could plow profits back into inventory.
Expenses cannot be effectively levied against an operation on a per coin basis. Or even a group of coins.
It must be computed on a yearly basis much the same as your taxes are filed.
Even if a dealer makes a 50% profit on a $50,000 deal,it will show up as a loss at the end of the year if his total gross profit for the year doesn't exceed his total expenses.
Everything is based on gross yearly sales versus gross expenses including overhead. The result is net profit.
At $1,000,000 in sales a 10% expense factor would make expenses $100,000 per year. A 10% gross markup on all sales simply won't work at this level of volume.
Either the profit margin must increase(at the risk of a slowdown in sales) or the volume must increase.
Doubling the volume to $2,000,000 per year will increase the expenses somewhat but certainly not double. Say 5%.
This would leave a 5% net profit on $2,000,000 or $100,000 per year. With no change in the pricing structure, there is a dramatic change in the bottom line.
Extrapolating this even further, $50 million in gross sales would enable the dealer to to sell at a more attractive price than the dealer doing $2,000,000,even with the added overhead.(Additional employees, more shows etc). Dave W
The priceless ingredient in any coin transaction is the integrity of the dealer.
David J Weygant Rare Coins website: www.djwcoin.com
Who cares!?!
If a dealer offers a coin to me for $500, it's none of my business whether or not he paid $5 or $450 for it. All I'm concerned with is it worth $500 to me.
Also, I always have to laugh when I ask for a lower price and the dealer says "I can't sell it for less because my cost is $800". (when he is selling it to me for $850!!). As soon as a dealer says "my cost is...." it kind of turns me right off of the sale. I should know, I've been on the other side of the table in another profession and I must admit, I tried this too when selling and soon discovered it doesn't work. Best you stay clear of mentioning COST to a potential buyer.
I could be wrong, but this is just my opinion.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
if you like the coin, if you really REALLY like it, then the price does not matter
if you are honest w/ yourself, & you follow this advice, then you will never, ever lose in collecting coins, period.
K S
DK - What if I really, really like two coins, but I can only afford both if I can get them at lower prices? Don't the prices matter then?
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
The dealer should factor all expenses into his overall profit for his business, but I am not sure if it makes sense to allocate overhead costs to individual coins. From an expense tracking point of view, it is great if the dealer can somehow figure out the overhead that can be allocated to individual coins in order to generate a certain percentage margin on his sales. In reality, I don't think many dealers to this. Also, in order to be competitive, the dealer needs to price his coins near to what other dealers are charging.
At what point will dealers start to do like lawyers and charge for xerox copies, postage, and other miscellaneous items. I worked at a big firm in the past, and we used to add an "administrative surcharge" to every invoice. I cannot remember the percentage, but someone calculated the amount of overhead (more or less) and simply passed those costs to the client. The odd thing is that no one complained. After a while, I think people thought it was cheesy, so they just increased everyone's hourly rates and it made things a bit easier.
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
<< <i>if you like the coin, if you really REALLY like it, then the price does not matter
DK - What if I really, really like two coins, but I can only afford both if I can get them at lower prices? Don't the prices matter then? >>
nope, what it means is, you really didn't like both coins.
think about it. if you wrap your mind around it, it really does make sense. what does it mean when you say you "can't afford" something? it means your unwilling to make the sacrifices necessary to afford it, which is a measure of how much you REALLY "want" it.
K S
<< <i>
<< <i>if you like the coin, if you really REALLY like it, then the price does not matter
DK - What if I really, really like two coins, but I can only afford both if I can get them at lower prices? Don't the prices matter then? >>
nope, what it means is, you really didn't like both coins.
think about it. if you wrap your mind around it, it really does make sense. what does it mean when you say you "can't afford" something? it means your unwilling to make the sacrifices necessary to afford it, which is a measure of how much you REALLY "want" it.
K S >>
Collectors sell to collectors now via Ebay, BST forum, etc. The dealer is bypassed. There are some niche/specialty dealers that attract coins not available elsewhere. More power to them. I believe the generalist dealer will experience continuing price pressure and decreasing margins. It's similar to real estate, where for sale by owner is done (though not exactly the same as selling real estate for a living is a licensed, regulated business.)
<< <i>I didn't read every post, but one thing I haven't seen is the modern, information-age concept that dealers, and there markups, really aren't necessary any more.
Collectors sell to collectors now via Ebay, BST forum, etc. The dealer is bypassed. There are some niche/specialty dealers that attract coins not available elsewhere. More power to them. I believe the generalist dealer will experience continuing price pressure and decreasing margins. It's similar to real estate, where for sale by owner is done (though not exactly the same as selling real estate for a living is a licensed, regulated business.) >>
this is no different then the past. in the past, coin clubs were MUCH more active, so there was alot of person-to-person buying & selling.
yeah, technology gives today's collectors advantages to collectors of the past, but those same advantages apply to dealers just as well.
to me, modern technology has given no edge to collectors that they didn't already have in the past. if anything, i bet collector-to-collector trades & sales have DECLINED comomon today over say 40 years ago, because the internet has made it so much faster & easier for dealers to reach the wider market.
K S
No way, Karl. Sure, you may have had 20-40 guys trading coins locally in clubs years ago, but the Internet has opened up a connection to every collector in the country. For dealers, they always had mail order, but mail order between collectors was virtually unheard of.
<< <i>I didn't read every post, but one thing I haven't seen is the modern, information-age concept that dealers, and there markups, really aren't necessary any more.
Collectors sell to collectors now via Ebay, BST forum, etc. The dealer is bypassed. There are some niche/specialty dealers that attract coins not available elsewhere. More power to them. I believe the generalist dealer will experience continuing price pressure and decreasing margins. It's similar to real estate, where for sale by owner is done (though not exactly the same as selling real estate for a living is a licensed, regulated business.) >>
Gosh! Are you saying collectors aren't marking their coins up when they sell to each other. Why wasn't I aware of this.
No more paying other dealers a markup for me. From now on I buy only from collectors who operate on a non-profit basis. Now the next thing is.....how do I contact these great benefactors who will sell me their great coins at their cost? Dave W
The priceless ingredient in any coin transaction is the integrity of the dealer.
David J Weygant Rare Coins website: www.djwcoin.com
Two months go by, gold is up 10%. John visits the local shop, the dealer is all smiles, "How is your son doing? Gold is up 10%, but because you purchased a rare coin, your investment is up 15%! Johns buys another Saint, at $920.
Another two months go buy, and John needs some money for some unexpected expenses. But gold is up another 10%, surely his new friend will allow him to break even on the last purchase, and make a 15% profit on his wise investment with the first coin. John tells his friend he would like to sell the coins back. Suddenly, the dealer develops a scowl on his face. He speech becomes terse and blunt. He does not ask about his son. He blurts our "How much do you want?" "Well, I would be happy to break even on the second coin, but would expect a 15% profit on the first." The dealer examines the coins at length with a loupe, and whispers back and forth with his partner. He looks intently a some sheets. He motions John to come over and look at the coins under a light. "These coins have some distracting marks on them, they will be tough to sell." "But you didn't mention the marks when I bought them!" The dealer ignores his response. "I will give you $1400 for both" John is shocked. "You told on my last visit the value had gone up 15%!"That was the retail value." John wonders what to do. The next dealer is 40 miles away, and he might be worse.
John takes the $1400, losing $320 on his rare coin investment, even though gold is up 20%. He vows never to trust another coin dealer.
Great anecdote (whether real or ficticious) and one that probably plays out in some form, somewhere, on a daily basis.
<< <i>Gosh! Are you saying collectors aren't marking their coins up when they sell to each other. Why wasn't I aware of this.
No more paying other dealers a markup for me. From now on I buy only from collectors who operate on a non-profit basis. Now the next thing is.....how do I contact these great benefactors who will sell me their great coins at their cost? Dave W >>
I will sell you my coins (most of them, anyway) at whatever cost the market will bear. Look at my Ebay listings. They all started at 99 cents. How many dealers do that?
<< <i>Gotta love the story from Nysoto. BTW, I honestly have had the same story from a "Dealer" regarding trying to justify the high price of a coin. Same deal with only being able to buy two coins at a show. My response went something like this........ Pass, sorry you weren't able to buy more coins at the show. Hmmmm, This was probably at least a couple years ago. And I haven't looked at this "dealers" inventory since. >>
You mean that the dealer declined to buy with the excuse that he limits himself to two purchases per show?
<< <i>
<< <i>Gotta love the story from Nysoto. BTW, I honestly have had the same story from a "Dealer" regarding trying to justify the high price of a coin. Same deal with only being able to buy two coins at a show. My response went something like this........ Pass, sorry you weren't able to buy more coins at the show. Hmmmm, This was probably at least a couple years ago. And I haven't looked at this "dealers" inventory since. >>
You mean that the dealer declined to buy with the excuse that he limits himself to two purchases per show?
No, I guess I didn't word my post very well. I have had a dealer selling that had a high price tag. Then told me that they were only able to buy a few coins at show. So they needed to factor their overhead in the coin since they weren't able to buy much.
By calling it a business, profit is implied. The gist of the article is to point out that collectors need to realize a coin's cost is more that the amount the coin was purchased for.
I'm not sure where I'm going with this, but wanted to chime in on this one.
I guess to sum up what I want to put out here is, "To ignore a dealer costs of doing business would be ignorant. To use business expenses as an excuse to justify a mark-up would be rude."
Here is a concrete example:
This F-15 1804 large cent sold raw as Lot 175 in the March 2007 Brooklyn sale at Stacks for $4830. It is now in the inventory of noted dealer HLRC, slabbed as PCGS VF25 for $9500 with this description:
<< <i>1804 1C PCGS VF25 (A) | A very attractive and extremely undergraded coin. >>
.
Naturally, there is now no mention of the removed spot noted in Stack's description:
<< <i>Sharpness of Very Fine-20, but a spot was deftly removed from the right obverse field Nice glossy medium brown surfaces show no roughness or planchet flaws. The spot interrupts the color in such an insignificant fashion that the few little hairlines are only notable under scrutiny. Some minor hairlines behind the hair are also noted but are only significant under the lowest curl. The marks are minor and consistent with the grade. A very desirable example of this key date, far more attractive than typically encountered >>
your one example should not give a blackeye to all dealers.
even several examples does not condemn all dealers as scoundrels.
i felt like being generous tonight, but your post is exactly how
i think this game is played by the majority of dealers.
dealers were making a 90% profit!!!!
Camelot
<< <i>rays,
your one example should not give a blackeye to all dealers.
even several examples does not condemn all dealers as scoundrels.
i felt like being generous tonight, but your post is exactly how
i think this game is played by the majority of dealers. >>
I am not implying a black eye, I am merely stating that in my experience, mark-ups are higher than 10-20%.
When considering purchase of gasoline that appears surprisingly highly priced, consider factors other than the oil company's cost which may be contributing to the inflated price. An oil company's profit must take into account overhead costs, in addition to the actual cost of producing gasoline.
Something's wrong....
(or a shot-taker) to mark up a $1000 coin by 20% when it's only worth $500-1000 retail. I run into this all the time. The seller's cost is irrelevant if he cannot assess grade/quality. Considering that I think 90% of the "deals" on the coin market are poor ones, then it follows that a majority of sellers significantly overprice their material.
To those very knowledgeable dealers who know exactly what they have and price it accordingly to a fair level, I have no problem with figuring off their cost. If it makes sense, then play, otherwise pass.
_______________
John takes the $1400, losing $320 on his rare coin investment, even though gold is up 20%. He vows never to trust another coin dealer.
John should have picked up the phone and called Heritage or any other major gold seller and gotten 95% of retail for his slabbed $20 Saint. Had he bought the coin from most well known gold dealers his downside would have been at most 5-10%. And in a rising market of 20%, he should have made money.
roadrunner
AL
The local coin dealer I visited once and bought only one coin from told me he would buy any 1999 silver proof sets from me for $200. I said, "Are you kidding? I can sell them on ebay for $400." End of story. I just don't need a coin dealer to collect my coins and currency. And I don't need a dealer to buy them from me either. I just sell them on ebay when I upgrade or change what I collect. Most of the time I end up making a small profit (receive a bit more than I paid) but we're talking about a very small volume. I'm a pure hobbyist, not an investor. And I'm not making stupid ridiculous purchases for REGISTRY points either.
Bottom line....I don't need or use a dealer so it doesn't matter one bit what markups dealers are making.
Jonathan
<< <i>
<< <i>All this time, I thought that the average mark up was...................... 300%. >>
Only when Fletcher or Dizzyfox walk through the door.
Russ, NCNE >>
"Post O' The Day" from another board regarding the insults quoted above ... "Then Russ insults Bidask who was only responding (in a civil manner) to a another post. His personality matches his photo."
My question: Russ, when are you going to stop being such a dick to everyone and realize that your incessant rudeness and lack of civility will never fill the void in your chest???
<< <i>One way to think about it is that the minimum mark-up is 10-15%. If a dealer buys a coin at auction, and it does not upgrade or is forced to pay strong money to buy it back from a collector, 15% is a typical number. If the coin upgrades or the dealer buys it right, the sky is the limit. >>
I think this says it best. There is a 10-15% return that a dealer is a pretty good chance at achieving. There is somewhat limited downside risk generally on the coins (probably in the 10-15% range), but if the coin upgrades, there is a significant upside.
Didn't wanna get me no trade
Never want to be like papa
Working for the boss every night and day
--"Happy", by the Rolling Stones (1972)
I wounder how much has this changed since 2007 when it was posted. Now you can see easily how much a dealer paid on Heritage or Stack's (for instance). And clearly, less B&M stores and more on line sells than 15 years ago (the discussion centers on eBay but now you can find very much what every coin sold anywhere in the world).
PCGS Cert Verification even has realized prices for Heritage, Stack's and eBay. This is significant since it's one place to capture prices on popular venues. One place that isn't listed yet is Great Collections.
Another thing that's happening is that it can be easier to tell if a collector is buried when coins are being shared!
$ 9 . . (3) lunches
$ 13 . . (1) dinners
$ 48 . . (1) dinner with clients
All the photos that I have seen posted here would suggest that dealers eat much better than the above prices suggest,,,,,,,,,,
Considering the downward market trend the past several years, I am surprised anybody makes money in the coin biz at all.
Great article, thanks for sharing. There are many factors besides cost of material which contribute to the costs of being in the business. Out of town shows one has a much bigger fixed overhead hole to get out of. If the people coming in bourse room broke or not retail buyers forget it, especially if they have nothing of interest to offer or unrealistic selling expectations.
Doing shows both before and post online there is no doubt online has overall been detrimental to shows both in sales volume and quality material offered by the public. My online store has continued to outperform shows. December was a very strong Sales month exceeding my outlook for it.
If your doing shows (taking table) practice good security (more thieves coming out of woodwork), don’t let players talk you down, find some wholesaler go to guys (retail material for show, shop or online store), and have fun buying. I love it when they have free doughnuts, coffee, and pizza.
The dealer’s markup is the dealer’s business. If they are off the mark, the coin will not sell.
However, the bottom line is that the coin’s value is what someone will pay.
I don’t concern myself with wondering what the dealer’s markup is.
Just my eversohumble opinion.
Cheers
Bob
I was going to say who figures their cost of driving a car only to the price of gas? Being a former owner of an over the road truck I can assure you the cost to travel to a show is probably 3-5 times the cost of the gas!
The reason why I resurrected this thread is because there is a coin I was browsing on eBay. I went to PCGS to check the certificate and saw how much it sold last year (2019) in auction, and how much the seller wanted (nearly 3 times the money). On top of that, had an offer option. And I spent some time thinking what would be a fair offer now that I think I know how much the dealer paid for the coin. I thought the sell price at 3x was excessive, but being conscious of the dealer's expense, ruined my capacity to come up with a fair price and would like to know how others deal with this...