If the coin market declines by 30%, what will happen to the auction companies?
MrEureka
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If the market declines by 30%, what will happen to the coin auction business? My guess is that the aggregate sales volume (for all auction companies combined) would decline by 50%. And if that's right, some auction houses will have to change their business models. Care to make any predictions?
Andy Lustig
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
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would reward themselves with a raise.
Experience the World through Numismatics...it's more than you can imagine.
My guess is that most auction companies cannot survive at half their current sales volume unless they take measures to deal with the new situation. Eating less meals out and walking to work probably won't be enough to save the firm.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
In that case, consider the OP a hypothetical question.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
<< <i>Layoffs would take place thus saving money and the higher ups
would reward themselves with a raise. >>
Auction houses still get less since prices drop but might only need to tighten their belts to survive like everyone else.
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I think some of the auction firms have one foot in the grave and the other on a bananna peel already, so it won't take much to push them over the edge.
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)
1. Fewer coins will be sold at live auctions and many more will be sold at online-only auctions.
2. It will generally become more expensive for consignors to buy back (i.e., not sell) their coins.
3. Auction companies will try to gain share by offering regular consignors something like the airlines' "loyalty programs". Instead of getting miles, the loyal customer will get lower commission rates.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Of course if folks quit consigning they may have to let somebody go .
The name is LEE!
sales volume should remain the same just less fee income would be realized is all...maybe a slight down size to compensate
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It may decrease the number on coins consigned, as the prices realized fail to meet reserve, and the cost of buy-backs increase.
If more coins are sold without reserve, to avoid buy-back charges, prices may go down, especially for the non-rare and even scarce examples. And the number of generic coins consigned will surely decrease.
I also suspect there will be fewer companies involved, and fewer auctions around the country. Perhaps more Home Office sales, like Heritage has been conducting.
The loyalty concept sounds reasonable and some variation of it likely has been used.
What I meant by my comment is simply this... the auction houses will survive, its just that they will make less... their employees will make less... their expenses will be cut and some of the cuts will not be missed because certain expenses missed the mark in terms of being effective.
Auction houses seem to be concerned about promoting their consigned coins more than promoting the hobby... more and new collectors will do more to maintain a healthy coin market than a catalog with a certain coin that few can relate to that sets a new record.
Collectors are born based upon interest first. That interest may be historical or in the artistic merit associated with coins. Second, there should be perceived value... and while value and even taste in coins can be disputed, rarely will a reasonable number of collectors start with coins that involve huge amounts of money. Based upon your senario, why should new collectors start in what is being touted as a bear market? In view of what has transpired over the past 60 days, and even longer in some sectors of the economy such as watching AIG tumble from over $70 a share to nearly penny stock status, I think auction houses have to take the initiative to re-invent the coin hobby and demonstrate that it is not all about promoting plastic and the finest known examples...
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NGC registry V-Nickel proof #6!!!!
working on proof shield nickels # 8 with a bullet!!!!
RIP "BEAR"
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While that sounds right in theory, in practice I can't think of any coin auction company that would benefit from acquiring or merging with a smaller coin auction company. It's so much more efficient to simply hire the talent, if there's the need for it.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Auctions got smaller because prices were less tempting to consignors, and also because the fewer coins sold had depreciated. I'd be surprised if the actual dollar volume sold didn't halve in the two years following each of those earlier busts.
As for the companies themselves, the marginal firms and upstarts tended to vanish.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
<< <i>3. Auction companies will try to gain share by offering regular consignors something like the airlines' "loyalty programs". Instead of getting miles, the loyal customer will get lower commission rates. >>
And at the live auctions, the food will be in the front half of the room, off limits to non-elite bidders, while people in the back of the room will have to pay $6 for a tiny bag of pretzels and a flimsy glass of Coke that you will need to enjoy quickly while cramming your knees into the back of the seat in front of you.
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<< <i>their revenues will drop by 30% >>
That was my answer, but I did not want to be the wise guy (this time).
<< <i>
<< <i>their revenues will drop by 30% >>
That was my answer, but I did not want to be the wise guy (this time).
Perhaps the total value of auction sales would decline by 30%, but a few companies would probably disappear and the survivors might not see any decline at all.
The major ones will still be there, their profit margin will just be a little less.
1. Auction houses will consolidate. Larger businesses will be able to offer more favorable terms to consignors than small ones, thus driving small ones to either merge, or go out of business.
2. Small auction companies will drop the costly hotel/coin show venue model and begin selling at rural farm implement auctions where they can sell scrap coins for outrageous prices.
3. Auction companies will cut overhead cost by reducing the number of coins they have slabbed and by limiting numerical grade to one letter and one digit instead of two of each. (I.e.: MS-65 becomes “S-5.”)
4. Printed auction catalogs will vanish, and descriptions will be selected from a list of out of date stock descriptions. (OK, that’s already done…)
5. Bid increments will become smaller. Instead of $100 or $500, they will be 1-cent or 5-cents.
6. No more auction buffets.
7. Someone will implement “No bid, You lose” policy where any coin not receiving an opening bid will automatically belong to the auction company.
8. Floor bidders will no longer have to raise their bid paddles during the auction. The auctioneer will sell the lots to anyone in the room who is breathing – and sometimes to those who have expired. (Aka: “Chicago bidding”)
9. Tie bids will result in both bidders being awarded the lot at full price and each charged commission on the full price. The coin will be cut in half for delivery.
No way. The firms that will exit have less than 10% of the market. Their removal will not enable the survivors to maintain sales volume.
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
One could create derivatives based on the overall price of any particular coin/grade on the price sheet.
One might even be able to create a derivative based on a single expensive coin.
The expert consultants used to adjust those price sheets would become instant VIPs with the sort of leverage that could be put on the coin world.
All it takes is someone who knows what they are doing in the world of high finance...good marketing...and buyers of those derivative contracts.
We'll worry about deleveraging later, when i've sold.
It would be interesting to compare that to holding auctions at "in-house" venues, as Stack's and Heritage sometimes do.
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<< <i>Perhaps the total value of auction sales would decline by 30%, but a few companies would probably disappear and the survivors might not see any decline at all.
No way. The firms that will exit have less than 10% of the market. Their removal will not enable the survivors to maintain sales volume. >>
If you already know what will happen, why post this in the form of a question?
<< <i>Can anybody come up with a good estimate of what it costs for a typical auction company to hold an auction at a hoel "pre-show" venue?
It would be interesting to compare that to holding auctions at "in-house" venues, as Stack's and Heritage sometimes do. >>
This is an interesting comment. I would also like to know the number of active bidders/lot viewers at the in-house venues as compared to active bidders/lot viewers at a hotel pre-show venue. I would also like someone from say, Heritage, to figure out if there is a significant difference in the actual bidders (by name) at in-house auctions versus pre-show auctions.
I have to assume that the BIG dealers who actively bid in these auctions, will bid in them regardless of whether the auction is held in Dallas or at a show. I also assume that the BIG dealers make up the largest percentage of winning bidders. Therefore, it is possible that Heritage will not have any significant decline in revenues as a result of holding only Dallas-based auctions, and may actually increase net income due to cost savings.
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)
No doubt there would be pull back, but if a catastrophic collapse has not yet occured, I think the coin market will weather the storm.
My only question is, how many of the deep pocket buyers were Wall Street types that now are facing major income changes. That could affect the high end of the market. However, the MS65 Morgan buyers (clearly a generic term for an example) seem to still be out in the usual numbers.