Typical dealer markups considering liquidity

stevepk

It is generally accepted that the more liquid a numismatic item, the lower the markup as the dealer expects not to hold it in his inventory very long. To hold an item in inventory for a long time means inheriting the risk of loss as well as money that is tied up and cannot be used for other investments. Typically, coins that are not liquid include:

-modern commemoratives
-modern business strikes
-problem coins
-higher grade uncertified coins that should be certified
-esoteric world coins with few collectors
-coins priced $50,000+ with a limited number of collectors with financial resources
-any coin excessively common with no collector challenge

Conversely, liquid coins typically share a few common attributes:

-problem free
-eye appealing
-popular United States series
-key dates
-early US coins
-wide collector market
-affordable yet valuable
-scarce

Considering a coin has the attributes listed above as a liquid coin, what is a typical dealer markup? I've been told dealers usually buy at Bluebook prices, but these prices are insanely low. What percentage markup is typical for a dealer at a coin show? More specifically, what percentage markup is generally accepted for a marketable United States coin in the $200 to $1200 range?

I am interested in the typical markup between a dealer and collector rather than a dealer to dealer transaction. This question excludes bullion.

mrpotatoheadd

I would venture to guess there are too many variables in the scenario presented to allow for a response that would be of any use.

coindeuce

It might help a wee bit if you defined the objective of your question.

RYK

<< <i>I would venture to guess there are too many variables in the scenario presented to allow for a response that would be of any use. >>


I agree, but perhaps 15-20% is a good starting point. I often see items acquired at auction by dealers marked up by this interval.

Of course, the actual markup on any given coin may be substantially higher or somewhat lower than this. For lower value coins, it is likely significantly higher. Who would bother trying to make a living selling $20 coins for a $3 profit?

DaveG

One thing: no one uses the Blue Book for buying prices.

If anyone you're considering selling to does, then you should not!

Generally speaking, dealers who have shops have different (higher) margins that dealers who exclusively set up at shows.

Most dealers at the shows I go to use the Grey Sheet as a base for their buying prices - especially for the more "common" (frequently traded) material.

If you're selling somewhat more expensive or less "common" material, dealers can use one of the electronic services that includes recent auction results and, perhaps, Coin World Trends or live dealer bids (say the CCE).

If you want to see what a dealer's margins are, the best idea is to offer him some coins - you don't have to accept his offer, but you'll have accurate, live information.

DeepCoin

I would challenge the concept of what is liquid and what is not liquid. If you price a coin properly, any of them become liquid given the modern market place with eBay, Teletrade, Heritage...etc. Inventory turns are as important to a coin dealer as they are to a manufacturer.

If your money is not working for you, then it is costing you profit in terms of opportunity cost. Due to the fluctuations of the marketplace it is important to understand that what you paid is not related to what you can sell a coin for. It is better to take a loss on a coin where prices have dropped and get your money working again with coins that can be sold for a profit.

Cougar1978

The studies I have done of dealer markups above CDN can show variations per individual dealer. Take a statistical sampling and compare a few of them. It can be a hobby within a hobby.

Basically it takes cost +40% to make it in the coin business. This is my minimal markup on material I purchase and if I cant achieve that then I don't do that material. Many dealers tell me they make a bigger markup on currency than coins.

I would not recommend worrying too much about dealer markups. Because a certain dealers markup is x is basically meaningless because he maid have paid way below bid buying from a desparate to sell walkup customer. Just look up the coin on coin facts and use the PCGS Price Guide as a barometer in what you want to pay. I saw the video at the PCGS site on how to use ones Iphone in evaluating a coins price with coin facts. Its a fantastic tool and I think the PCGS price guide is vary reliable and found the videos at PCGS very informative on how the prices are developed. The ability to drill down further on coin facts into auction prices is a super tool tho have. PCGS has performed a technological leap over NGC in these reference tools. In bidding on ebay sometimes I will lookup the coin in coin fact and then divide the value by 1.4 or 1.5 in determing my bid in an ebay or teletrade auction.

Some series will have greater markups than others. You can probably find an 1881-S Dollar for a minimal markup over bid but I hardly think you will find nice branch mint gold coin for anywhere near bid. I would rather collect a set of CC dollars than dates across the board. I would buy the best quality I could afford and research the coin extensively via coin facts before buying.

JohnMaben

"It is generally accepted that the more liquid a numismatic item, the lower the markup as the dealer expects not to hold it in his inventory very long."

No correlation between degree of liquidity and mark-up, none whatsoever. Mark-up is determined by market value minus cost. Both (market value and cost) have many variables. Also the guidelines that a particular dealer or collector may choose to work within come into play.

John

2ltdjorn

12.5%

BryceM

It depends.

You can't even assume a dealer will sell the same coin to two different people for the same price. The better known, established client will probably get better stuff for less compared to the first-time client.

...... and that's just one of a hundred variables.

CEOcoinshopcom

Agree with cougar.
Mark up would be determined by cost X whatever... There is no "set" price for any coin, each coin, and each deal are their own deal.
I did shows for 20 years, and now B&M, and internet... and still no set formula.
Price the coin (not the dealer) and pay what you think the coin is worth.

lasvegasteddy

if only all cities had truth serum in the water supply
i bet dealer mark-ups could shock some

RedTiger

For slabbed coins in the $200 to $1200 value range, I'd guess 20% is a ballpark average. For store fronts with higher overhead, it is likely a wider spread. Many dealers give better deals to their best customers. Many dealers will ask for more like 40% to 50%, but some will come down off that.

Some experienced collectors have commented that for their internal tracking they mark the value down by 30% for coins they purchase at retail. Meaning for a $500 value coin, it gets marked as $350 as a ballpark wholesale price if they have to sell immediately. That may be conservative, but it probably isn't too far off for collectors buying at retail and selling at wholesale, depending on the dealer, depending on the coin. For lower value raw coins, the numbers tend to get worse for collectors, more like 50% for a $20 value raw coin, perhaps more like 75% for a $20 value esoteric item that doesn't trade that often. So a collector pays $20 for a raw coin, might get $10 back when selling wholesale, maybe more like $5 if the item is a real slow mover.

As always, there are so many variables. Long term customers almost always get better deals when buying or selling than new customers. Many dealers size up customers and charge accordingly. A few dealers treat newbies as potential marks, and will ask for moon money of 100% to 300% over, if they think there is a chance the newbie will cough it up. Some of these dealers are bold enough to brag about these scores later. As groups, telemarketers that sell coins over the phone, and the cable TV coin shows are notorious for their very high pricing, and 200% might be tame for them on numismatic coins.

COALPORTER

If you sell it too fast, then you are not marking it up enough !

Cougar1978

Dealer methods for markup can vary. I have seen several in use (like to vary them like a QB runs thru a playbook) and used many of the ones below:

Replacement Cost Method (RCM): Estimated Replacement Cost (CDN Ask for instance) times a percentage for profit like 10-15%.
Discounted Retail: Krause or CW Trends less a percentage (say 5 or 10%). This strategy is best where a lot of hagglers are expected, price stickers are put on a group of coins, and one can just merely say: "its already at our best price."
Highest Retail: The higher of several retail sources: CU, CW, KRause, Dealer Pricelist......
Kayo Punch: One of the others plus 25-35% or more extra on stickered coins. A guy I shared a table with mentioned this is what he did. He said everything else was at RCM.
Cost +: Cost times a percentage but not to be lower than CDN Ask.
Keystone Markup: simply cost x 2
Sheet plus Forty: CDN Bid + 40% (I know of one major CW advertiser who seems to consistently use this).
Fifty Plus: Cost + 50%
Commission off invoice: Consignors price plus a commission. For instance at a recent show a major dealer (I have good business relationship with) gave me about a dozen PCGS 63-65 $20 Saints on invoice to put in my display case. The agreement is that at the end of the show I would return any unsold pieces plus payment for any I sold or decided to purchase at invoice price (it seemed to be bluesheet + $25). Of the dozen pieces I retailed 4 (around CW Trends), purchased 3 at the invoice price for inventory, wholesaled 2 at his invoice price plus $20, and returned 3. At the end of the show he seemed pleased with the transaction. One of the 3 pieces I purchased sold in a coin club meeting at CDN Ask +10% the following week.

291fifth

The markup is whatever the market will bear.

AmandaVarner

<< <i>The studies I have done of dealer markups above CDN can show variations per individual dealer. Take a statistical sampling and compare a few of them. It can be a hobby within a hobby.

Basically it takes cost +40% to make it in the coin business. This is my minimal markup on material I purchase and if I cant achieve that then I don't do that material. Many dealers tell me they make a bigger markup on currency than coins.

I would not recommend worrying too much about dealer markups. Because a certain dealers markup is x is basically meaningless because he maid have paid way below bid buying from a desparate to sell walkup customer. Just look up the coin on coin facts and use the PCGS Price Guide as a barometer in what you want to pay. I saw the video at the PCGS site on how to use ones Iphone in evaluating a coins price with coin facts. Its a fantastic tool and I think the PCGS price guide is vary reliable and found the videos at PCGS very informative on how the prices are developed. The ability to drill down further on coin facts into auction prices is a super tool tho have. PCGS has performed a technological leap over NGC in these reference tools. In bidding on ebay sometimes I will lookup the coin in coin fact and then divide the value by 1.4 or 1.5 in determing my bid in an ebay or teletrade auction.

Some series will have greater markups than others. You can probably find an 1881-S Dollar for a minimal markup over bid but I hardly think you will find nice branch mint gold coin for anywhere near bid. I would rather collect a set of CC dollars than dates across the board. I would buy the best quality I could afford and research the coin extensively via coin facts before buying. >>



Sooo ... do you have a list of specific dealers, and their average "markup strategy" with percentages? That would be an absolute trip to read!

PTVETTER

Gold bullion my guess is less than 5%
wheat cents by the bag is like 50% B&M buys for 2 cent ea. sells like 3 cents each to another dealer.

shorecoll

Cougar...that is good stuff...and if you answer Amanda's question with real info, I will fall out of my chair.

MGLICKER

<< <i> More specifically, what percentage markup is generally accepted for a marketable United States coin in the $200 to $1200 range? >>



For an NGC or PCGS graded coin, a high volume dealer would generally mark up a coin by 25% from cost in the range that you reference.

segoja

All coins are liquid at a given price.

Markups...all over the board. If I was making 20% I would have thought I had died and gone to coin dealer heaven. Some dealers do work off more.

AmandaVarner

<< <i>Cougar...that is good stuff...and if you answer Amanda's question with real info, I will fall out of my chair. >>



That'd be some good extortion material, if such a list were to be compiled!

Cougar1978

Amanda - Thank you for your interest and I really appreciate your show reports, pages - very well done.

I would not reveal individual information on this subject in a public forum for obvious reasons. I do perform extensive audits using an extensive excel tool to analyze where certain dealers or ebay sellers I consider competitors are in pricing their material. Mainly where is their pricing vs CDN Bid or for that matter CW or CU. This is mainly to compare the pricing of my material which I sell online and at shows - to have a basis to compare mine with and blitz the guy who wants to buy cheap. I have an excel summary page with graphs for about a dozen sellers of interest and detailed spreadsheets with audit samples of 20+ items per. I note date, mm, denom, description, CAC?, ask price, CDN Bid, markup over CDN, comment on the coins if possible. I may add columns for CU, CW, Krause as well. I also do this for ebay auction items I have been tracking to help in my bidding decisions, etc. I also look at what CAC coins are going for vs non CAC. If a certain ebay seller of inteerst is having success, what is it and what is it going for? In this way I develop my own independent opinion in pricing plus what price x do I want to buy something for if my best price has to be y to be competitive.

I have recently completed a project to compare how graded modern world banknotes (1961 to present issues) in 66 and 67 are trading for vs catalog which is just for unc. Both auction and what major sellers are asking.

But to directly answer your question Amanda - yes I do have individual markup factors (based on my samples which I update on a regular basis) plus a summary page with graph by seller. However, out of respect for the privacy of these individuals and other reasons keep this to myself. Because seller 1 is higher than everybody else does not necessarily mean he is the most aggressive in pricing. It could be the nature of the material and what its bringing at auction, its availibility, etc plus he has to pay well over bid to get it. One may have to drill down into the details.

MrEureka

It would help to define "liquidity".

It would also help to specify whether "mark-up" should be based on published retail prices, or on something else.

And FWIW, many dealers operate on average profit margins of less than 10%, and many have much higher margins. Lots of variables come into play, perhaps the least significant of which is greed.

OldIndianNutKase

In most respects a dealer is like a market maker in the stock market. Is there more differential to be made by holding the coin for six months at a nice asking price, or moving the coin at +5% in a few days. If the dealer has lot's of available inventory then + or even - 5% makes sense. Dealers are much the same as stock traders, except stocks have market defined values, whereas coins have subjective values.

The market in coins is NOT LIQUID. Problem is that the money chasing coins can seem to be significantly less than the money that owns the coins. So most collectors will acquire cons at no reserve auctions rather than through a dealer. But employing a dealer-expert is a very intelligent to assure a good result for high dollar coins in an auction.

OINK

Cougar1978

I disagree a coin dealer is like a stock broker. Of course there are many coin dealers who would like one to think that lol. One of my favorite quotes is a friend who runs a coin shop telling me way before the Texas sales tax on coins and bullion was repealed "I am just a collector of sales tax (we don't make any money)."

A dealer may have material he will quickly move at minimal markup but keeper coins will be for all the money. A minimal markup for ebay would be putting cost + shipping + ones profit on the coin. For instance dealer A has $100 in a coin. He will ship it non insured with tracking and allocate a $5 shipping charge. He wants to make $20 on it at the end of the day (merely the cost of a lap dance). So 100+5+20 = 125. If I put 125 in my calculator (cost) with 9% margin (covering ebay, paypal fees) I get a sell price of $137.36 (or a markup over cost of approximately 1.37). The coin sells for $137.36 - subtracting cost of 100 + 5 shipping allocation + 12.36 (ebays take .09 * 137.36) we get $20 as our profit left over after standing in line at USPS to ship the coin. Hopefully we were able to ship it for less than our shipping charge of $5 and cover not only USPS shipping but packaging costs as well. I am not sure the irritation of standing in a long USPS line can be quantitatively measured.

Certainly dealers will blow out low end or slowing moving material at CDN Ask say 5% to get rid of it. They may not be making money but this will provide cash flow to the business and allow one to apply the capital to material which can be successful.

Coins are a retail hobby related business. 5% markup on coins does not even cut it for even variable selling expense - commissions, fees, shipping, etc.