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Typical dealer markups?
stevepk
Posts: 238 ✭✭✭
I know this is a taboo and difficult question, but as a collector, I would like to know. What are typical dealer markups? I understand markups are higher for low value items that will be expected to sit in inventory for long periods of time. That is one of many reason why I stay away from problem coins and buy coins that are eye appealing in my personal opinion. All of my significant purchases are in either a PCGS or NGC slab with a couple of ANACS exceptions.
I've read countless articles that scarce coins are a horrible investments and a terrible way to hold value. Based on the sources I've read, this is because dealer markups are extremely high and that selling coins to a specialized buyer can be very difficult. The high volume of pessimistic articles I find are convincing me to accept the fact the money I've spent on my coin collection as money I will never see again. I guess I am writing this becuase I just read an article that advocates never to buy a rare coin unless it is offered for melt or close to it.
I've never sold a coin to a dealer. I've only sold coins directly to collectors through the local coin club. Suppose I attempted to sell a number of problem-free, eye appealing copper, draped bust, capped bust, seated liberty, Barber, early 20th century, and gold type coins valued anywhere between $200 and $2,500 each. Assuming I have patience and am not desperate for a quick sale, how much of a discount should I expect to receive from a buying dealer in relation to the price he will realize for the coin?
I've read countless articles that scarce coins are a horrible investments and a terrible way to hold value. Based on the sources I've read, this is because dealer markups are extremely high and that selling coins to a specialized buyer can be very difficult. The high volume of pessimistic articles I find are convincing me to accept the fact the money I've spent on my coin collection as money I will never see again. I guess I am writing this becuase I just read an article that advocates never to buy a rare coin unless it is offered for melt or close to it.
I've never sold a coin to a dealer. I've only sold coins directly to collectors through the local coin club. Suppose I attempted to sell a number of problem-free, eye appealing copper, draped bust, capped bust, seated liberty, Barber, early 20th century, and gold type coins valued anywhere between $200 and $2,500 each. Assuming I have patience and am not desperate for a quick sale, how much of a discount should I expect to receive from a buying dealer in relation to the price he will realize for the coin?
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Though I've seen up to 150%
PCGS Registries
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SeaEagleCoins: 11/14/54-4/5/12. Miss you Larry!
That does not seem right to me.
I give away money. I collect money.
I don’t love money . I do love the Lord God.
If you're selling scarce dates, popular series, or coins with a beautiful, unique look, your offers will be higher.
I regularly sell some coins to other dealers at prices higher than PCGS full retail, and I also sell some coins at 20% below greysheet bid.
A dealer will pay up for a coin that they know they won't have a chance to buy again for a while, and they'll pay rock bottom prices for "stuff" that's everywhere.
The real money in coins is made utilizing various numismatic skills such as grading and cherrypicking. Recognizing when a coin is undergraded, spotting a variety that the seller hasn't recognized, etc, can all be very profitable.
<< <i>I've never sold a coin to a dealer. >>
That is not good. You need that experience. You need that experience w/coins you can afford to lose on. It will give you a better idea of what to buy, what dealers are looking to buy and for how much.
As for the original question, nice bust/seated in that price range should work on 10-30% margins. You can also go consignment for around 10% if you are willing to wait for a sale.
That does not seem right to me.
The markup has to cover the time invested in the deal. And if it takes 10 minutes to buy and then sell a $20 coin, it's probably not going to get done for 5%.
Edited to say that all of this changes if there are big quantities involved. For example, a $1,000 face bag of 90% silver dimes can get done for a 2% markup, even though the coins are only a couple of bucks each.
Doggedly collecting coins of the Central American Republic.
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Truly, there is no answer to your question. Buy nice coins; know what you are doing; sell when you want or need to and you will find out more than I can type.
In honor of the memory of Cpl. Michael E. Thompson
So, sometimes I'll end up breaking even or only making 5-10% on a coin, other times I'll make well over 100%.
Michael Kittle Rare Coins --- 1908-S Indian Head Cent Grading Set --- No. 1 1909 Mint Set --- Kittlecoins on Facebook --- Long Beach Table 448
<< <i>I know this is a taboo and difficult question... >>
It's not taboo, but it is difficult. The answer is in RYK's post following yours.
To me, the price of a coin is what I think I can sell it for. Hopefully, in most cases, that number is higher than what I paid for the coin. All of the coins look like decent buys when I purchase them, but sometimes I guess wrong. So a high markup on one coin makes up for a low or zero markup (or a loss) on another one.
An authorized PCGS dealer, and a contributor to the Red Book.
Suppose I attempted to sell a number of problem-free, eye appealing copper, draped bust, capped bust, seated liberty, Barber, early 20th century, and gold type coins valued anywhere between $200 and $2,500 each. Assuming I have patience and am not desperate for a quick sale, how much of a discount should I expect to receive from a buying dealer in relation to the price he will realize for the coin?
>>
The average collector is likely at about the 20% loss level for the described material, the moment they walk off the bourse (if they sell to a dealer). For each individual it depends on how well you bought. A person's grading skill, access to coins, negotiating skill, market knowledge are the main factors. Another part of the equation is the relationship with the dealer(s) that the collector is selling to. The best customers tend to get much better deals on the buy and sell side than a newbie walk up customer. There are some collectors that make a profit, they are often part-time dealers, or have elite level grading skills (top 10%) and contacts (top 10%). While most of us would like to believe we are in that top 10% group, the reality is that 90% of us are not.
As for the low value question, go to the $1 and $5 value coins and it is crystal clear. A slightly better date Lincoln cent in a 2x2 might retail for $1. It takes a dealer a few minutes to put the coin in the holder, and write the price on the coin. Wholesale for that coin might be 5 cents or even 2 cents in a bulk deal. No one will get rich retailing coins in 2x2s for $1, even though the markup might be 50 times the cost of the coin.
<< <i>I don't ever use a standard mark up. I think I have a pretty good idea what coins are really worth. If I get lucky and buy a coin for $200 that is really worth $500, I'm going to try to sell it for $500! In most cases, I have to look through thousands of coins to find a deal of that magnitude and then go through the trouble of buying and selling the coin. There is no way I'm going to only sell it for $220-$240 just because someone else thinks that is a fair markup and that's all I deserve. Whatever!
So, sometimes I'll end up breaking even or only making 5-10% on a coin, other times I'll make well over 100%. >>
If you get a $500 coin for $200, the chances are that the seller got royally screwed.
<< <i>
<< <i>I know this is a taboo and difficult question... >>
It's not taboo, but it is difficult. The answer is in RYK's post following yours. >>
I concur with these answers. If you are lucky enough to know the dealers personally and have purchased coins from them in the past then you can often times get better coins for a reasonable price. However, if you plan on walking into a B&M with the intentions of grabbing a coin for a discounted price with no history with said dealer then I think that you would be very disappointed with the outcome, unless you pay cash and it is a coin that you really need for your collection without the benefit of a cost basis for tax purposes.
-Dan
<< <i>Why do you think markups are higher on low value coins?
That does not seem right to me. >>
Very simply, the "transaction cost".
Not relevant to my previous comment, sometimes a dealer, often a specialist, may have to wait a long time to find the right buyer. This sometimes translates into "opportunity cost".
<< <i>
<< <i>I don't ever use a standard mark up. I think I have a pretty good idea what coins are really worth. If I get lucky and buy a coin for $200 that is really worth $500, I'm going to try to sell it for $500! In most cases, I have to look through thousands of coins to find a deal of that magnitude and then go through the trouble of buying and selling the coin. There is no way I'm going to only sell it for $220-$240 just because someone else thinks that is a fair markup and that's all I deserve. Whatever!
So, sometimes I'll end up breaking even or only making 5-10% on a coin, other times I'll make well over 100%. >>
If you get a $500 coin for $200, the chances are that the seller got royally screwed.
That depends.
In a very esoteric area of the market were a limited number of dealers play, sometimes, if you are a dealer, you sometimes sell this material to the specialists who have the customers. For example of you have a super rare Civil War token, and you are not know as a CWT dealer, you might sell the piece to a specialist who has the customers. It's an odd thing but some collectors will buy coin X from dealer Y, but if dealer Z has exactly the same coin they won't buy it or they won't pay as much. It makes no sense, but that's how it works sometimes.
The alternative is to put the piece up for auction, but that can takes months to settle, and sometimes it's better to get your money and move on than trying to choke the last dollar out of the deal.
<< <i>
<< <i>I don't have a "typical" markup. My markup has ranged from minus 95% to 2500%. It depends on what the market thinks the coin is worth. And, before someone complains about the 2500%, first that coin was a cherrypick from a dealer and it was sold to another dealer who I told I had picked it. He said congratulations and willingly paid the price of the coin. And, second, if you found a 1955 doubled die cent in AU in your change, would you sell it for 26c? That is a 2500% markup.
To me, the price of a coin is what I think I can sell it for. Hopefully, in most cases, that number is higher than what I paid for the coin. All of the coins look like decent buys when I purchase them, but sometimes I guess wrong. So a high markup on one coin makes up for a low or zero markup (or a loss) on another one. >>
How can you not like this reply.........totally honest! >>
+1
Rob
Successful Trades with: Coincast, MICHAELDIXON
Successful Purchases from: Manorcourtman, Meltdown
<< <i>
<< <i>I don't ever use a standard mark up. I think I have a pretty good idea what coins are really worth. If I get lucky and buy a coin for $200 that is really worth $500, I'm going to try to sell it for $500! In most cases, I have to look through thousands of coins to find a deal of that magnitude and then go through the trouble of buying and selling the coin. There is no way I'm going to only sell it for $220-$240 just because someone else thinks that is a fair markup and that's all I deserve. Whatever!
So, sometimes I'll end up breaking even or only making 5-10% on a coin, other times I'll make well over 100%. >>
If you get a $500 coin for $200, the chances are that the seller got royally screwed.
But that is not always the buyer's fault. For example, if the coin is bought at auction. The seller took his chances and lost (in your example).
I once knowingly paid a 7500% markup for a unique, historic, coin die. Of course, I knew what I was doing. I felt the dealer earned every penny of that profit.
The dealer markups in my sample ranged from 21% to 57% above CDN Bid for the sample selected. Data was arranged by dealer to arrive at an average markup above CDN Bid for that dealer. For each audit test I wanted at least ten coins from that dealer to develop a composite. Factors like type of inventory (common coins and generics vs top pop coins and key dates) can result in high markups over CDN for high grade key dates or top pops because the seller probably had to pay over bid in the first place. Its no mystery many generics and common coins can be purchased close to bid. However, high end pieces or coins with exceptional toning (rainbow) will trade much higher.
The expenses of selling on ebay alone are about 15% of sales once paypal is thrown in. Add to this at least another 5% variable cost for "free shipping" one needs a margin of at least 20% of sales to break even on the Bay. Whatever I sell on ebay I like a target 30% margin (Gross Margin pct of sales) which leaves me 10% to cover fixed costs and whatever modest profit I am able to take if any. A 30% Margin (GM % of sales) is equivalent to a 1.43 markup over cost (1.0 sales / .70 cost = 1.43 MUF)
<< <i>I don't have a "typical" markup. My markup has ranged from minus 95% to 2500%. It depends on what the market thinks the coin is worth. And, before someone complains about the 2500%, first that coin was a cherrypick from a dealer and it was sold to another dealer who I told I had picked it. He said congratulations and willingly paid the price of the coin. And, second, if you found a 1955 doubled die cent in AU in your change, would you sell it for 26c? That is a 2500% markup.
To me, the price of a coin is what I think I can sell it for. Hopefully, in most cases, that number is higher than what I paid for the coin. All of the coins look like decent buys when I purchase them, but sometimes I guess wrong. So a high markup on one coin makes up for a low or zero markup (or a loss) on another one. >>
Well said.