Dealer markups (profit) and retail pricing - Lots of complaints from Nat'l

jsanz

I figured I would try to consolidate this into one thread. I really enjoyed reading all the updates from the Nat'l but a common theme seems to be that dealer prices were too high. I was looking for unopened product and only bought from BBCE at what I think was a fair price. To keep this discussion simple lets compare prices for graded cards only because there is more stanardized pricing.

I own a chain of retail stores so I know something about buying, selling, and profit. I don't know how card dealers do their markups since this is a different type of business. Is there a somewhat stardard markup? Lets say a card at retail of $100, $1000, and $10,000. I understand the percentage of profit would be lower on the $10,000 card because the total profit dollars are much higher. So what profit do you think dealers have to work with? Is it possible they are really just making a tiny profit and can not go down in price? Are they holding onto inventory in hopes it goes up in price? I heard that a few times at the Nat'l. I see other dealers like BBCE do the opposite, buy and then sell things really fast, and then repeat over and over.

What is your opinion? Why were prices so high? Are dealers getting greedy? Are they making very little profit? Are some of these dealers not business men but really collectors?

alifaxwa2

<< <i>Why were prices so high? >>


In general, prices are on the rise. Just like in a growing housing bubble, if your priced at market, your priced too low.

slum22

If I were in this business I would follow the model of quick in and out. I would rather buy a card for $60 let's say and sell for $90 and repeat this multiple times over then wait on end to get $100-120 for the same card. If I repeat this two to three times in the time it takes to sell once at a higher amount then I will have done better.

Webb63

What I noticed were dealers trying to maximize a return on their items. I'm sure there is a fairly hefty expense that goes into setting up at the National and it seems logical that prices would be a little higher because of that. I also noticed they were often willing to negotiate. I believe the definition of "high prices" is relative to the scarcity of the item. If you can pick that same item up at the next table for a cheaper price, then you can say the other guy was "high". However, if you can't find that same item anywhere else, it gets a little more complicated.

ndleo

I heard the cost of a dealer table was $1300. Add travel expense and that is a lot of cost to re-coup. I can't imagine what a floor display like BBCEs cost to set-up.

Those guys selling cards out of discount boxes had to do a lot of volume to make up the costs.

jsanz

I agree the total cost to get there and set up has to be a factor. I thought the same thing about those tables with boxes and boxes of cheap cards. True they looked busy but did they really sell enough low dollar cards to make it worth their time, cost, and effort.

Sheamaster

Supply and demand. Collectors are snatching up the high end cards. Prices keep rising and dealers are finding it is hard to replace them.

mtcards

Overhead is the silent ballbuster in any business. I own a retail store....not cards, but that isnt important, but my overhead (Utilities, taxes, etc) amounts to 25% of my product cost. In our industry 3-1 to 5-1 is the industry standard, so if you sell a $20 item, then you have $5 in overhead/$5 in product cost and the profit is only $10. I imagine the overhead costs for the national are even more severe and the markup on product is not as great either.

slum22

I definitely think that with the advent of eBay and collector to collector selling sites, that the markup in the sports card market is not nearly the markup in other true retail settings. I would not be surprised it the markups are only in the 20%-30% range on some items. This is a much thinner margin than many retail outlets.

Beck6

I thought prices seemed high but today's high prices have proven to be next years bargains. I saw a lot of buying opportunities for the dealers from people walking into the venue, which is supposed to be for dealers only. This would help justify the expense of setting up. Talking to a few dealers I knew, they were getting some nice items for good prices this way. I saw a complete set of t200's being shopped around and some rare cabinet cards.

MantlesMantra

It's a good thing. It's a sellers market, especially for unopened. We've also seen prices for premium cards consistently rising.

As others have said at the National there's a premium for being there so I'd expect the higher prices than online.

MULLINS5

I hate selling cards because the markup is extremely low. Honestly don't see how people can survive in that business.

I deal in antiquarian books where the markup is at least 3x on expensive items ($1,000+) and an average of 8 to 12x for most everything else. As mentioned, overhead is everything and since I sell online via Etsy the fees are extremely low. When I list the same item on eBay I list slightly higher to recoup the additional fees -- but eBay has mainly been a place for me to dump dead inventory. Next year I'm hiring a professional to build my own website so that I can offer less on eBay and Etsy. With the markups in antiquarian books, I was able to leave my day job and pursue this fulltime. I don't think I could ever do the same with sports cards.

I've noticed time and time again Steve's prices at BBCE are extremely fair. I bet he can ask more for most of his product and still be able to move it out quickly.

Also, I think that the majority of potential customers of sports cards and memorabilia are so darn picky with pricing that they misconstrue fair prices for high ones.

jsanz

It's an odd business model too where all dealers are claiming "top prices paid", "buying, buying, buying", "we pay the most". In my business and most others you are proud to get a product at a great low cost and try to make as much as possible without being unfair. Again, it is a different business where some of the basic rules seem to not apply.

bounce

Nowhere near "most" of these dealers are dong this for a living. Yes, they had expenses to setup but I see that as a cost no different than final value fees on auctions or PayPal fees under relatively normal selling conditions. Considering the number of people and the length of the show, $1,300 isn't a crazy amount to recoup and if you're worried about that, you shouldn't be setting up. "dealer" is as meaningless a term now as it ever was.

I evaluate pricing based on whether commerce is actually occurring. I think the 1986 Fleer Jordan is a perfect target for this argument, as it's one of the hottest cards and sets in the hobby, and they aren't scarce. Does anyone feel like these weren't available at this show? I probably saw 30 PSA 9s at least, and more likely 50+, it could have even been 100+ considering I saw multiple tables with 4-5-6 of them. Virtually every one I saw was priced north of $4,000. The real question is, how many sold for that?

I haven't heard of anyone here paying that for one, and I'm not aware of a dealer telling me they sold one for that. I'm sure some changed hands, but it wasn't many at least in what I saw and I was there every day and this is a card I was looking for and talking to people about.

i could give other examples, like 1956 Topps PSA 8s or various mid-grade T206s. The overwhelming majority I asked about started roughly 15-20% over recent auction prices.

I guess a question I would ask is, if you don't have the final value fees or PayPal fees, why wouldn't the recent auction prices be enough? Why should it cost MORE than that just because it costs to setup?

It cost me to get in the show, and a hotel room, I don't have to pay for any of that to shop online. Why shouldn't I expect a discount?

In my opinion, neither of those arguments is reasonable. Maybe I can say it best this way - just because you spent money to get there or setup, that doesn't change the "value" of the cards or your inventory. Market is market, meaning it's worth what someone would spend.

I think a ton of money went home with a lot of collectors, over less than 20% in price and more likely less than 10% in most cases. Why did this happen? Prices were too high to start with, it's a big show so why sit there and try and grind with someone who doesn't appear interested in selling in the first place? As I've said, this got better starting Friday, but for people who weren't there all days it didn't matter.

To answer the OPs original question, I think most of these dealers have had most of these cards for a long long time, they setup for fun but also for money, and they've probably got 50% margins or better in a lot of this stuff because they owned them for years already. What that means though is there is a ton of room to negotiate and I felt like two-thirds of the room wasn't interested in that, at least not until the weekend and even then often not.

I think a reasonable margin on a short term flip is anywhere 10-30%, if it's more than that then you maybe got lucky because market moved faster than you thought and/or you just held, or you bought at a great price (lots of reasons this can occur, not just lowballing buy prices even if that is the most common).

begsu1013

every biz is different but our motto is: pick up nickels and dimes all day long. when we run across the occasional quarter or dollar, well that's just gravy.

inventory wise, we never hold. sell it and move on to the next deal. basically keep your money flipping...and keep your nut small.

expansion/too fast for it's britches has killed more businesses than it's helped. controlled growth plans are just as essential.

ndleo

From a dealer point of view, why shouldn't I maximize the value I can get for "in demand" cards? So far the price rise for the better cards over the past 3 years have justified their strategy.

Plus the replacement cost for the really good stuff is very high. Even though there are a lot of PSA 9 Jordan RCs out there, not many are being sold at prices 20% below market.

I'm on the buy side at these shows, so sure I would like to see lower prices but it wasn't happening on the really good items. I came home with about 50% of my bank still in my pocket. I'm happy that I still have cash for the next deal.

Stone193

I guess what I need to know - what does the inventory cost?

I did see some overpriced vintage baseball games and stuff.

Good question but hard to answer IMO.

bounce

<< <i> I came home with about 50% of my bank still in my pocket. I'm happy that I still have cash for the next deal. >>



exactly - I'm glad I've got money left too but it's a little disappointing considering my buy list was pretty extensive - across autographs, vintage and modern graded and even ungraded, so at least in my case it wasn't due to a short want list

schapko

Its a different world now than 20 years ago. I was a collector in the 80's and early 90's. I am a collector now again. The BIG difference is that I had no real outlet to sell cards in the 80's and 90's. If I wanted to sell something I either do a rummage sale (oh god) or talk to a "dealer" and they'd give me 50% to 60% of the cards value especially in a bulk situation. Well lets take us to now; EBAY! The world has a market where collectors like me can sell just like the big dealers at prices that are equal or at least very close to equal. This has drastically reduced margins and why I feel that 98% of the "dealers" do this part time as you can't live on a 10% profit margin or so. So I guess the major difference is that as a collector we have an outlet to sell now and that has leveled the playing field and this premium price for being a dealer has been substantially reduced.

jsanz

Everyone has good points. I agree that ebay and the internet in general changed the game. I remember as a kid in the 80's selling cards to dealers and they would pay at most 50% of retail. I guess we can assume most dealers are not making double their money these days. Getting back to some of my original questions, what are dealers making these days? Maybe there is very little room for negotiation.

I also agree with the earlier response about table fees at the Nat's vs ebay and paypal fees. Those ebay and PP fees really add up. If it was me selling I would rather give a little discount instead of giving fees to ebay and PP. Just my opinion.

70ToppsFanatic

I can say from experience that the table fee ($1300 this year) is far from the only "overhead" expense involved at setting up at National. When you start adding in all of the other costs (transportation, shipping, hotel, food, special event sales tax, etc.) you are talking about probably 3x-5x the table fee when all is said and done.

At that level of overhead, you need to generate somewhere on the order of $39k - $52k of gross revenue with a 10% margin just to break even.
There are many exhibitors that set up who lose money on the show. The dealers with high-end and big ticket items do just fine. It's the little guys who have a hard time making it work out.

When I set up in Chicago in 2013 there was a guy from California set up not too far away from me. He was definitely not a big fish and based on what he said, his gross revenue for the show was about $6k. When you add up all his costs (table fee, flights, hotel, insured shipping to/from Chicago, meals, facility "extras", showcase rentals, etc.) it's pretty clear that he was not making his living this way. And he was very disappointed at the show results.

Show prices at the big venues need to be a bit steeper for anyone looking to make a living from the hobby. Only for those who have the high-end, rarities, big ticket items does it become a completely different story as their items are pursued well over market by collectors on white whale hunts.

Yes, there still are deals to be found at National for the "average" collector, but they are getting harder to find as each year passes.

That being said, I wish I had been able to make it this year. Would have loved to see old friends, meet new ones and find a whale or two on my list. Thanks for all of the great write-ups and pix everyone posted.

CollectorAtWork

<< <i> ...

In my opinion, neither of those arguments is reasonable. Maybe I can say it best this way - just because you spent money to get there or setup, that doesn't change the "value" of the cards or your inventory. Market is market, meaning it's worth what someone would spend.

... >>



Although I think your argument is sound, I don't think this is completely true. The reason is that unless you are local, many of the attendees of the National also paid hefty costs to get there (hotels, gas, airfare, etc). Therefore, when they are at the show, many feel compelled to buy something even if it's a bit overpriced. And one justification for this premium is that they can see and inspect the card first hand when purchasing it rather then seeing some scan on ebay. Another advantage is that they can pick the card up right then without worrying if it's an ebay scam or if the card may become lost in the mail.

The other part is that the "value" of the cards do change in a way when you are at National. That is, this isn't some brick and mortar store that only locals go to, but National is a destination, even almost a vacation for some people. And when people think of vacation, that means that they feel they can overpay because they are being "entertained." There is entertainment value in walking the floors of the National. This is why people pay $8 for a bag of popcorn when they see a movie even if the "value" of that popcorn is much cheaper in the grocery store. Same thing when going to other entertainment destinations such as Disneyland where the food inside the park is obscene, but people still happily pay it.

I think the other side of selling things at National is the opportunity to buy new inventory from walk-ins. Therefore I think many dealers don't just calculate how much they need to sell at National to break even, but they are also looking to replenish inventory where it's via the dealer to dealer sales before the National officially opens or through walk-ins. If they are able to buy a rare cabinet card for $1K less than they can sell it for, then they can almost pay for their table fee right there.

flatfoot816

Prices were indeed high. I think they always are at the Natty---errrr--National.

I asked a number of dealers how their show was going on Thursday before noon--and many said the show was already incredible. I asked how it could have been when the show JUST STARTED--and many said that their sales were dealer to dealer. Meaning 1 dealer bought -- then put it on his table at a bigger mark up. Nothing wrong with that I guess. But it meant that we collectors were going to pay an even higher price for something we wanted. I went there looking for a Jordan PSA-9---finally bit the bullet. I got it from Al Duroso--a great guy--for a fair price in today's market. I did not see another at a similar price--all over $3,700 or more.

I too left with some cash in my pocket--