Dealers, what is your profit margin?
TexasNationals
Posts: 3,837 ✭
Doubt I will get many responses here but am always curious as to what the actual margins are. I get fixed and variable cost, work them in and before all that I have heard anywhere from 8% to 50%, that is a big arse spread, so what is norm, 15%?
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bullion around 3-5%
coins can be as little as 3% to as much as 1000% depending on many factors.
<< <i>There are good ways to figure out this information, and this is not one of them. >>
Ultimately its going to depend on your financial situation, business, how long you could afford to sit on it.
This will determine your profit margin, there is no right answer.
<< <i>Why CCU? Is it a secret, do I need to join a club? How would I figure it out? PM from a buddy? Ask a dealer? Intern for 12 months at a shop with a full time job? >>
Find coins that the dealer bought at auction and compare the dealer's cost with his asking price to determine his mark-up. Mark-ups usually varies from coin to coin. An esoteric coin that may be in inventory for a long time will have a higher mark-up than a popular coin that sells very quickly.
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Louis
An authorized PCGS dealer, and a contributor to the Red Book.
Okay, ready to open shop
That means the percentage is going to vary widely. At the high percentage end, on a better wheat cent bought in a bulk deal it may be huge. For example, a cent bought for 2 cents as part of a huge bulk deal, turns out to be a better date in better condition worth $1 or $5 in a 2x2. At $5 that is what 25000% (2 cents to $5)? Sounds great, until a person factors in time spent and labor and it might translate to $10 an hour, and that's if the wheatie sells for $1 within a year or two.
On the other side, a nice $1000 value certified coin bought from another dealer where the buying dealer had a good retail customer already lined up, it might be 5% because of the buddy discount and sure to be instant sale. More typical is 10% to 25% on coins in that value range, though many will ASK for more initially to unknown customers. Some have observed dealers buying at auction and then asking for 30% to 100% more. Bullion is in the smaller ballpark, typically 3% to 20%, depending on the volume done by the shop and the item. For numismatic coins, go lower down in value and percentages tend to go up because a dealer needs to move more of those coins to make the same money. Go higher up, and some dealers work for less percentage because the dollar amount are higher. A few would prefer to make a big percentage on a big number and buy that second or third Ferrari, and some do that and have that kind of lifestyle and income. It is competitive game, so the two-Ferrari dealer tends to be near the top of the food chain. The dealers lower in the food chain have to fight tooth and nail to move up, no one gives up their spot to be nice.
On slow moving items, the spreads can be very wide because inventory sometimes sits for ages, and yet at the same time is very difficult to acquire so can not be replaced to keep capital working. 100% or 200% in not uncommon in slower areas. See why the question is near meaningless?
Some dealers also take losses on some coins. They may have paid too much, or the market moved while holding. Most dealers also suffer from shop lifting, or other losses through theft, lost packages in the mail, scammers, fake or counterfeits bought by mistake.
Typical pawnshop operating margins are 200% to 300%. In other words, buy for $10, try and sell for $30 to $40, or buy for $100, try and sell for $300 to $400. Coin shops tend to work much narrower, but it gives a person an idea.
I am turning to the internet. Why should I invest $600-$2500 to do a show before I sell a coin? I have been doing the show circuit for close to 20 years. I have proven results from when shows boost the amount of dealers they have. My best example is the BRNA show in Ga. When they went from 1 room to 2 rooms my sales dropped 40%. I have confirmed the same with probably 50% of the original dealers that attended the show when they expanded. It is a bubble! I will survive the bubble by dropping these over saturated shows! I am dropping 6 shows I have attended for years in the next 12 months. While it might be good for collectors and the clubs in the short term, it will kill some shows in the future!
I am in the camp that doesn't have to do anything. I will simply retire and enjoy my life if I can't make a reasonable profit doing shows! My goal now is to do away with all but the shows that are profitable and hopefully start enjoying shows only as a buyer!
What say YOU????
``https://ebay.us/m/KxolR5
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Seems reasonable to me, but I honestly wouldn't want to be a dealer. I HATE haggling, and would have a very hard time holding my tongue if faced with an unreasonable customer. I do a lot of traveling, so I don't really like to go to coin shows. I prefer to work with a small group of dealers instead.
RMR: 'Wer, wenn ich schriee, hörte mich denn aus der Engel Ordnungen?'
CJ: 'No one!' [Ain't no angels in the coin biz]
Well there is a price guide to kind of go off of, but normally 10% back to 5% over ask works for me on more common coins, tough coins, forget gray sheet. I guess the mark up would be what the dealer paid, so if he had to pay ask I would expect to pay ask + 10-15% on average I guess.
``https://ebay.us/m/KxolR5
<< <i>Tiger, there must be a law of averages that apply, say 22% before fixed and variable cost and 11% for costs. I have to assume most operate on some sort of P&L no matter how basic with top and bottom lines? Don't confuse this with a single or 2-3 coin deal structure. Average profit margin pre cost or post cost is what I am getting at. Revealing it doesn't reveal you fixed and variable cost, thus revealing jack nada. >>
For bullion, some of the replies have told you, 3% of big deals, maybe 10% on smaller deals. For $1000 value certified coins that move readily, it tends to be in the 10% to 25% range, depending on the dealer, the person they are selling too, the business model of the particular dealer. For slow moving, hard to replace rare inventory it might be more typically in the 100% range because inventory is so difficult to replace and buyers so hard to find. I'm not sure what more information you want, sure there is an overall average, but what do averages for a local shop bullion dealer have to do with a small time local show dealer, or a big time two-Ferrari national show dealer, or a dealer in esoteric 19th century medals? Most dealers aren't going to give you proprietary information, because that information might be used by other dealers to climb over them in the very competitive world of coin dealing.
For example, if a big time dealer reveals their average is exactly 22% and likely to stay at 22%. That 22% number can be extremely useful information to any competitors that are competing for the same retail customers, or the same wholesale inventory.
Dealers that you know well will tend to cut you a better deal. Dealers that you don't know, will tend to ask for more. In either case, margins might be all over the place. Many dealers may ask a high price on their website or at the show, but many come down off that price if asked, especially if the coin has sat for a while. Some dealers back off their asking prices within a month, others may virtually never do so. There is no one-way, no one price, no one mark up, no one business model.
For fast food places, the rule of thumb is similar to the pawn shop, three times the cost. If the food costs $2, charge $6 if you want to make a decent living. For coin dealers there is no one standard. Yes, there is an average, but that number is unknown and unknowable. I would guess that for $1000 value certified coins that trade readily, the average for show dealers selling at retail is around 15%. It might be more like 10% during a down year or for favored customers, or more like 20% or 25% during a boom year. Of course, that 15% average is just a guess, with any average, there some working at half that average, and many working towards double the average and that second Ferrari.
anywhere from 50% loss to 1000%s profit
do i declare items i give away as 100% loss
.
My Cat track loader cost me 42 an hour to own and operate, my hourly charge is 155. The bulk of my rent property returns 100 bucks for every 23 bucks in cost, but i have some rent property that cost me 125 bucks for every 100 in rent. When i do gun shows i will not pay more than 50 cents on the dollar unless it is a quick flip.
Owning a B&M looks scary to me on paper, i would rather go the big show route and that does not appeal to me.
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my hat is off to dealers...yes that includes you too twosidesacoin...lol...
<< <i>Is the password, SALSA? >>
Try DORITOS
or MUSTARD
I had a Harvard MBA tell me once that if you can't make at least a 20% profit before taxes, you need to find another business line.
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I read your post and I can comment on the same situation. Not me personally, as i only due a couple of local shows here in town and thats mainly for addvertising reasons and to help our club. But two dealer freinds of mine who have done numerous shows for close to 15 years or more have cut way back on their show set up schedule for the exact reasons mentioned.
jim
It is interesting that you asked this question now, just after tax time. It just so happens that I got all the numbers as they pertain to my business. Keep in mind that the volume of bullion I do is so minuscule that it really has no effect on the big picture.
On average we mark up our inventory 15%. That doesn't mean we make fifteen percent on everything we sell; in fact the gross/net profit numbers are quite different. Our gross profit margin is a high single digit, while our net profit margin is a low single digit.
I hope that helps, just a little, to answer your question.
njcc
Rule of thumb for me, for items that I know I can sell at a fixed price like above (instant turnover) I just look at profit, not margins. For coins that I will hold in inventory, profit margins will be higher, and turnover will be slower.
Making an average of these two aspects of my business would not yield a meaningful metric.
merse
Certain items can be as low as 1%, others might be 500%.
I firmly believe in numismatics as the world's greatest hobby, but recognize that this is a luxury and without collectors, we can all spend/melt our collections/inventories.
eBaystore
Eric
You will still see the higher end retailers using 20-35% markups because they can convince their clients that all their coins are pq and worth the premiums. A lot of dealers
were making 0-5% on 5-15% markups and probably aren't in business any more. The bullion game is totally different and one could probably survive on 1-2% with huge volume.
It's very hard to get volume on numismatic coins because most every one is treated different. If there are dealers netting 30-50% after expenses I doubt you'll see any of them
stating it here......
<< <i>I recall one dealer posting here proclaiming their markup was never more than 25%. Ironically, they had just purchased a 5 figure coin from me and had it marked up 30%. >>
Lots of dealers price their coins accounting for the fact that lots of buyer expect to get a 10-15% "good customer" discount.
<< <i>Profit margins in a B&M will be different then those obtained though an Internet or show based business like mine.
It is interesting that you asked this question now, just after tax time. It just so happens that I got all the numbers as they pertain to my business. Keep in mind that the volume of bullion I do is so minuscule that it really has no effect on the big picture.
On average we mark up our inventory 15%. That doesn't mean we make fifteen percent on everything we sell; in fact the gross/net profit numbers are quite different. Our gross profit margin is a high single digit, while our net profit margin is a low single digit.
I hope that helps, just a little, to answer your question.
njcc >>
Is your markup 15% over cost or something like GS ask?
<< <i> Selling on eBay is a losing proposition when dealers pay "fair prices". >>
As it is for collectors as well too! I'd guess collectors would take a loss on 75% of their coins if they sold them through an auction venue.
but the real answer is, as unsatisfying as it may be, "it depends"
on what? on many factors. Card up a gem modern cent from a bank roll, costs face 1 cent, sell "someday"for a quarter or 50c., big % but no $ and takes forever
It's like those who are saving pre-1982 pennies out of change, and "making" over 100% because the copper is "worth" over 2c. Wow, over 100%! But how much did you BANK and when?
On the other hand, flip a five figure coin at a show in an hour for 1%, rinse and repeat, different business model.
It Depends on What You Do
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A markup target has to be based on a realistic sales volume considering demand and market conditions. Then the fixed and variable costs of the business have to be considered. Because I set up at shows and operate online my fixed costs are low (publications, supplies, bank box rental, bank fees, etc) but the variable costs (travel, entertainment, meals, lodging, mileage, table fees, seller fees, shipping) are easily 15% or more of sales. At a show there could be 100 other dealers hence competitive factors have to be considered. Online is just as competitive. The key is having what customers want at a price they will pay.
You can't just say well your going to markup your coins x as that may not be achievable. Some things like bullion dictate really narrow spreads. You have to design your business on what the market will give you then a big play here and there. Coins are not something like dining, entertainment, lodging, or autos which allways have a strong demand. Many people in the business have income from other sources.
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Finest Toned Ike I've Ever Seen, been looking since 1986
Years ago, my manager told me if we didn't make a 28 MARGIN
... we could close the doors.
A few years later, we didn't make that margin and we closed our doors !!
28 MARGIN = 56% profit. Just to keep the doors open.
Of course, that's the retail furniture business.
So, I do not blink an eye when I see a dealer mark up their coins 33%,
as that's just a 16.5 Margin. Of course, the dealer has to buy the coin right
in order to substantiate the 33% mark up. Otherwise, the coin could languish
in inventory, no matter how nice it is.
~~~~~~~~~~~~
Coin collecting is not a hobby, it's an obsession !
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