Question- What is a dealer's "typical" margin?

BAYOUBENGAL · May 20, 2009 4:08AM

I am new to this board and have enjoyed reading the posts. I am (I think) a typical collector and have a question. When I buy a $5,000-$10,000 coin from a regular dealer (at a show or off of his site) what type of margin is he usually making? I am sure this can VARY a ton, but let's say it is for a 1909- S VDB in 65 red? These are for sale failry regularly and are a collector type coin. If I buy it at his "ask" price what is he likley maming? 10%, 25%? Is there any rule of thimb on this?
I buy mostly larger type delaers like DLRC, HLRC, Hall, Snow, DVRC, RCI etc. and also from auctions when I can. Just curious what the mark-up is. I would have to think if the auction juice is 15% this would hold true for the dealers too.

tjc2120 · May 20, 2009 4:15AM

I am interested to know this too - but to be exact, we should assume the coin is correctly graded and that an acceptable market retail is the asking price and the coin was acquired at grey sheet. Otherwise, there are a lot of variables that would affect the margin - ie is the dealer misrepresenting the coin or did the dealer rip it etc.

right?

Wolf359 · May 20, 2009 4:16AM

It's impossible to answer that question. How long has the dealer had the coin? Prices go down with time. How desperate are they to sell...anything? How much did they pay? If they are really desperate the price marked is a loss.

BTW, for a typical collector a $100 coin is a large purchase.

tjc2120 · May 20, 2009 4:26AM

Maybe it would be easier to give an average margin for a set time - say monthly or yearly? Each coin would obviously be highly variable.

tmcsr69 · May 20, 2009 4:33AM

I am not a dealer but will assume that like any other business, profit margins vary from item to item. Premium, rare coins will always bring the better margins.

Bear · May 20, 2009 4:34AM

17% - 25% would not be unreasonable

in most circumstances. Coins under 500 might

go for a 30% markup.

BAYOUBENGAL · May 20, 2009 4:35AM

good points....let's do it this way, the dealer bought a 1909-s vdb in 65 red and a 1909 s vdb in G 4, both correctly graded in pcgs holders, no cac, he bought them 2 weeks ago at the PCGS show from another dealer and as is the case for most any dealer, he wants to sell them quickly and move on....he paid grey sheet bid for both, what does he expect to make, while one is about $7,000 and the other about $750, I would think the margin would be the same. 10%, 20% etc. any thoughts, or is this a futile process?

DieClash · May 20, 2009 4:35AM

As a rule of thumb, I expect a 40% on most coins. Probably less on the higher end stuff (that I can't afford). When bidding on e-bay for common circulated discontinued series my max bids are about 60% of Red-Book value. It serves me pretty well.

It seems to me though if you're a full-time dealer and not making 40% on average, you either move a heckuva lot of inventory or else you won't be able to feed the family.

EDITED to add:

to the boards

gecko109 · May 20, 2009 5:04AM

<< As a rule of thumb, I expect a 40% on most coins. Probably less on the higher end stuff (that I can't afford). When bidding on e-bay for common circulated discontinued series my max bids are about 60% of Red-Book value. It serves me pretty well.

It seems to me though if you're a full-time dealer and not making 40% on average, you either move a heckuva lot of inventory or else you won't be able to feed the family.

EDITED to add:

to the boards >>

COSTCO has thousands of employees, and tons of overhead, yet those "families" seem to be eating just fine on their 15% mark-ups.

What you MEANT to say was that if a coin dealer isnt making 40% on average, he might have to scale back on the new beemer, or take 1 less vacation.

speety · May 20, 2009 5:08AM

Keep in mind that as the price of the coin goes up, the margin generally goes down. Dealers won't get by with a 30% markup on a $20k coin but they will on a coin they maybe paid $50 for.

Usually it seems 10-15% is the norm for the $5-10K coin from what i've seen.

CaptHenway · May 20, 2009 5:11AM

<< 

<< As a rule of thumb, I expect a 40% on most coins. Probably less on the higher end stuff (that I can't afford). When bidding on e-bay for common circulated discontinued series my max bids are about 60% of Red-Book value. It serves me pretty well.

It seems to me though if you're a full-time dealer and not making 40% on average, you either move a heckuva lot of inventory or else you won't be able to feed the family.

EDITED to add:

to the boards >>

COSTCO has thousands of employees, and tons of overhead, yet those "families" seem to be eating just fine on their 15% mark-ups.

What you MEANT to say was that if a coin dealer isnt making 40% on average, he might have to scale back on the new beemer, or take 1 less vacation. >>

Of course, COSTCO's purchasing agents can just pick up the phone and buy all of the inventory they need at a wholesale price, delivered.
Who do I call to get that same deal on coin inventory?????
TD

BAYOUBENGAL · May 20, 2009 5:37AM

Thanks to all, speety, I agree, I am sure size has a lot to do with it.

Sounds like 20% or so is a decent starting number, but there are a ton of variables.So if a dealer sells $100,000 per month at a 20% margin he makes $240k per year with no expenses. Of course, throw in trips to 5-6 shows ($20k) and a half page ad in CW each week ($55k) and someone to help ship/keep books, buy/sell ($60k) and you are taking in $105,000 before paying for your insurance, office space etc......so, how many coin dealers make over $250k per year all in (before taxes)???? 20? 10? outside of senior people at Heritage and Bowers etc. it must be a precious few, or am I missing something? You have to sell A LOT of 09-s vdb in 65 reds at 20% to make $250k- and this is not a coin you sell everyday or even every week! tough business in my eyes....

DieClash · May 20, 2009 6:11AM

<< 

<< 

<< As a rule of thumb, I expect a 40% on most coins. Probably less on the higher end stuff (that I can't afford). When bidding on e-bay for common circulated discontinued series my max bids are about 60% of Red-Book value. It serves me pretty well.

It seems to me though if you're a full-time dealer and not making 40% on average, you either move a heckuva lot of inventory or else you won't be able to feed the family.

EDITED to add:

to the boards >>

COSTCO has thousands of employees, and tons of overhead, yet those "families" seem to be eating just fine on their 15% mark-ups.

What you MEANT to say was that if a coin dealer isnt making 40% on average, he might have to scale back on the new beemer, or take 1 less vacation. >>

Of course, COSTCO's purchasing agents can just pick up the phone and buy all of the inventory they need at a wholesale price, delivered.
Who do I call to get that same deal on coin inventory?????
TD

>>

The OP inquired about "margin". Whenever I hear that term I think of Gross Margin (Net Sales - Cost of Goods Sold). This number doesn't factor GS&A and other overhead like rent and storage. And if you use the term "mark-up" then I interpret that to be the same as Gross Margin. Not to be confused with EBIT or net profit after tax.

pennyannie · May 20, 2009 6:15AM

Bayoubengal- Go buy 10 coins that show to be about 5k for dealer ask in the greysheet. Walk around and try to sell them for bid. It is not going to happen. They will tell you that the coin you are trying to sell is a 64 and not a 65 and yada yada yada.

My guess on a local B&M pricing. They pay based on silver and gold value. Common date morgans. quarters, dimes etc. If a rare date slips by them while paying silver price ( hey they get busy) it will not slip by when they go to price the coin. Last time i actually tried to sell any coins to dealers i was given prices like 30 percent to 40 percent back of bid. This was a few years ago. If i had to make a living selling coins i would want to pay as little as possible and sell as high as possible.

ziggy29 · May 20, 2009 6:15AM

If you mean just the markup of the coin and not adding in other overhead costs, it totally varies:

Is this a coin that can easily and quickly be flipped or a low-demand item which can sit in inventory for months? (The faster the flip, the less the margin usually needed.)

Is this for sale from the dealer's inventory or a consignment? (Consignments usually operate on lower margins because the dealer isn't committing his/her own capital in the coin.)

But ultimately, the question (except for consignments) is: What did the dealer pay for the coin, and what do they think they can get for it? Ultimately that determines the margin.

BillJones · May 20, 2009 6:59AM

The only rule of thumb I can give you is, the cheaper the coin the, higher the mark-up. On very expensive coins some dealers are happy to make two or three thousand on a fifty thousand dollar sale. But if you are selling State quarters are show, many times the dealers got the coins at face value and are selling them for 50 cents to a dollar which ranges from 100% to 300%.

GoldenEyeNumismatics · May 20, 2009 7:00AM

$5k-$10k.... maybe around 10%-15% on average, for a dealer who sells typical mainstream US coins.

For a coin like a 1909-S VDB MS65 RD, maybe only 5% (or less). 1909-S VDB's are about as liquid as coins come and are usually dealt on pretty slim margins.

GoldenEyeNumismatics · May 20, 2009 7:02AM

<< As a rule of thumb, I expect a 40% on most coins. Probably less on the higher end stuff (that I can't afford). When bidding on e-bay for common circulated discontinued series my max bids are about 60% of Red-Book value. It serves me pretty well.

It seems to me though if you're a full-time dealer and not making 40% on average, you either move a heckuva lot of inventory or else you won't be able to feed the family.

EDITED to add:

to the boards >>

If dealers averaged 40% on $5k-$10k coins, they either sell very, very few coins, or have found a gold mine of cheap material. Very few dealers average anywhere close to that percentage with coins in that price range.

DieClash · May 20, 2009 7:21AM

<< 

<< ... Probably less on the higher end stuff (that I can't afford)... >>

If dealers averaged 40% on $5k-$10k coins, they either sell very, very few coins, or have found a gold mine of cheap material. Very few dealers average anywhere close to that percentage with coins in that price range. >>

I can't afford $5K-$10K coins

I buy in the $40 - $500 range. I expect if one took a random basket of coin goods in this price range, and compared Grey Sheet Ask/Bid to Red Book retail values that you would find the mark-up to be around 40%. I do agree that there is a cotinuum with the higher mark-ups on the lower-priced coins and ever decreeasing margin on thru the higher priced coins. I guess it all depends on how you look at it.

Cheers!

stman · May 20, 2009 7:36AM

IMO, there are no absolutes in Numismatics. I wouldn't try and figure their profit margin, nor would I pay any attention to what they say they bought the coin for.
I believe my Sig line applies once again.

GrumpyEd · May 20, 2009 8:12AM

Never been a coin dealer but I assume even if they made 40% on a coin most of it's not "profit" and all coins don't get 40% over their cost.
They need to pay rent, workers, supplies, taxes, interest on the money used for inventory.
Once in a while they get hosed on a deal or take a loss on a fake.
Once in a while they make a killing, find something good in a lot or find a variety or a gem.

Elcontador · May 20, 2009 8:51AM

Anywhere from 5% to whatever they can get from a buyer. A lot depends on the coin and the dealer. As others said, the % spread drops with the increased value of a coin.

I also have a hunch that the more marketable the coin, the lower the spread. Ie, if a dealer thinks he can flip a coin, he'd mark it up less than if he takes a flyer on a coin which might sit in inventory for awhile.

It also depends on the dealer and the clientele to whom he caters. There are some dealers from whom I have never bought a coin because I thought their pricing was excessive. Did they pay strong money for these coins? They'll all tell you they did so, but until this is quantified to me, I'll reserve judgement.

Amigo · May 20, 2009 9:07AM

I can only answer from my personal experience of buying / selling. I'm not a full time Dealer ... more of a Collector that likes to Deal. I'm not big time, fact is, I'm small time ........ but this is my experience.

Some coins in the 5k range I have paid less than 1k. It's a matter of me not needing the coin and the seller wanting to sell, coupled with me not willing to have 4.5k of my money parked in one coin looking to get 500 ........ it just ties up my cash where I can't buy blocks of other coins. It doesn't happen often, but does happen.

Coins in the $25-100 retail range, I usually pick up for 25% of retail. Coins in the 100-500 range somewhere in the 25-50% range.

On the other hand ........ if I have cash sitting around, and an astute collector that won't bargain ........ sometimes I overpay and take my chances. Ex. This week I picked up 60 BU raw Morgans that I propably paid high retail for ........ simply in the hopes that my grading eye will reward me with a few slabbed gems, but no guarantees ......... a function of not that much Cash outlay coupled with a desire to gamble. If I don't get any Gems, oh well, I still have very marketable coins that are liquid, even if I end up loosing some money ...not that big a deal and was worth the risk.

Bottom line for me ...... I buy as cheap as possible and sell as high as possibe. That translates sometimes into 500% return to sometimes loosing money. I've made a hobby out of Dealing part time, if I loose on a Deal, I make it up on another. Which is very different when I owned three Restaurants in town ......... there I could tell you exactly what my profit margin would be for each year depending upon the store. One was 15% and another was in the 33% range, all depending upon location and food served etc. It's simply impossible to quantify coin sales the same as a retail business. To me, the coin/currency business is just all fun and games ........ sometimes you win, sometimes you loose, but sure beats playing slots.

There are secrets to buying coins, even from astute collectors, which is where the money is made.

pennyannie · May 20, 2009 1:47PM

You got to factor in the customer buying the coin also. I deal with 3 dealers that discount pretty heavy to me if it is a coin that i need verse a coin i might flip. (when you could actually do that) Some dealers do not like some customers and they will not move much if any on the price. My favorite dealer just told me that i could have a 1942 proof walker for 500 that he has marked 800. I saw another collector looking at the same coin and he told him 750 was as low as he would go.

I have tried to deal with some other dealers to no use. I know one dealer that does not like me (big surprise lol) ( probably a lot more in reality). If he ever has a coin i like i have another dealer go and get it for me. I have used a dealer a few times to make a purchase for me on a coin i could not swing a deal on. Once it was a 1893 S morgan and the dealer that i had buy it for me saved me 500 dollars on it compared to what i could do it for. I always offer to pay the dealer that d0es it for me. 99 percent of the time they will do it for free. A gift certificate for a nice dinner sometimes goes a long way.

As some one stated there is not precise answer. I have had a few dealers ty to price coins to me at magazine trends. I would not mind doing it that way if it was a 2 way street and they would pay 10 back of trends on coins i want to sell.

MrEureka · May 20, 2009 2:55PM

Every dealer has his own way of doing things. Speaking for myself, I'd say that my buying decisions are based on the "need" to earn an expected return of 3.5% a month. For example, if I estimate that a coin will tie up my money for 2 months, I won't buy it unless I project a profit of at least 7%. (That's an oversimplification, of course.)

BTW, this rule has nothing to do with my selling decisions. It's not like I'm going to raise the price of the coin 3.5% every month, just to try meet the original goal. In fact, I'm more likely to drop the price after I've owned the coin a while.

rays · May 20, 2009 3:23PM

In my experience, dealer's markups of 10-15% are a myth. Much more typical is 30-40%, even on coins in the 25-50K range. How do I know this?
1. Try selling to the dealers you mention

<< like DLRC, HLRC, Hall, Snow, DVRC, RCI etc. >>

and see what kind of offers you receive.

2. Follow the money. Watch auction results on specific lots of interest to you and then see the same exact same coins on dealers' price lists and figure the markup. Generally speaking, it will not be 10%.

ColonialCoinUnion · May 20, 2009 8:57PM

Whenever this topic comes up, some people start to use the terms mark-up, and margin interchangeably, and/or seem to confuse gross margin with net margin or even with net income.

TwoSides2aCoin · May 20, 2009 10:27PM

Just remember that dealers are "atypical". and "marginal", at best. And at worst, they won't answer you. That's all you need to know.

I'm kidding, and they know it.

bidask · May 20, 2009 10:50PM

To answer this question, I have advocated on behalf of collectors to simply ask the dealer you are buying the coin from what their buyback level is....that will pretty much answer the question.

If a coin is coming from a dealer's inventory it is important to me to know their "market'.

It also gives me an indication how strongly, or not, a dealer backs the coins he sells.

So ask before you purchase.

MrEureka · May 20, 2009 10:55PM

To answer this question, I have advocated on behalf of collectors to simply ask the dealer you are buying the coin from what their buyback level is....that will pretty much answer the question.

If the dealer knows the market and is completely honest, the answer may help you muster the courage to make a purchase. But if the dealer is so honest, there should be no need to ask in the first place.

In other words, asking the question may help you get a read on the dealer, but it will tell you nothing about the value of the coin.

TwoSides2aCoin · May 20, 2009 10:57PM

<< To answer this question, I have advocated on behalf of collectors to simply ask the dealer you are buying the coin from what their buyback level is....that will pretty much answer the question.

If a coin is coming from a dealer's inventory it is important to me to know their "market'.

It also gives me an indication how strongly, or not, a dealer backs the coins he sells.

So ask before you purchase. >>

That's beautifully put and I'd like to add: Thank you "dealers" for sharing here.

bidask · May 20, 2009 11:10PM

<< To answer this question, I have advocated on behalf of collectors to simply ask the dealer you are buying the coin from what their buyback level is....that will pretty much answer the question.

If the dealer knows the market and is completely honest, the answer may help you muster the courage to make a purchase. But if the dealer is so honest, there should be no need to ask in the first place.

In other words, asking the question may help you get a read on the dealer, but it will tell you nothing about the value of the coin. >>

Agree,....so if it is a coin like a 1909 s vdb in red 65 I would prefer to purchase it from a dealer who makes a market in his coins.

If it is a coin that is generally harder to find and replicate as for as purchasing and the dealer hedges on answering the question then the ball will really be in the buyer's court as they won't have a clear read on the dealer or the coin..............

bidask · May 20, 2009 11:16PM

If it is a true date rarity with demand and ultimate condition census to boot, then throw away the thought of 'typical margin' as the sky could be the limit.

TwoSides2aCoin · May 20, 2009 11:20PM

<< If it is a true date rarity with demand and ultimate condition census to boot, then throw away the thought of 'typical margin' as the sky could be the limit. >>

oi oi oi
You're going to cause inflation.

bidask · May 20, 2009 11:22PM

<< 

<< If it is a true date rarity with demand and ultimate condition census to boot, then throw away the thought of 'typical margin' as the sky could be the limit. >>

oi oi oi
You're going to cause inflation. >>

InternetJunky · May 20, 2009 11:40PM

nicetoning42107 · May 21, 2009 12:43AM

It does not bother me to make only 10% on a coin in the $50 to $1000 range. But i'm a flipper and probably don't represent the average dealer at shows or B&M. A dealer setting up at shows is generally probably in the 20 to 30 percent profit margin. A dealer with a B&M more likely also in the 20 to 30 percent profit margin - this is after expenses are accounted for. Note the "markup" on the actual coin would be higher from the B&M dealer.

i agree the profit margin generally decreases as coin values increase.

Bear · May 21, 2009 6:29AM

There are a number of factors the determine markup

1.Dealers sales volume and turn over rate of inventory

2. Control of overhead expenses

3.Purchase cost of coin and related expenses such as
attending distant coin shows( Travel, hotel, table fees, food)

4.There can be different mark ups for long time clients vrs new
clients.

5. Dealer to dealer mark up are different from dealer to client.
Dealer tio dealer may be 5-10% depending on how long a dealer
has had a coin. A quick flip may be a lower mark up.

6. There are different mark ups, for different price ranges of coins.

7. The mood of the dealer and dealer's cash flow, may also determine
the size of the mark up. It can even be impacted by how a collector
approaches a dealer and bargains over a coin.

8. The fact that a dealer is selling a coin on consignment from a collector
may allow him to set a lower mark up or, he may be bound by collectors,
set minimum sales price. This could go either way.

9. Lastly, a mark up may be set by no more then the fickle finger of fate
the quarter of the moon or if the dealer had a good BM that morning.

coolest · May 21, 2009 7:18AM

All those people talking about a 10-25% markup are in for a rude awakening when you try to sell some of your coins.

I'm not complaining I don't think any dealer could stay in business with such a small margin.

tjc2120 · May 21, 2009 7:22AM

There are secrets to buying coins, even from astute collectors, which is where the money is made.

do tell

joebb21 · May 21, 2009 11:55AM

in terms of how much a dealer marks up a coin- I never care. if I like it and the price is right for me Ill pay it. in terms of myself- depending on how big the purchase is, is how I determin how much profit I like to make. If I buy a 10 $50 dollar coins and sell for 10%- that means I have to find 10 customers, while if I buy one coin for $500 and sell for $550 I only need to find one- (though the higher the tag the harder to find the customer, but they are there).
overall thought i generally like to make 5-10% and on $10,000 of material anywhere between $500 and $1000 is mighty fine!!!

lkeigwin · May 21, 2009 12:36PM

<< What you MEANT to say was that if a coin dealer isnt making 40% on average, he might have to scale back on the new beemer, or take 1 less vacation. >>

What you meant to say is "one fewer vacation".

This is a silly question. The mark-up varies according to a hundred factors. Stop thinking about it and start remembering people need to make a living and you need to be happy with your purchases.
Lance.

DieClash · May 21, 2009 1:32PM

<< 

<< What you MEANT to say was that if a coin dealer isnt making 40% on average, he might have to scale back on the new beemer, or take 1 less vacation. >>

What you meant to say is "one fewer vacation".

This is a silly question. The mark-up varies according to a hundred factors. Stop thinking about it and start remembering people need to make a living and you need to be happy with your purchases.
Lance. >>

The word "typical" is pretty generic. The industry that I work in has nothing to do with coins. But the general rule of thumb is that the business should generate a 40% contribution from Gross Margin to be profitable. And I think that is a good rule of thumb for any business model!. Just MHO though!

NumbersUsacom · May 21, 2009 3:16PM

2. Follow the money. Watch auction results on specific lots of interest to you and then see the same exact same coins on dealers' price lists and figure the markup. Generally speaking, it will not be 10%.

This above approach is one of the truest ways I've experienced. It is usually 30% to even 100% depending on the desirability of the coin and how good of a deal they got it at auction.

TwoSides2aCoin · May 21, 2009 3:33PM

A dealer won't lose no matter how thin the margin, and this is typical. That's why they're still in business.

Longacre · May 21, 2009 11:26PM

Razor thin, of course.

ColonialCoinUnion · May 21, 2009 11:33PM

<< A dealer won't lose no matter how thin the margin, and this is typical. >>

Every dealer loses money on a certain percentage of coins.

ziggy29 · May 21, 2009 11:57PM

<< A dealer won't lose no matter how thin the margin, and this is typical. That's why they're still in business. >>

In the aggregate, that is true. Dealers can and do lose on individual coins just as Warren Buffett sometimes "loses" on individual stock picks.

Question- What is a dealer's "typical" margin?

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Question- What is a dealer's &quot;typical&quot; margin?

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Question- What is a dealer's "typical" margin?