What is a fair dealer mark-up?

seateddime · July 13, 2011 9:08PM

If a retail coin dealer buys a coin, what mark up on coin would be fair? I think we all can agree dealers need to make a profit.

At what point (if any) would you say is too much?

GoldenEyeNumismatics · July 13, 2011 9:20PM

There is no simple answer. It depends on each respective coin and what the dealer paid for it.

Justacommeman · July 13, 2011 9:20PM

No one fit answer. Whatever the market will bear. As low as 10 to 15% on competive items and more on coins that went below acquisition expectations. If a dealer makes a great purchase and below the market they are entitled to a much higher mark up. Besides expenses, dealers take on the risk of carrying inventory and there are always stinkers that will lose money............need to have some offsets.

MJ

RichieURich · July 13, 2011 9:37PM

<< No one fit answer. Whatever the market will bear. As low as 10 to 15% on competive items and more on coins that went below acquisition expectations. If a dealer makes a great purchase and below the market they are entitled to a much higher mark up. Besides expenses, dealers take on the risk of carrying inventory and there are always stinkers that will lose money............need to have some offsets.

MJ >>

Here is an example illustrating that a high markup might not be excessive:
You find a 1955 doubled die obverse cent in EF in your change. Your cost is obviously 1c. The coin is worth $1,800 according to the PCGS Price Guide. If you sell it for $1,800, your markup is 17,999,999%. If you sell it for 5c, your markup is still 400%. Assuming you decide to sell the coin, what is a "fair markup"?

7Jaguars · July 13, 2011 9:59PM

OK, these seem to dodge the question by bringing up extreme examples or not answering the intent of the OP.

Maybe I can take the liberty of restating the question:

what would be the markup of a retail valued $500 Morgan in MS63 (in other words a scarcer date coin of an avidly collected series that does not have value tied up in condition rarity but is a nice coin and NOT some VAM hypervarietal)?

What about a similar coin but valued at $1000?
What about a similar coin but valued at $5000?
' ' ' ' ' at $10,000?

etc...

The "it depends" answer doesn't really give any basic understanding IMHO.

291fifth · July 13, 2011 10:00PM

Whatever the market will bear.

Tiny · July 13, 2011 10:03PM

You said it, "dealers need to make a profit". He should make what ever he can
and if I don't like the price I just go some where else. I seem to all ways find a
high price coin at a fair price.

MidLifeCrisis · July 13, 2011 10:08PM

Any amount the dealer can get.

I'm not kidding.

Justacommeman · July 13, 2011 10:13PM

No one is dodging the question.

If a dealer buys a coin for $500 and they can get $1000 for it then great.
If a dealer buys a coin for $500 and they can get $550 then great.
if a dealer buys a coin for $500 and they have to sell it at $400 then too bad. It is what it is.

No two coins are the same and there is hardly a static environment. I want my dealers to make money so they can service my needs.

I would have no problems if a dealers net mark up was 30%. The part they actually keep depends on how they run their business.

If a dealer buyers a coin for $15,000 and they can sell it for $20,000 them good on them. They did their job well. Just because they paid $15,000 and it's worth $20,000 doesn't mean they are obligated to sell at a set mark up like 20% or $18,000 in this example. Why should they sell for $18,00 and let the buyer make the extra $2,000? the best answer is what ever the market will bear. CaptHenway answered it well in another recent thread.

The OP's question is too vague to give a more definitive answer.

MJ

dollarsandcents · July 13, 2011 10:17PM

<< If a retail coin dealer buys a coin, what mark up on coin would be fair? I think we all can agree dealers need to make a profit.

At what point (if any) would you say is too much? >>

What do you mean by a "fair" mark-up? Just like with everything in this world, a coin is only worth what someone is willing to pay for it. What does "fairness" have to do with anything?

MrEureka · July 13, 2011 10:23PM

Any amount the dealer can get.

Thanks for the advice. I just sold a raw 1962 Proof Set for $25,000 to my mother. (No cameos, but only a few of the coins were spotted.) I told her that according to what I've read on the PCGS forum, the price was fair.

MrHalfDime · July 13, 2011 10:25PM

Strictly from a collector's perspective, I have always approached this question with the same philosophy. Whenever I am offered a coin by a dealer, I invariably do not know what the dealer paid for it, nor how much he has marked it up. I just ask myself one simple question: Am I willing to pay that much for that coin. Period. It doesn't matter to me how much the dealer has marked it up; I am only concerned with the final asking price, and if I am willing to pay that price.

As a small (non-coin-related) business owner, I can fully appreciate the many costs of overhead involved in getting that coin to the customer, and these are often forgotten by the buyer. To a collector this is a hobby, but to the dealer this is his livelihood, his way of paying his mortgage, buying groceries and supporting his family. He must be allowed to not only cover his costs, but to make a reasonable profit, as well. Besides, if his coins are priced too high, they won't sell. Let the free market decide.

Justacommeman · July 13, 2011 10:28PM

<< Any amount the dealer can get.

Thanks for the advice. I just sold a raw 1962 Proof Set for $25,000 to my mother. (No cameos, but only a few of the coins were spotted.) I told her that according to what I've read on the PCGS forum, the price was fair. >>

I just saw her list it on the BST for $35,000. She has Retail in her blood............MJ

notwilight · July 13, 2011 10:31PM

A fair markup is from where he bought it to what the coin is selling for. If it is a $1050 coin and he bought it for $1000 because he knows he can sell it immediately, the a trouble free 5% is fair. If he is offered a coin for $1000 from a knowledgeable client or other dealer and knows it is a rare variety in a series with few variety collectors and that the market value is twice that but he may have to inventory it for 2 years, then 100% is fair.

Bottom line, it is fair for a dealer to sell a coin at market value. Markup depends on what he has to pay for it. The second example is much more rare than the first.

--Jerry

RedTiger · July 13, 2011 10:41PM

It varies. As I wrote in the other thread, the difference between low wholesale and full boat retail might be 300%. So a coin might get sold at low wholesale in a bulk deal for 1/4 of what a full priced dealer ends up asking for the coin. The coin might change hands many times and each dealer takes a slice of profit. Dealer to dealer trade is where many dealers make their living.

For a more plain vanilla answer, if a coin stays at one dealer (which is unusual), a 100% markup is common on low priced raw coins. So a collector that buys a $20 numismatic coin at retail might realistically expect $10 back when sold wholesale to a fair dealer. Go up in value and that percentage decreases. Maybe 20% on a $100 coin, maybe 10% on a $500 value coin, maybe 5% at $2000, if the one coin stays at one dealer. Those are ballpark numbers, as they will vary widely. Some dealers might include their expenses so 20% translates into a real 40% difference because they figure their expenses in. Some dealers only make a one-way market in their coins and tend to buy them as cheap as possible, spend a ton on advertising, and price them to the moon waiting for fish to bite, and try for the full 300% for themselves. There are a lot of different ways to operate, not one set of prices, either retail or wholesale.

dollarsandcents · July 13, 2011 10:42PM

<< A fair markup is from where he bought it to what the coin is selling for. If it is a $1050 coin and he bought it for $1000 because he knows he can sell it immediately, the a trouble free 5% is fair. If he is offered a coin for $1000 from a knowledgeable client or other dealer and knows it is a rare variety in a series with few variety collectors and that the market value is twice that but he may have to inventory it for 2 years, then 100% is fair.

Bottom line, it is fair for a dealer to sell a coin at market value. Markup depends on what he has to pay for it. The second example is much more rare than the first.

--Jerry >>

If 5% mark-up is "fair" on a quick transaction, then why not 6% or 7% or 8%? You can see where this is going, right?
If a dealer has to keep a coin in his inventory longer, then a higher mark-up to the tune of 100% is "fair"?

So, if I'm reading you right, "fairness" is a function of how long a coin sits in a dealer's inventory?

I'm still confused on the whole concept of "fairness" and it's place in the buying and selling of coins.

PTVETTER · July 13, 2011 11:06PM

another way of looking at it is:

as a dealer it MY coin, what's it going to take to get me to sell it.

NO different if the coin is yours, if a dealer or any other source makes an offer on thast coin its your to accept or reject the offer.

Its just that simple.

And how long I have a coin has no bearing on how bad I want to get rid of it.

MrEureka · July 13, 2011 11:14PM

I'm still confused on the whole concept of "fairness" and it's place in the buying and selling of coins.

Yes, it's complicated and confusing, but many unfair transactions take place every day.

llafoe · July 13, 2011 11:16PM

I suspect a Fair dealer mark-up would be considerably higher than a B&M or Show dealer mark-up!

Who was the dealer at the Fair?

BAJJERFAN · July 13, 2011 11:20PM

<< Strictly from a collector's perspective, I have always approached this question with the same philosophy. Whenever I am offered a coin by a dealer, I invariably do not know what the dealer paid for it, nor how much he has marked it up. I just ask myself one simple question: Am I willing to pay that much for that coin. Period. It doesn't matter to me how much the dealer has marked it up; I am only concerned with the final asking price, and if I am willing to pay that price.

As a small (non-coin-related) business owner, I can fully appreciate the many costs of overhead involved in getting that coin to the customer, and these are often forgotten by the buyer. To a collector this is a hobby, but to the dealer this is his livelihood, his way of paying his mortgage, buying groceries and supporting his family. He must be allowed to not only cover his costs, but to make a reasonable profit, as well. Besides, if his coins are priced too high, they won't sell. Let the free market decide. >>

Would it matter to you if you did know what he paid? If you sell a coin on the BST for $X and a dealer buys it and puts it up on his site for $X + $Y [no guarantee that it will sell for $Y tho] would you have a different opinion of his markup?

seateddime · July 13, 2011 11:23PM

Good responses.

I do not disagree a dealer should make the most they can, they are in business to make money.

Let's try this:

Say a dealer has a buy/sell spread on widgets like MS66 PCGS morgans or MS61-63 Saints or the like. A clear BUY and SELL price that may adjust with the market.

If I put the question that way how would opinions change, if at all?

TahoeDale · July 13, 2011 11:44PM

as to the last example, $25 per coin.

Unknown · July 13, 2011 11:56PM

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GMan · July 14, 2011 12:38AM

I'm from the "If I like the coin and price, I may buy it" camp. I really don't care what the seller has in a coin, it's not relevant to me. When I'm buying, the only relevant question: "Is the coin worth the asking price."

For an example, I have a 1942/1 Merc I found in a bag of junk silver. I paid $1 for the coin and about $50 to grade it. It graded XF-45. If I sell it for $700 I'd then have a 1400% markup. Is that "fair?" Of course it is because I'd be the jackass if I sold it for less than market value simply because I have comparatively little in it.

Some may ask if it were fair to me to cherry pick such a coin from melt. It's isn't my fault the seller didn't do his due diligence. I'm not going to search coins for people for the 15% or so I make on junk silver. Now, if it's just a few coins I'll look them over and check the dates, and I always check all Morgan/Peace dollars, but a bag of 500 dimes isn't going to get looked through until I have time. I also have a copy of the Redbook laying right on the table and if anyone asks me about rare dates in their junk silver, I show them the Redbook, how to use it, & where to get one. I tell them I don't have the time to search through all their coins but their welcome to look them over and bring me back anything they think might be worth than melt. I think that's fair and at that point if they sell the junk to me and I find something nice in it, good for me.

One last thing, life in general isn't fair either. As TDN once said, there is no Santa Claus in numismatics.

BigRick · July 14, 2011 12:42AM

fiveNdime · July 14, 2011 2:23AM

what is a fair markup for you when shopping? (assuming you knew what said dealer paid)

would it matter if they made 1% or 2000%, if it was the coin you were after?

what is a fair markup when it comes time for you to sell that coin???

aint capitalism grand?

<< At what point (if any) would you say is too much? >>

when they can buy a beach house in CA with the net profit.

RedTiger · July 14, 2011 2:58AM

<< Good responses.

I do not disagree a dealer should make the most they can, they are in business to make money.

Let's try this:

Say a dealer has a buy/sell spread on widgets like MS66 PCGS morgans or MS61-63 Saints or the like. A clear BUY and SELL price that may adjust with the market.

If I put the question that way how would opinions change, if at all? >>

As with all the answers, it varies. For a $300 value generic Morgan, it may well be about $25 if the dealer does a big volume, and posts a public buy/sell spread as many dealers do on the CCE. At a small local shop, the spread might be more like $50 or $100 or more, because the dealer buys it and then sends it to the bigger dealer, and how much they value their time. In another example on the other thread, the dealer might only offer at a low wholesale price and quickly flip it at a higher wholesale price. The margin may be similar but the prices are lower.

For a $1700 low grade MS Saint it might be $40 at a big volume dealer, but again will vary. Some sellers might seek to get $100 or $200. Some telemarketers have in the past moved bullion related classic coins at double or triple the typical price levels.

Coins are an unregulated market, so what dealers pay when they buy, and charge when they sell are a mix of experience, the current market. Some dealers might size up the customer and charge by how big a fish they think they have on the line. Again, a lot depends on where a particular person is in the numismatic food chain. Those at the bottom of the food chain, are prey, and pay the most and get the least. Those in the middle get more average prices. Those at the top, feed on the profits channeled to them from those lower in the chain. Those that like to complain about the fairness or unfairness of prices won't change anything.

rhedden · July 14, 2011 3:21AM

Many brick & mortar dealers use this equation:

Fair Mark-up = (Largest possible amount of money a collector will pay) - (Smallest possible amount of money the dealer can pay for it).

Dealers have to pay the bills somehow, and it gets frustrating when nothing good walks into the shop for months on end.

Zoins · July 14, 2011 3:23AM

The market seems to bear this dealer's price on Morgans.

Fair or unfair?

RB1026 · July 14, 2011 3:26AM

<< Whatever the market will bear. >>

I agree. I may not always like it but I support the concept

rays · July 14, 2011 3:46AM

What is a fair markup vs what is a typical markup are different questions. I don't know what's fair, but if you follow the money (i.e. verifiable) from auction price realized to dealer's asking prices, it is usually on the order of 30-50% or more.

pennyannie · July 14, 2011 4:55AM

I work for myself, at times i get material goods for free that i later resell for 500 to 1000 bucks or more. I gave 300 bucks for a ford diesel that i resold a few weeks later for 5000 dollars. I had a guy that was desperate for cash and needed 6000 bucks asap, he sold me a 15k car for 6k. To be honest i really did not want to buy it but he was insistent. I am thinking about giving a guy 8 months of rent for a Limo with 20k miles.

When you got cash and other people need it, they are sometimes willing to take a beating to get it if they do not have any better options.

If a dealer offers 25 bucks to buy BU Morgans i do not care, if said dealers offers 100 bucks on 1000 dollar coins, i do not care. The seller needs to decide if they like the offer or not.

So the answer is what ever they feel like. You decide wether you want to acccept or not.

erickso1 · July 14, 2011 5:03AM

Would you consider Heritage a form of dealer? Or at least the auction process? The function is the same and the markup becomes whatever the market will bear. All it takes is two mis-guided buyers to run a 1962 proof set p to $2500.

jesbroken · July 14, 2011 5:56AM

Anyone that has been or is in business(b&m) with overheads with large inventories moving regularly has paid too much for some items and hit a lick on others. The problem with trying to discern what is "a fair markup" is nearly impossible to answer. We all know that when one item has not moved nor has moved far below expectations then this loss of profit or extremely reduced profit must be made up. One of the many ways to do this is by marking up higher than normal, an item that may bear this additional weight, such as, harder to obtain coins(not necessarily extremely rare). Profit must be maintained in a brick and mortar business and it's not just as simple as 20% is fair, so let's markup everything at 20%. Dream world.
Then, that's just my opinion.
Jim

telephoto1 · July 14, 2011 6:33AM

A buyer should be primarily concerned with the asking price and how much they are willing to spend; what the seller paid, be it one cent or $100,000, is immaterial to the transaction.

A seller should be primarily concerned with how much they can obtain/how much they will accept for their item; what the buyer resells it for, or even whether they resell it at all, is immaterial to the transaction.

IMHO, entirely too many people in this hobby/business are scared to death at the prospect of anyone (but them) making a buck.

seateddime · July 14, 2011 8:35PM

So based on these responses, I think we all agree that there is really no limit to what dealer should make on coins or widgets.

Make as much as can.

RedTiger · July 14, 2011 10:55PM

<< So based on these responses, I think we all agree that there is really no limit to what dealer should make on coins or widgets.

Make as much as can. >>

There is a balance to be found. Price consistently too high for the quality level and would be buyers learn to look elsewhere and sales dry up. Offer consistently too low when buying and that dealer will only get desperation deals or know-nothing inheritance deals. As I wrote, it is a mixture of experience, market trends, and sizing up the person on the other side of the transaction. Word gets around, and certain dealers get red-lined as a do-not-go zone, by the smart collector crowd. If the reputation gets bad enough business dries up, and the dealer has to work for someone else, or start being more competitive on pricing, or some other trick (perhaps advertising) to make their business go.

Some operations do prey at the wide ends of the spectrum. Telemarketers and certain other sellers often price their coins at double and triple what others typically sell them for, and go out and find marks that agree to buy at what may seem like inflated prices. I wouldn't call those "fair" prices, but those companies spend considerable time, money and effort finding their marks. Pawn shops, hotel room buyers, and some folks might include some local coin shops, often offer very low, and tend to get mostly the desperate need-cash-today crowd, or know-nothing inheritors that just want to get rid of the stuff. In between the wide extremes, there are many dealers working closer to the middle.

What is a fair dealer mark-up?

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