How do dealers make any money?

How do coin dealers make a living?

I’ve thought about the business, and I wonder how it’s done. Websites, coin show attendance, travel etc must cost a lot of money.

I’ve looked at the hammer prices of group lots at auctions, and doing the maths, I can’t figure out how you’d make your money back by buying Gordian III/Constantine Dynasty/the usuals in bulk for these hammer prices. Especially with the added risk of buying without having personally seen the lots.

Or, you might be lucky winning an individual coin at a low price and then flipping it with a mark up - but you’d really need to spend a lot of time watching auctions for promising candidates.

I can understand how CNG, Roma etc make their money with seller/buyer fees and fees for photography. But how does a dealer make a living?

 

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By buying at lower prices from the public. In the coin business you make your money buying coins, not selling them. If you buy them right you can always sell them.

 

I wonder if @Ken Dorney might wish to respond....

It certainly seems 'dealers' have a rather slim net profit margin to work with after all the expenses are addressed.

 

Wisely, with knowledge, and an ability procured over an number of years. It ain't something you can pickup over the 'net'..........and you and me can't do it.

 

That’s for sure!

 

But, we can endeavor to become more knowledgeable with the markets, if that is what we desire. Frankly, I don't want to do it. Doing so requires extreme adherence to game at plan, and I'm a collector.........I wanna have fun, and care less about making money.

 

I thought about it for a while and then tried to do something different. I buy big lots, keep the coins I want, and sell the rest to try to break even. Obviously don't make any money but I have a decent collection ... and that's more important to me. I suspect quite a few lower level dealers are doing exactly the same thing.

Oh, and Happy Thanksgiving to all.

 

Yeah, I figured one could safely break even from the big lots but making money from them seems less reliable.

Happy Thanksgiving too (we don’t celebrate it in Australia.. sadly I have to work (. )

 

Holiday tomorrow, and we feast. Will be thinking of you. You might do well to join us in celebration......

 

A well known dealer on another forum once said that if you want to make a million dollars in the coin business, you've got to spend two million dollars.

Chris

 

A former dealer told the story of being asked if he had made a small fortune in coins. He replied yes but it helped that he had started with a large fortune.

 

Smoke, mirrors, the complete lack of a normal human conscience, and tax evasion by the boatload.

 

I fully concur .. Buy Low but Don't Sell? Real Short Term Dealer

Buy Low and Sell High .. Short time Dealer with access to cash.

Buy Low and Sell High ... Got it . Dealers wanted ..

 

Don't mean to sound crass but being a dealer in anything is having a better mousetrap so people will come to you and think you add value to their purchase. The mousetrap is what makes your business... That will be different form place to place your intelligence etc.... no fixed formula for success .. time and effort with luck is the name of the game in all things. Hopefully you do not have to depend on luck.

 

I would think as a buying dealer you have to know when to walk away from a nice coin if you are not sure you can sell it for a profit. I guess some dealers are able to hold on to inventory longer than others. I guess it helps to not have an emotional attachment to the coins too. It would be hard for a lot of us collectors to give up our coins. Of course the dealers will get our collections on the cheap when we kick the bucket and our family tries to make a quick buck on something they have no attachment to what so ever.

 

This clip from "Freaks & Errors," an interesting documentary on philately, makes a few suggestions about how dealers do what they do.

 

True, unless one is lucky to have a fellow collector in the family. I wonder if someone is crass enough to run an advertisement in a mortuary trade journal

 

Knowing how to isn't very hard, but knowing how to is very hard.

 

With great difficulty. It is very true, the net margin is exceedingly small, so its much more important to work off a large inventory. But that takes big capital which is why there are not more dealers out there, and of those that are out there the inventories are quite small (in comparison to some).

The topic has many nuances, and there is much to discuss, such as business model: Consignment or own your coins, or a combination of both? I can say this. Of the biggest names in the business most (if not all) were wealthy before they got started. What does that mean? Well, they had enough money to weather a storm of starting a business in a volatile industry and could afford to lose much money until they turned a profit.

This is not an easy question to answer as there are many directions people come from and go to when becoming a dealer.

Yup. This is possibly the biggest method in which dealers get started. Just be careful. At a certain point your collection could become inventory, as it has for so many others.

I dont know about part of this statement, but this was often true in the old days. Now Paypal reports all money transfers to the IRS. Unless you are cash only and doing only business in person, you cant hide your income.

It is critical to success to remove any and all emotion from your buying and selling. One has to know when to walk away from any deal. Auctions are where one can get into the most trouble, especially online auctions. Its easy to just keep hitting a 'bid' button. Before one knows it, you can have an unsellable inventory. As for the last part, well, most collections go to auction, not to individual dealers. We have to compete for the same coins with all the other dealers and collectors in the world.

 

I want to say that coin sellers maximize profits by making their own ancient coins in their basements, but I figure very few here would find that funny. As others have mentioned the families of deceased collectors must be a lucrative source for sellers. I also wonder about how nighthawks, especially near sites like Viminacium dispose of their finds. I'm new here so please forgive me if I'm broaching a taboo subject.