How does a wholesaler make money in this market.

Discussion in 'US Coins Forum' started by Derek2200, Nov 26, 2019.

  1. Derek2200

    Derek2200 Well-Known Member

    I know of a wholesaler who sets up at shows all over the country, has a shop, does a booming business in slabbed coins priced around 5 pct below bid. He says he operates on a 4 pct spread and sells around $25 k to dealers a month plus whatever he gets from the public.

    Considering table fees, meals, travel, lodging how does he make money in this market?
     
    GoldFinger1969 likes this.
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  3. desertgem

    desertgem Senior Errer Collecktor

    Probably too free with the truth.

    Maybe his way of being away from home a lot on purpose.
     
    Amos 811 likes this.
  4. rooman9

    rooman9 Lovin Shiny Things

    Buy high, sell low, make up in volume.
     
  5. PlanoSteve

    PlanoSteve Well-Known Member

    The key is in the word "wholesaler". When he sells a coin, he gets the whole value, as opposed to us, we only get partial value! :hilarious::jawdrop::eek:;)
     
  6. Clawcoins

    Clawcoins Damaging Coins Daily

    Have you audited his books?
     
  7. baseball21

    baseball21 Well-Known Member

    Don't believe everything you hear
     
  8. PlanoSteve

    PlanoSteve Well-Known Member

    Reminds me of an old Superman episode (1950's TV) where a meager accountant was spied at a horse race track. After every race, he went to the window to collect his winnings. He was kidnapped by people with nefarious intentions, to find out his method/system of winning every race. Naturally, he was rescued by Superman. Turns out, he bet on every horse in each race, so he could have the experience of winning each race! :smuggrin::smuggrin::smuggrin:
     
  9. baseball21

    baseball21 Well-Known Member

    lol that’s one way to always win. I’d be shocked if any of the dealers are really being 100 percent honest with their finances with anyone else.
     
    Derrick Combs and PlanoSteve like this.
  10. Mainebill

    Mainebill Bethany Danielle

    A lot of wholesalers buy strictly on price and sell the same. A lot of coins they sell are c or lower for the grade so they can sell back of bid because dealers want to dump them and sell to price point buyers. Plus with a shop they get steady trade of people who want to sell I do business with a dealer like this. I have to wade through box after box of crap and problem coins but once in a while I can pull out something decent. Plus he’s always willing to make me a fair offer for stuff I want to say goodbye to
     
    Derek2200 likes this.
  11. messydesk

    messydesk Well-Known Member

    I'm going to guess that "plus whatever he gets from the public" is not being handled at a 4% margin and includes a lot of bullion.
     
  12. Collecting Nut

    Collecting Nut Borderline Hoarder

    He may be making up what he's telling you. If he's being honest or close to it then he's doing a great business and he makes up for it in volume. What do you think?
     
  13. GDJMSP

    GDJMSP Numismatist Moderator

    You're asking how he does it, and yet he's told you how he does it - but you and apparently others doubt him. To me, what he's saying makes perfect sense and it's pure simplicity.

    To help explain that lemme ask you a question or two. Are you aware that 80% of all coin sales are dealer to dealer transactions ? They are, and that matches up perfectly with what he's saying.

    Next question would be, are you aware of what the spread is that majority of coin dealers operate on is ? For most of them it's pretty close to 10%, though quite a few do go a good bit higher than that. And I'm talking about averages here, not averages for all dealers, but averages for individual dealers. For instance, on some coins, depending on the price, a dealer may be able to accept a lower profit percentage, maybe even 2 or 3% on high dollar coins. On low dollar coins he has to get a much higher percentage, maybe 50% or even 100% in order for the deal to be worthwhile. 2 or 3 % of a 6 figure coin is a lot, but 50 or even 100% of a $10 coin is very little.

    So, accepting that most dealers operate on a 10% profit margin, and he's operating on a 4% profit margin - that kind of explains everything doesn't it ? That's how he makes money in this market.

    Or you can throw the whole idea out the window and say I don't believe it. But me, I do because it makes perfect sense.
     
    GoldFinger1969 and bud250r like this.
  14. Conder101

    Conder101 Numismatist

    One important question, is that 25K gross or net? If he is netting 25K a month after expenses, he's probably doing just fine.
     
  15. Derek2200

    Derek2200 Well-Known Member

    Most of his coins are C coins with some B and no Cac. Lots of traffic at his table. Towards end of show looks picked over.

    I got impression $25k gross sales.
     
    Last edited: Nov 27, 2019
  16. baseball21

    baseball21 Well-Known Member

    The profit margin certainly does happen, but 4% on 25k a month traveling around for shows means you're losing money unless you sleep in your car and live off of Ramen so those numbers don't add up. He's very likely doing better than he's letting on but it's better for his business to let people think his margin is only 4% when he could be buying a lot cheaper from at least some sources than he's letting on
     
    Sunflower_Coins and Derek2200 like this.
  17. RonSanderson

    RonSanderson Supporter! Supporter

    I have often wondered how the wholesale market works. There is a premium each time the coin changes hands, yet its end value never changes. Exactly who is paying for this 4% so the coin can change hands between dealers? And if you are both selling off stock that does not move and replacing it with stock that does, do you break even? If so, where does the wholesaler’s income come from.
     
    GoldFinger1969 likes this.
  18. Randy Abercrombie

    Randy Abercrombie Supporter! Supporter

    Salesmanship class 1..... I am selling at or near cost.... Always.
     
  19. Derek2200

    Derek2200 Well-Known Member

    Wholesalers depend on a high volume low markup operation where they have a fixed table fee and expenses they can easily overcome. They would not make it on eBay where it can take about a 30 pct margin / 43 pct markup over cost.

    A shop owner where it walks in at 50-60 pct of bid could sell at bid plus 5 -10 pct at show and some wholesale on stuff bought right (below bid). Plus purchase nice stuff at 70-80 pct bid from walk up traffic (beats what sellers would get from auction house after juice). Nice PQ / scarce material wb at retail about bid plus 30 pct - they pay the money or don’t get the coin. It takes big money run that kind of operation. They may also purchase stuff they pickoff from online auctions below bid then flip at shows. Their online store would be for retail giving them more income plus lots small ticket items marked up 50- 100 pct.

    Jake in coin club says “I might bid on 50 items in xy auctions put in bid no more than 80 pct of bid after juice. Sometimes win a lot sometimes not. Cac and really choice items will mark with low bid early on then come back in final seconds try beat them get at my price sometimes score big time. Towards end of auction items the other bidders may be out of money then I clean up on some of those too. The really nice stuff sell at retail only had some those sell within a week or so.”


    Drops in PM or bid can be bad news.
     
    Last edited: Nov 27, 2019
    RonSanderson likes this.
  20. Ushuaya

    Ushuaya New Member

    I think he's not telling you the truth. It doesn't feel like reality. I would even say that there is no point in it, he would not do it at a loss to himself. Money should always be in your pocket, no one would sell cheaper than what he bought at a higher price. Around the world and top of the best selling apps, another scheme is criticized in order to buy cheaper things and sell them much more expensive(or at least 20-30% higher than the original price). I earn my own money, and I would not sell even cheaper what I already bought for a penny.
     
    Last edited by a moderator: Jan 22, 2021
  21. charley

    charley Well-Known Member


    it is stated he/she operates on a 4% spread. it does not state what the buy price is/was, and does not state he/she buys at a 4% spread between buy and sell. it does not state that the 4% is net or gross over cost. it does not even state what spread means.
    it does not state that the 4% is after cost of doing business.
    it does not state what the sales to the public are.

    just a math exercise, if his total sales were 500k, and after all costs of doing business, he is operating on a 4% spread of net profit,, that is not bad after taxes, considering write offs, ira contributions, depreciation and inventory, rentals/lease, self employment payments and health insurance payments, etc.

    i know sole proprietor physicians that wouldn't mind that return, after all in.
     
    Last edited by a moderator: Jan 22, 2021
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