Margins on High End Coins ?

I am a full-time dealer (read: I do this for a living) and I would like to address both the points brought up in the initial post, but also points brought up in the quoted post. I will also add that this thread seems to be a discussion of at least three different topics and at least one of them appears to be a carryover from another conversation, which can make all of this tough to follow for others.

The statements in the quoted post (above) will be touched upon first. In my opinion, a retail buyer has little, if any, right to be able to claim the ability to pay the same for a coin as another dealer might pay. The reasons for this include that most dealers do many transactions with one another over the course of quite a few years and they build a trusting relationship with one another; additionally, dealers invest significant time and effort to make contacts with each other and to learn where to move material that might be difficult to sell on a retail basis from their inventory; also, dealers are generally willing to help one another out in terms of leads, buying stale inventory and short-term loans; and lastly, retail clients typically have not "earned" the right to buy at wholesale levels. If a retail client cannot handle this then I have to wonder if they go to their grocery store and refuse to pay a mark up for food or if they go to their physician and refuse to pay more than what basic insurance might cover-it just makes no sense.

As for the original post, well, it depends. It depends upon if the coin is in a series that is hot (liquid), if the coin is a key date that always has a strong following, if it has some amazing individual quality that sets it apart from other otherwise similar pieces (1953-S Franklin half dollars with FBL, coins with amazing natural toning, etc...), the cash flow of the dealer and the relationship of the dealer with the client in question. I've sold three coins fairly recently that fall within the low end of the original range of prices. One was sold wholesale and two were sold as retail transactions. One coin cost me $1,000 and I sold it for $950 because it became stale in my inventory, one coin was a key date that cost me $1,200 and I sold it very quickly for $1,350 while the third was also a key date that cost me $2,200 and I sold it for $2,400, also very quickly. The first two listed were retail transactions and the last was a wholesale transaction. I could have likely make more on the last transaction, but I have a good relationship with the buyer and he needed the coin for his want list clients, too, so I did him a favor.

 

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thanks, TomB for that very informative post from a dealer's perspective. It was very educational for me.

 

A dealer may buy a coin from the public based upon the price the dealer wants to buy at and were the seller can live with. Just as doug said it is not my fault that the person doesn't know he has a $4000 coin in a lot of say 30 coins. If he wants say $100 for the lot I'll give it to him. I take all of the risk and labor to get that $4000 coins sold. The risk being is that the coin could lose half its value if not more by tomorrow and labor in terms of marketing the coin listing it on my site calling people up who might be interested in it. Buying tables at coin shows and trying to market it there. if I retail customer I've never met ebfore came up to my table at a coin show and offered $3800 for it I would make the counteroffer of $3900 and it would sell. The retail customer doesn't need to know what I paid for it all he needs to know is he got a $4000 coin for $3900 so to him it was a good deal.
Trying to say that dealers should pay near retail for every single coin they buy is absurd. You have to remember. Coin dealers have bills to pay. They have a car payment electric bill, food expenses, gas, Mortage/rent and who knows what else. They have to make a living selling coins so as long as these dealers are selling coins at fair market value and not something like 3X retail then I see no problem.

 

I'm going to say about a 40% margin on their cost will give them about a 10% profit. On the key dates they're basically throwing out their income statements and going over on those.

 

I disagree with this. A doctor or lawyer has hundreds of thousands of dollars in tuition loans and in all business this cost is placed on the consumer. The only tuition cost for coin dealers is lost income for the 2-8 years spent getting a degree at cointalk university.

Second of all it is apples and oranges. I understand the point you are trying to make but the difference here is doctors and lawyers have a fiduciary relationship with the clients/patients they serve. I'm not saying coin dealers should be held to this level but this obligation makes the comparison inappropriate.

All of this is just quibbling about semantics. I agree with the point you are making just not the examples you used.

 

1. If you have purchased these collections like you stated I would think you would have a better understanding of how coins are bought and sold.

2. If you are buying an expensive coin check ha and coinfacts for pricing info. Also completed eBay auctions. It doesn't matter what the dealer bought the coin only what you should pay. And if you do it right and the coin is not very esoteric you can always throw it on eBay for -13%.

 

Sales tax. You're the ultimate consumer in the transaction. He has to collect that from you and report it on his income statement. Dealer-to-dealer means none of that. For one...

 

I agree with nearly everything you say Doug. I didn't go into lower or higher value items since the OP didn't ask, but even for the same value coin I immediately discussed how it depends on the specific situation. So every single thing you discuss in that regard I agree with.

The only point you and I differ is when you say there is no right of anyone to judge a person's ethics. I would hope everyone would view a dealer who rips of the proverbial little old lady by only offering her $50 for a $5000 coin as a thief with no ethics. Your definition says I have no right to think of him as a thief and to question his ethics, and I seriously disagree with that.

 

I think that what everyone is trying to get to but no one has flat out described is this.

If you ask a dealer what the fair retail value on a coin what does the dealer do? When the dealer sees the little old lady, if he says a coin is only worth $70 and I'll give you $60, but the coin is worth $5000 this is wrong because the dealer was asked the question what is the coin worth and he flat out lied. If the dealer says the coin is worth $5000 but I'm only going to offer $50 it is a bad deal, but ethical. When someone asks a dealer for an appraisal of a coin or a collection, it is not the offer to buy the collection that determines the ethics but whether or not the dealer is honest when directly asked what is this worth.

 

Getting back to the op question, I would not make a deal to sell any of my coins in the range you describe for less then 80% retail. What the dealer needs or thinks is right or moral is totally unimportant. There are plenty of dealers and plenty of auction venues such that I don't really have to accept less then that. There are going to be exceptions to this general number but forget about fair or ethical in this free market I don't feel that you need to accept less, few exceptions noted.

 

Great post Tom B. I appreciate that you took the time to touch on the many different directions this thread was going. I also like the examples you gave.

For the record for everybody, I am not by any means saying dealers should not profit. I intend not to offend dealers but rather ask tough questions about feelings I myself have as well as others I over hear from time to time.

 

The most statistically accurate reason for the "dealer did or tried to rip me off" is going to be overpayment on purchase of the coin, in my opinion

 

Again, I agree with your points Doug. Way too many people blame dealers for their own lack of knowledge.

Regarding a profit of 100 percent on all of their coins, I know of many dealers and their business models that make this. I have always been the one to support companies like Littleton, who spend a lot of money to reach their customers. Dealer profit is not the issue at all. The issue, in my mind, is there is a demonstrable buy and sell price for problem free US coins. So, a dealer who only offers $50 for a coin with a greysheet value of $5000 is immoral, unethical, and a thief. I do believe, if the circumstances are known, collectors are allowed to judge a dealer. That is all I am saying Doug.

 

I figure 20 % above grey sheet is about my limit for buying, 20% under for selling.

I know there are some issues that CDN does not accurately reflect, but I leave that to the more advanced collectors for now.

 

It is the lying about the retail value that is unethical, not the offer. If the full retail value is specifically asked for and an intentionally misrepresented number is given is where ethics come into play. Not the offer itself.

 

All I really expect from a dealer is to give me a fair price . If he buy's a $5000 coin for $50 he's the one that has to live with himself and what he payed is none of my business . But if he tries to charge me $6 or 7,000 for a coin worth $5000 I'd say he's unethical . I also don't see how anyone can make a comparison with a dealer to Groceries or merchandise in general as most are priced fairly close to a manufacturers suggested retail price .

 

I am sorry, but for you, as a so-called "professional", to use your, ahem, knowledge to pull a $4k coin out of a lot you're paying $100 (or $3.33 each) for, and then attempt to justify it by whining about the "work" and so-called "risk" you're putting in is utterly ridiculous. Ethics aside, you need to understand that there can be benefits to not paying the lowest price possible, just as there can be, on different levels, with selling for less than absolute top dollar. I've told you before that a reputation as someone who does not pay fairly and/or reasonably, be it to those who may not know what they have, to those who do, or to dealers is not something you want. While nice material can and sometimes does come from the uninformed, having to rely on them to acquire your rips isn't going to get you anywhere fast.