Poll: At What Point Is A Dealer Taking Advantage

I would say that statement isn't true.
I like to go by Wholesale/Greysheet while I'm bidding on a coin, and Heritage makes that easy for those of us who don't have access to Greysheet.
Heritage has wholesale prices which are near Greysheet prices, if not exactly with it, for the coin. You want to buy the coin at a wholesale price not at a retail price.
And I know dealers go by Greysheet as well when buying/selling a coin, so explain to me how nobody uses it.

 

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So you're saying a dealer would pay less to a seller than to another dealer.
Good thing I've decided to die with my collection intact because that would be the result anyway if a dealer offered me less than BID.
He wouldn't get the collection and after I die I would be beyond caring.

 

You have to understand that coin dealers are no different that any other businessperson. They're in business to make a profit. How much profit they make depends on how well they control their overhead expenses, ie purchasing coins from private collectors.

This is an industry that demands the collector to be knowledgeable of coin characteristics, and fair market value for different denominations, metal content, rareties, keydates, and so on, in order to be able to negotiate properly with any potential buyer.

It really all boils down to, what the potential buyer is willing to pay for your coin.

 

In terms of simplistic math (I'm sure it's more complicated than this), if a dealer with a $10,000 inventory turns it over once a month at 20% profit, he'll make $2,000 a month.
That's only $24,000/year.
Change that to a $100,000 inventory and the profit comes out to be $240,000/year.

Very few people can live on $24,000/year.
On the other hand I could be quite happy with $240,000/year.

 

But a 10k inventory can be turned over 10 times as fast so they both should be the same 240k.

It's all just variable and not easy to just put into terms of one line item.

 

"Simplistic math", I'll say. I know of no business that has zero operating expenses. How about rent, loan interest,and on and on.

BTW, my guess is turning the inventory over once per month is probably a sellers dream and $100,000 inventory is probably way too low. Matt would have a lot better answers to those though.

 

Awhile back I saw a Littleton catalog and I believe a standard IHC in good condition was $8. Does anyone know what they would buy an IHC for?

 

OK, first of all we're talking coin dealers and honest livings? Let me try and wrap my mind around that for a minute.... Sorry, can't do it.

I know that these guys have to make a living too but some the these guys are simply snake oil salesman that buy and sell coins rather than snake oil. It is my expereince that they give you roughly half the value of the coin. Some much less, some a little more. I had to look long and hard for a coin dealer I like to deal with and I am pleased with every transaction I have with this outfit. Whether I'm buying or selling, they treat me honestly and give good advice. As far as the poll goes, I'm going to go with what seems to be the industry default and say 50% of value.

 

Okay - I did not think the ranges were large enough. I vote 20-25% - but I expect this to be an average for the complete transaction. Assuming B&M shop of course. I really think the range should be like 20% to 40% - because with overhead and everything it may need to be between around 30%.

 

Yes, a dealer has to make a profit and there are established ranges for what that profit should be, depending on the coin(s). But, far too often, I’ve seen dealers offer 10% or less of a coins value. And, far too often, I’ve heard dealers state, “They’re always looking for suckers, that don’t know what they have”. If a dealer offers an unusually low price because they don’t need the coin in their inventory, they should tell the seller this is why they’re offering a very low price. If a dealer is looking for a sucker, well, that’s criminal or it should be.

 

I really wish this was broken down in to two categories. One for Brick and Mortar stores and one for show only and E commerce. The former needs about 30% for the convenience and expense of being convenient. They can do this by being honest and marking it up by 30%, but most are buying a grade low and selling a grade or two higher AND buying at 80% of retail (of the undergraded stock) for fast moving merchandise. This does not apply to dealer to dealer sales of course.

That means a LOT more money for those that use grading rather than pricing to create value.

Those without the extra expenses are able to work on a smaller margin and many have to because of the extra competition in the forum they choose to use.

 

Well,
I'm not going to answer the question or poll at this point as I don't know for sure and I work in a shop. I do have a few comments though (as usual).

That price sounds high even for Littleton but they do pay strong. At times stronger than we would sell to retail customers in bulk.
We've sold them IHCs at $1.50 each. Drawback is they are very picky and generally slow to pay. They send a lot back and it takes to long to get paid.

Yep,

It's very rare for a dealer to pay bid to a seller and also rare to sell to a customer at bid or even ask.
It DOES happen on occasion but not often.
As stated a LOT of inventory goes to other dealers at least where I work. The margins are smaller but the cash flow is higher volume and quicker.

If I were to sell a coin to my boss I wouldn't even expect bid and I work for him. Employee or not he's gotta make money.

Amen! My boss can be quite cranky at times. Part of the reason I'm there actually. If it's a coin we need or want you'll get much better money. Usually this is NOT the case.
One thing I have learned from him though is that if you're going to "lowball" someone it's best to just tell them you are and why.

The phrase "I'm going to insult you with this offer" is used a lot at the shop.
Walk in with a proof set that we already have 100 of and we don't really want it. We'll pay 70% of bid and if WE'RE not watching that is sometimes lower than face value.
Common $1 silver certificates? I offrer as low as $1.05 and suggest people keep them. Nobody is buying them so we don't need more and it ties up money and space.

Tuesday I had a guy come in and asks what we're selling 2008 Proof sets for. Boss wasn't there so I just took the prce off of our website. $75 (about 20% over bid). Oh, but he's being tricky because he has two to sell.
I told him we'd pay $45 each. I showed him bid and offered him almost 30% back. Why? - because we don't need them.
I told him if he came back when the boss was there he might get more but not my shop and not my money. I offer what I am allowed to. Not sinking in very well and I couldn't be more honest about it.
Next was a roll of mixed proof Kennedy halves. All common and looked like they came from roll searching. I told him I wouldn't even make an offer. Again, we don't need them.
Eventually the message started to sink in. I'm not being rude but I point out the truth and some just won't accept it.

Now, later on Tuesday we had a guy and his wife come in that had made an appointment. Long time customer and selling it all.
A boatload of GSA Morgan dollars. The guy was meticulous about record keeping and picky about his coins. The boss (who loves GSA Morgans) paid strong but also left room to make money.
A big purchase (the seller basically doubled what he paid to show you how long ago these were purchased) and now we have to deal with them.

So today I spent a lot of time organizing them. My co worker and I eyeballed them for slabbing. 74 are headed to NGC. This costs more money and it will take a while to get them back. THEN we have to sell them.
Lots of time and money involved.

If we get lucky we'll have a few good "hits". In the meantime we'll probably be running a sell on the dealer lines. Less profit per coin but it generates more cash flow.

As for turning inventory in a month we'd be thrilled if we could turn it in a year.


So what did we ship out today? A lot of coins to be graded which will cost us more money. Almost forgot we shipped out 10,000 wheat cents. We basically doubled our money at $460. Nice margin but not much money. Keeps the lights on for another day but didn't cover the wages of three employees for the day.

Nice thread you started here LostDutchman. Perhaps I'll figure a % out some day.

Wake up folks. I'm done typing.

 

Whatever you need to make to at the very minimum break even. There is no set amount as a percentage as I see it. You are going to make a nice margin on some and a skinny margin on others. When it's all said and done you need to pay the bills, and eat. Anybody, and I mean anybody that thinks they've been ripped off should take a good long look in the mirror at who did that horrible thing to them.

 

I answered 25-30%, mainly because the bulk of my collection is pretty common.

 

Unless you have a little know how of what it takes to really run your own business, then i feel it is hard to give a good answer to this thread. There are far too many variables to really give it an honest go. There is a huge difference between running a true B&M store, and many of the so called "dealers" that one in the hobby might encounter. You would be able to run a B&M in Dog run WV for less than your electric bill would cost here in N.J. That being said, there are too many other price driven costs of doing business to make this a one vote yay or nay. A high end dealer might drop 2.5 k just to go look at one collection knowing they may not buy it. That same dealer might even wait around the shop an extra hour to appraise your collection only to have you come in with boxes and boxes of superbly organized junk world coins. Even though a loved one spent countless hours stapling them into flips, and peering into a loop it is hard to explain to someone that their collection is essentially worthless. Bottom line, time is money. If you know what you re looking for, and what people are paying for it then you are two steps ahead of the game. If you want pf 70 state quarters, or rolls of 2009 d dimes and knowingly pay a huge sum then dont throw a fit after the fact. It is only business after all.

 

This question is hard to reply to as just look at a more structured environment like Wal-Mart. What is their margin. Well if you look at their food it's gonna be much less then say the electronics section. So some would answer 10% but some 50%.

 

More than "structure", its turnover. Walmart is the Epitome of efficiency. The last I heard, they get 9¢ of every dollar they sell for profit, salary, rent, building, heat, et al. In second place was Target at 15¢. Just how people can expect a coin dealer to exist on 10 - 15% is beyond me. And my guess is coin dealers are the opposite of a Walmart.

 

I have one dealer I go to because I know his gold prices are really good and the only reason for that is because he has so much coming in and has to move it. Of course I have tried to sell him gold rings 14k and he was gonna rip me off quicker than I could say hell no!! I don't take it personal at all because I have been in his store when other sellers have come in and I've seen first hand what he has offered them. I know there are honest coin dealers that are just barely feeding their families and making a comfortable living but when a dealer is making money out the yazoo and won't even give their repeat customers a fair price that is when dealers are taking advantage. Incidentally the coin dealer I am speaking of buys and sells alot of jewelry as well.