What margins do dealers try to get?

[WinstonWare]

I’m just curious. I’m sure there is more to it than I'm aware of but in general what type of margin does a dealer hope to get when they purchase a coin and then list it in their inventory for sale?

 

Thanks for any insight. Winston

 

[James_OldeTowne]

My basic premise is to mark the coin up 20%, and expect to be talked down 10%, meaning I'll make about 10% net profit. It's important to note the "net" profit, which means I must include overhead into the cost of my coins. So if I spend $1000 on coins at a show, but the show cost me $250 in gas, table fees, lunch, etc., then I must figure the $250 into the cost of the coins.

 

I look forward to others' answers.

[WinstonWare]

Interesting. Thanks James

[MarkFeld]

I’m just curious. I’m sure there is more to it than I'm aware of but in general what type of margin does a dealer hope to get when they purchase a coin and then list it in their inventory for sale?

 

Thanks for any insight. Winston

If you get honest answers, they will be very different, depending upon the dealer, the coin in question and market conditions. Typically (as in about 90% of the time), I mark up my coins by approximately 15% over my cost. If I have to stretch and pay a bit more than I think I should, I mark it up less. And if I buy a coin at what I think is an especially good/low price, I will mark it up by more than 15%.

 

With the internet, auction archives and overall greater visibility and transparency these days, it is much easier to trace various coins and their prices. So it's not particularly uncommon to see where and and at what price a coin sold for in a large public auction, and then shortly thereafter, what a dealer is asking for it.

[WinstonWare]

I see what you're getting at Mark. Thanks

[James_OldeTowne]

With the internet, auction archives and overall greater visibility and transparency these days, it is much easier to trace various coins and their prices. So it's not particularly uncommon to see where and and at what price a coin sold for in a large public auction, and then shortly thereafter, what a dealer is asking for it.

Of course, it's a double-edged sword. I will never forget the time I innocently bought a really scarce coin for something like double retail, marked it up accordingly, and put it into inventory shortly before a big show.

 

At that show (which took place a couple of days later), somebody was seriously interested in it. He went away for a while, then came back a couple of hours later, furious, flustered and fuming, because apparently, he looked up the auction results that the coin came from. My retail price was TRIPLE what the coin had closed for in a major auction not three weeks earlier! This guy demanded to know how I could charge such a ridiculous markup and still have a clear conscience.

 

What he could not know (and I didn't know either) was that the coin had changed hands -- not once, not twice, but three times in just the intervening three weeks, and thus by the time I got it, it had gone through three markups, plus my current markup.

 

To this very day, that guy will not even say "hello" to me. He must think I'm the biggest scam artist this side of the Mississippi River. Not that it's a big deal, but sometimes, assumptions can be very wrong.

[WinstonWare]

Interesting story James

[supertooth]

Winston---- I am "NOT" a coin dealer. But, on occasion over the years I do get a chance to buy some family collections---sometimes on Ebay----sometimes in private purchases.

 

Unlike sales like Mark is talking about, many local folks will walk into a local B and M shop and get a 10% on a dollar kind of offer. Such was a true case of a patient friend of mine. He had taken a collection to a dealer in Delaware. The guy was soooooo "BAD" that he offered to take their silver coins "dollar for dollar". What a great guy. At that time, silver was being bought at 6X face by Kitco. I offered 6X face for the common stuff. In the end, I bought the whole collection. It took me days to look through "all" the coins. A dealer would normally NOT do this.

 

That kind of buying is far different than marking up a Heritage purchase by 10--15%. It is also different buying "raw" coins over coins already holdered. I've bought coins where I have sent them in to be certified---and then bought them at the TPGS grade when they came back.

 

Then there are the folks who want "cash" today---don't want to wait any time for their money. What do you do with the stuff that is out of your area of expertise?? Is the stuff counterfeit---altered?? You buy based on you NOT getting hurt. Each case is different. You can "Always" come back and give them more later.

 

Course, I did have a friend of my dad's who I tried to give more money to----she refused to take it saying "I've already gotten more than I EVER expected to get---you keep it". Folks just seem to know if you are doing them right or not. Those people usually can tell---especially if they have already gotten "other" offers before they got to you. It is all about being pretty decent and fair.

 

Then there are the folks that I've "MADE" coins for them. Got "NOTHING" for doing it but a good feeling. Sometimes you see their need more than your profit. Sometimes you just like to use your knowledge to "beat the system". I've done that a lot----and laughed a lot too. I once had two dealers outbid me on line for some 1921 Walkers. The lady seller in Florida had "Not a clue" that I was helping her---until after the auction was over. I sat and had a glass of wine while typing to her. She was having a soda----she didn't drink. I had bid with 4 minutes to go---knowing full well that the dealers would overbid me. But the lady had a sick mom---I had talked to her ALL week about the coins. I wanted her to get the "fair market value" for her coins----and she did.

 

Profit margins are sometimes what you want to make them to be. Especially if you are NOT required to get the last buck out of it. Those two dealers that outbid me in the above story. I had bid leaving them a profit to be made. Fair was "FAIR". Bob [supertooth]

[gmarguli]

I’m just curious. I’m sure there is more to it than I'm aware of but in general what type of margin does a dealer hope to get when they purchase a coin and then list it in their inventory for sale?

 

A simple generic answer is 40% and then they work their way down the longer it sits.

[James_OldeTowne]

Since this seems to be a good day for numismatic anecdotes, let me add one more quick one.

 

When I was a kid in Junior High, just barely learning about coins, there was a Shop teacher (you know, woodworking, industrial metals, etc.) (not a professional dealer, but the "vest pocket type") who spread the word that he was paying 99c for Ike dollars, and 49c for Kennedy halves. Why? Because "nobody else wanted" them !

 

Granted, that's a measly 1% to 2% margin, but you get enough goofy kids to bring in their parent's Ike & Kennedy hoards, you might make enough to buy a new band saw or something.

 

This guy also used to do something kind of interesting and almost clever. He would make 1944 "steel cents" out of a 1943 reverse and a 1944 obverse by planing each face down and soldering the two halves back together, then zinc-plating the whole. This way, the fake "steel" was attracted to a magnet and weighed darn near the correct amount! They were very convincing fakes. I don't know that he ever tried to sell any, but you can imagine his ethics if was paying kids 99c for Ike dollars ....

[WinstonWare]

Thanks Bob. You’ve given me a few things to think about.

[MikeKing]

I’m just curious. I’m sure there is more to it than I'm aware of but in general what type of margin does a dealer hope to get when they purchase a coin and then list it in their inventory for sale?

 

A simple generic answer is 40% and then they work their way down the longer it sits.

 

 

I've encountered this all too much

[WinstonWare]

I’m just curious. I’m sure there is more to it than I'm aware of but in general what type of margin does a dealer hope to get when they purchase a coin and then list it in their inventory for sale?

 

A simple generic answer is 40% and then they work their way down the longer it sits.

 

Thanks for your input Greg

[Houston Investor]

As a general practice, I operate on a narrow spread allowing a modest commission (5 - 10%) above inventory and operating costs in order to move my material as quickly as possible. There may be exceptions to this for things like junk box material or stuff I would not want to give away below bid or bullion value. The thing that riles me the most would be someone ignorant of my operating costs (and what it takes to be in the coin business) and comment about my sales price vs the cost of the coin like I am some kind of pirate. I believe some of those types individuals are ignorant of basic accounting. My income statement takes Sales - Cost of Goods Sold to get Gross Margin. GM less Operating Expenses (selling, shipping, travel, meals, entertainment, office supplies, computer, phone, etc.) = Operating Income. Consequently GM should be greater than Operating Expense in order to have a positive Operating Income.

 

However there are times at a show, I would be wanting to generate cash flow / quick inventory movement and sell a coin I had $240 in for $250, hardly a gross margin which would cover operating costs. Recently, I shared a table at show with a dealer who is a big wholesaler and ended up purchasing many coins from him at say 1-5% below CDN Bid. I bought thousands of dollars of bullion and slabbed coins from him. I still did manage to retail some of my material (two cases with coins and currency, many stacked to the hilt) despite his huge presence at my table. He commented to me the overhead on his shop (he has employees) is $100 k a month and I frankly can't see how he can stay in the business with that kind of operating cost and sell at wholesale. I think I would just fire them all, close that expensive shop and keep the $100 k!

 

However what others have posted here seems typical for the business. I think it would take a minimum markup of 15% above cost to simply stay in the coin business, however that persons operating costs would have to be really low. A more realistic number put out by many is inventory cost + 40%. Coins are like any retail business - the guy who runs a store I buy model rr stuff from says "I pay 60% of what I think I can sell them for." Consequently a coin dealer paying 60% of CDN Ask is not making that unfair of an offer considering operating costs and the length of time the item will have to remain in inventory before sale. Many dealers price their coins at 10 - 20% above CDN Ask (what they consider replacement cost). But forget this on 19th century type because this material is difficult to buy cheap or anywhere near CDN Ask! In addition, coins which are exceptionally PQ or high end for the grade cost + becomes more of a driver vs some arbitrary number like CDN Bid. There is no set markup rule in concrete in my view. I just like to move them quickly and have fun.

 

If you are really interested in how dealers markup their coins, take some ads from Coin World put the dealers asking price in one column and CDN Bid in the next one and then calculate a markup factor over bid. I have often done this myself.