Is Dealer Loyalty a Double Edged Sword?

[AnkurJ]

I posted this ATS across the street some time ago, but would be intersted to see what everyone here things.

 

So in one case, you can get first crack at coins you want or that are on your want list. But it seems some dealers who have strong followings have significant markups on their coins. I understand that PQ coins will have PQ prices, but it seems to me that when those collectors try to resell, they will have a hard time and find they are buried. For some collectors who have tunnel vision, and will only deal with certain people...will they wake up one day and realize they have been overpaying all this time?

 

What are your thoughts?

Ankur

[Oldtrader3]

This has been an issue with better for grade coins ever since I can remember and certainly since TPG grading commenced. I have paid premium money for better than average coins many times and it is certainly a mixed bag financially. The one positive point in this discussion is the fact that often a coins by being a premium specimen assures stronger buyer interest at sale.

 

My financial track record with this attribute set is less assuring at least for show sales with limited time constraints. Many interested dealers are going to try an buy the coin at close to sheet anyhow, even if they recognise the strong grade attributes of the coin. Some dealers will pay premium money for this type of coin, particularly of they have a want list request for it, some will not.

 

I think that you either have to know your dealer or be prepared to wait for an opportunity to arise which will help sell the coin. For example, you can shop the coin as being available to a particular party who is interested in obtaining a strongly graded example for some premium and show the coin to some dealers who may be interested in that material, then wait and be patient to allow the presale effort to have some effect. The weakness of this tactic is time lost with no potential sale guaranteed.

[Raisethis2]

If a Dealer friend is actually buying things for your want list you should have some discussion regarding the price you'll be expected to pay before he makes an acquisition. I'd be really hard pressed to turn such a coin down once the grade, price and condition are agreed.

 

On the other hand, if you're just buying from his inventory (as you describe) if it's over priced ask for a lower price or make an offer. Dealers RARELY pay bid for inventory but in the event he did, Gray sheet ask is a real good place to stand your ground.

 

 

[Arizonadesertrat]

Were the other coins comparable to the one you asked about in terms of quality for the XF grade? Opinions based on looking at images alone are not always well informed. If several others have sold recently, then I would not worry---keep looking for one that is more recently priced.

[Kenneth F]

IMHO, I avoid those who abuse the acroymn PQ. But for the sake of conversation, I think it would depend on the coin. If the coin makes me go ga-ga, I will think about paying asking price. For example, I have plenty of 1879-S Morgans. I recentally found one that has eye crossing frost.. even half the devices are frosty. This coin makes me go ga-ga and Im willing to pay well over the FMV for this coin (havent pulled the trigger yet.. but will soon). The asking price is about $200 over FMV. If you like what you see, I dont see a problem paying for it... within reason of course.

[AnkurJ]

I removed the example as it was from a few years ago. But the example I bought had original skin while the lower grade example had striped surfaces.

[DaveG]

Generally speaking, PQ coins bring PQ prices.

 

I suggest that the dealer paid a PQ price to obtain the coin, which means a collector has to pay a PQ price to obtain the coin.

 

(This is one reason that it's hard to buy PQ coins in down coin markets. Certainly I have a number of coins that I won't sell unless someone offers me "stupid" money for the coin.)

 

However, if the dealer has a strong following that means that a lot of collectors feel that he is delivering good value for their money.

 

This would suggest that you can sell the coin back to the dealer, who will pay up for the coin because he has customers waiting to pay him a PQ price for the coin.

 

Odds are that if you sell the coin to another dealer, he's just going to turn around and sell it back to the first dealer because the first dealer is well-known to pay up for PQ coins (which is how he gets his inventory in the first place).

 

I suggest that this is a typical business model for a specialist dealer.

 

For a collector, the trick is to be smart enough to sell a coin to the proper buyer or in the proper venue.

[TomB]

DaveG has given a very good response. Your post, however, leaves me a little confused in that it appears you would be offering multiple scenarios, but I don't see them. I will attempt to answer as I understand the post.

 

One way to look at getting first crack is that you are possibly paying more for coins, but another way to look at it is that the dealer is doing you a favor. In either case, your position for initial negotiations will be weaker than if the piece were in inventory for a year. Additionally, you will presumably know at least somewhat the market into which you are buying and this should protect you. Of course, downside risk cannot be protected and the dealer has no responsibility to get you out of a coin at cost if the market turns down dramatically in the future. If you are looking at short terms holds and sales then numismatics might not be the proper venue.

 

Blind loyalty is just that...blind. It is not good.

[Oldtrader3]

Digital images are better than even 3-4 years ago but creative image editors still image as well. You have to know your dealer and have some level of trust based on success with them. Presently, I am restricted from crowds because I have CVID (genetic immunity issues). This has curtailed my coin buying at shows completely and has placed me primarily in the mode of choosing a few dealers to do business who have been fair with me, met my expectations and having the patience to wait.

 

Because of illness and other issues outside collecting desires, my acquisitions are slowed a little from past years, plus the majority of my better inventory was sold to supplement college tuition savings for my children. Some issues are also based the stale economy in our area and in 401-k compression.

 

Without strong dealer loyalty, I would not collect coins at all any more.

[Barndog]

my wantlist is so short that I would love to have the chance to overpay for something I need for my collection

[jgrinz]

Loyalty is based on TRUST and there is no doubled edge sword to it.

 

Most dealers I work with usually work on margin over cost - If it is a PQ coin he paid PQ pricing for it and obviously will command a larger price over book to sell it to me.

 

[Houston Investor]

To me its the coin and what kinda deal it is. As far as the dealers rep means nada to me if the deal does not float my boat. Don't necessarily care who the dealer is as long as its not someone who had hacked me off in the past.

[Oldtrader3]

This is a different world than I worked in. My field was all built on relationships and building trust and partnerships to assure success and completing complex project tasks with the desired business outcomes met. Partnerships and some reasonable level of mutual trust, plus a man's word being good for something, were the paths of meeting and working with others to attain objectives for both partners or lack of it assured failure mostly. Coin collecting is really no different in many ways. Otherwise, why bother to have B&M overhead at all? It would be a waste of money, time and resources.

 

I understand that this business is to a great extent transactional based and perhaps may result in a single transaction with a particular individual dealer or another collector but certainly not all of it. I utilize dealers (fewer now maybe), some of whom I have done business with since the early 1970's. As things change in the hobby, I change dealers as well but usually to an adjunct from a former dealer who has moved out on his own. Relationships also create an implied interpersonal connection with a dealer which imbues trust.....hopefully.

 

Many dealers now seem to see this a character defect? But I do not live in the jungle and do not to have to collect coins in that manner. The best collections were never built that way to begin with. Not that my collection is great or even interesting to anyone but me.