How do dealers do it?

[Merc]

I've talked to several middle sized dealers (ones who sell certified coins from $100 to $5000) and I've observed them. Many have other jobs as their main source of income. They just deal on the weekends. Depending on the dealer, they offer 80 to 100% of greysheet bid when buying. When selling to the public, they want from 40 to 100% over ask. That seems like a big spread to me. It seems that many just place on high prices and hope a buyer will come along. I've had some tell me they sell a few coins the first day of a show and then nothing on Saturday and Sunday. Then other bigger dealers may go to a show just to do wholesale business with other dealers and never sell a single coin to the public.

 

I guess I don't understand the business. How is it worth their time an effort to go to a show to sell, when they price coins high and sell little? Do they do so much business with other dealers they make money?

[truthteller]

"Do they do so much business with other dealers they make money?"

 

 

Yes. Most of the major business is done BEFORE the show even opens. Major transactions with clients and dealers are consumated in the hotel rooms or offices before the show. In general, the secondary market is on the dealer day of the show, then, by opening day of the show, the rest of the sales are gravey. In addition, the auctions are becoming the "extra" buy and sell days of the show, since many dealers meet with clients at the auction, and finish up deals there. For medium and smaller dealers, the retail client provides the meat and potatoes for larger transactions with higher premiums, meanwhile, the volume transactions with less profit are done opening day.

 

 

 

TRUTH

[James_OldeTowne]

Here's another perspective. I actually do little business before shows, since very few of my coins did I pay low enough to be able to wholesale them.

 

I have quite a few coins priced way over bid and ask, or way over retail, maybe even multiples of retail. Dealing is just a hobby for me (sounds odd, doesn't it?), since the coins I'm selling are basically part of my collection. I do consider myself a dealer, but I have a "real" job elsewhere.

 

But since the coins I sell are part of my collection, they tend to be coins that I paid a really strong premium for myself, because I try and choose the choicest possible coins within the allotted grade range.

 

I approach any show with the attitude that if I never sell a coin, I'd be just fine with that, since the larger reason of why I even set up with shows is that I just enjoy talking with fellow collectors. I'm not in it for the money (or else I'd really be in the poor house!)

 

James

[Merc]

I still don't understand if dealers do business with dealers, they are just selling to each other at their wholesale prices. Both dealers want to make a profit on the coins they sell, but are both trying to buy at the lowest price. That doesn't lead to much of a mark up. Then once you buy a coin, you need to sell it for even more to make a profit. So does a coin trade hands at a show several times with little mark-ups each time?

 

I guess if you are lucky, someone from the public will bring in nice coins for you to make an offer. I've been to tables when this happens and the dealer will get out a greysheet and say, I can offer you 80% of sheet.

 

I've seen other dealers using James' method where the coins are priced high and the dealer doesn't care if they sell or not. I've seen some dealers with the same inventory show after show. I know their coins because I've seen them so many times. Their prices are high so it doesn't move. I don't know how they cover the table and other show fees.

[James_OldeTowne]

Here's something else that happens that may help explain why coins can change hands between dealers at practically no markup.

 

Suppose I'm at an auction and the bidding is weak. I bid on some coins outside my normal realm of early type because they're going so cheap. So, I might end up with a couple of Washington's, an album of Frankies, a few modern proofs, etc. at, say, 20% below bid. I would rather sell these to another dealer for 10% below bid for a quick profit than hold onto them for potentially months in hope of making that extra 10%. Better yet, if the dealer I "flip" the coins to has a few early types that he doesn't want, maybe I'll get THOSE for 10% back. Another scenario is where I as a dealer buy a large collection, half of which is coins outside my realm, so needless to say, I would move those as quickly as possible.

 

James

[chinook]

I have also pondered this question. How much can you mark up a coin if you are only going to wholesale it back out. If you buy a $500 coin and resell it for $525, then you have to do this at least 10x in a day to make it somewhat worthwhile.

 

You could mark it up to $600, but if it was a $600 coin to begin with, then why did the first dealer let it go only $500. The only way I see how a dealer can make money is to make low offers, play the crackout game, or sell to retail public. This seems to be a bit time consuming.

 

I would really like to know how much the average mid-sized dealer makes in a year. 30k? 50K?, 100k? Anything less than 100k with the amount of travel involved and time away from family doesnt seem worth it.

[Oldtrader3]

I would bet that many local, small show dealers do not turn their inventory more than 2 to 3x per year. If they have $50K inventory, at 20% markup, they make $20-30K gross. If it is a part-time hobby and they don't travel far, they may feel that it is worth it.

 

Many small dealers also make money by cracking mint and proof sets and selling the individual coins at markup.

[TomB]

The questions you have posed are good ones, however, you are mixing dynamics of two largely different pools when you start your comment using small, part-time dealers as an example and then end the comment with larger, full-time dealers.

 

My experience, as a full-time collector who has a real job but who also takes the occassional table on the weekends is that I will buy coins that are nice only. This means that I often pay over Greysheet for the pieces I buy, but that I also only sell these coins over Greysheet. If a coin does not move, I don't worry about it because I like the coin and I don't need to turn it over in order to generate income. Many similar collector/dealers follow the same philosophy but they extend it to include buying anything that they can make money on, regardless of type. Some friends of mine don't do anything with modern proof sets, but if a member of the public comes to the table with 50 modern proof sets and wants to sell them all immediately then my friends will buy them at 10% back of Greysheet and will move them an hour later to dealers who specialize in this material at bid.

 

These type of transactions can generate $100 or more in an hour or so simply by knowing who to bring the coins to. This is how much of the dealer to dealer business is done. As for me, I have a following of folks who come look for me if they want superbly toned coins or original type. Consequently, other dealers come to me when they buy this kind of material. In these cases the dealer acts as a conduit to move the product from the seller to the dealer who will have the largest audience for the material.