Auction Representation and the New Consortium

[wayneherndon]

I've not really given my thoughts on the Consortium and give all the threads on the topic, I'm sure most of you were grateful for that. However, my thinking around it has been from a different perspective than I've seen discussed here or ATS so I thought I'd go ahead and post it. Besides, Greg is counting to make sure I get in my four posts per month.

 

While the full membership of the Consortium is not yet public, the numismatic professionals so far known to be involved include John Albanese, Laura Sperber, Doug Winter and Mark Feld. IMO, all four belong in any list of top auction representatives. All are great professionals to screen coins for buyers be it in the auction or private treaty context.

 

To date, such representation services are relatively limited in the scheme of things numismatic. Such services are arranged around individual coins one at a time and one-on-one between the potential buyer and the reviewing dealer. As a result, they take a decent chunk of the professional's time to enter into the arrangement, review the coin, discuss it with the client, (if advised) execute the bidding, pay for and pick up the coin, collect funds from the buyer, and ship the coin. The piece of most value to most clients is the review of the coin (although in certain situations professional bidding strategy can also be helpful) yet this makes up only a small part (perhaps as little as a few seconds and a few minutes at most) of the whole process. This is the of the process that requires the talent of an advanced numismistist. The rest is predominately administrative.

 

While I believe Consortium founders had other motives in mind when they began organization activities, the business mind in me sees this as a neat way to mass market these professionals' screening services. The Consortium allows these talented individuals to more quickly review coins in more ideal conditions than allowed at lot viewing. It also eliminates the time consuming interaction with the customers. Together, this allows the group to see more coins and lower the overall fee per coin. In effect, they are separating out the process of reviewing the coins, "packaging" it separately and marketing it to consumers without the time consuming adminstrative procedures involved in representation. In this manner, these professionals better leverage their skills than through the traditional representation process.

 

In effect, the Consortium's business plan bottles up these services and mass produces them for more everyday collectors who would not ordinarily engage representation (be it for price, unfamiliarity with the process, lack of relationship with a trusted dealer, etc.). Many potential buyers will be happy to have the benefit of these professionals review at a much lower price albeit at the expense of interacting with the dealer. Sure, there will still be many collectors who want the personal attention of representation and will pay accordingly. For the most part, these are the collectors already using representation services. Thus, I predict very little impact on these services.

 

The interesting twist here is that the services of the Consortium will be sought and paid for by sellers. Thus, the business plan depends upon being able to convince potential sellers that their PQ coins will sell for more (or will sell more quickly) if they pay to have them pre-screened for the buyers. While this is a change from they way representation pre-screening services have been marketed, it is from the same perspective as third party grading. Thus, I don't see this as a huge hurdle.

 

I don't mean to imply that any of the parties involved see this as a stand alone business and seek to increase their revenue from coin screening. I'm sure each makes some decent money with low risk from screening coins and that said revenue will increase with their involvement in the Consortium. However, each offers screening services as an adjunct service in their dealership. By being full service they build stronger relationships with customers which in turn means more coin sales. I'm sure that will continue to be the case for each of them. In other words I'm sure they won't be giving up their "day jobs" but generally see their involvement in the Consortium as a positive for their coin businesses.

 

WH

[Tradedollarnut]

I don't foresee most collectors buying coins sight unseen. Auction representation will still be desired in most cases.

[wayneherndon]

1) The Consoritium Sticker Will Not Replace Auction Representation.

 

I agree with you. That's why I wrote:

 

"there will still be many collectors who want the personal attention of representation and will pay accordingly. For the most part, these are the collectors already using representation services. Thus, I predict very little impact on these services."

 

 

2) The Consortium Sticker Will Not Create A Wholesale Sight Unseen Market in Stickered Coins

 

While there will no doubt be higher sight unseen wholesale bids for stickered coins by the involved firms, I still doubt that many stickered coins will change hands sight unseen among dealers. Sight unseen bids for stickered coins will migrate toward the value for the lowest, just-barely-got-the-sticker coins. Most stickered coins will be nicer than the threshold and the dealer owners will seek higher levels for them. Pretty, original coins do not need a sight unseen market (and that is especially true with wholesale).

 

 

3) The Primary Group Relying on The Sticker Will Be Investors and Retail Buyers

 

IMO, the primary group that will be rely most on the stickered coins will be retail collector and investor buyers who are either buying the coin sight unseen or sight seen via internet, phone, mail order, etc. (with a return privilege). The sticker will either substitute for their own grading abilities where they feel they are lacking, be seen as a way to reduce the likelihood of a return, a way to mitigate future market risk, and/or as a way to increase liquidity.

 

In fact, I believe "the sticker" is more likely to increase sight unseen retail sales than sight unseen wholesale sales. More retail buyers will be willing to buy without seeing the coin if it has the sticker than if it doesn't.

 

FWIW, this is not intended as a criticism of CAC. It is just commentary on who I think will put the most reliance on the sticker. I have no idea if the concept will work. But if it does, I do believe it will be a benefit to the hobby for this group to have access to these experts' opinions on potential purchases through the sticker program.

 

WH

[carson city]

Well stated Wayne. This CAC thing is not for Collectors !

[wayneherndon]

Actually, Carson City, IMO both investors and casual collectors (which is most collectors) will rely on the sticker and (assuming CAC does a good job and sticks to a published standard) benefit from it. It won't be as useful, however, for the very serious collector who is either comfortable with his/her own skills and/or has a trusted dealer to screen coins. I also don't see it developing into a wholesale sight unseen trading network.

 

WH

[MarkFeld]

Actually, Carson City, IMO both investors and casual collectors (which is most collectors) will rely on the sticker and (assuming CAC does a good job and sticks to a published standard) benefit from it. It won't be as useful, however, for the very serious collector who is either comfortable with his/her own skills and/or has a trusted dealer to screen coins. I also don't see it developing into a wholesale sight unseen trading network.

 

WH

Wayne, I'm not all all surprised that 1) someone tried to put words into your mouth in order to fit his agenda and 2) that you caught it and politely called him on it.

[Stanley]

Actually, Carson City, IMO both investors and casual collectors (which is most collectors) will rely on the sticker and (assuming CAC does a good job and sticks to a published standard) benefit from it. It won't be as useful, however, for the very serious collector who is either comfortable with his/her own skills and/or has a trusted dealer to screen coins. I also don't see it developing into a wholesale sight unseen trading network.

 

WH

Wayne, I'm not all all surprised that 1) someone tried to put words into your mouth in order to fit his agenda and 2) that you caught it and politely called him on it.

I agree and would add if I were CC I would attempt to add some credibility to my replies by revealing my identity at least to some degree.

 

CC are you a collector, ebay seller, small dealer, etc?

It seems you are taking this a bit hard.

 

[MikeInFL]

A very interesting and well thought-out post. Thanks, Wayne, for sharing your perspective on things.

 

In large part, I find myself agreeing with your logic, but you did get me thinking about a few scenarios....

 

I think that the mass-marketing of prescreened coins could actually be counterproductive for the dealers providing auction representation -- after all, if a coin that is stickered has already been approved by the best-of-the-best, why is a second approval needed, particularly if the sticker means a guarantee bid price and the second approval doesn't? Could these dealers be shooting themselves in the proverbial foot by providing these services at a much lower price point albeit with lower dealer risk?

 

Also, I see Heritage, Stacks, eBay, and other online sight-unseen bidding venues being a bigger winner with stronger retail bidding from those with the newfound confidence in getting a quality coin. [edited to add, looks like you already covered this in one of your responses. ]

 

Your thoughts, along with those of whomever cares to comment, would be appreciated...Mike

[MarkFeld]

I think that the mass-marketing of prescreened coins could actually be counterproductive for the dealers providing auction representation -- after all, if a coin that is stickered has already been approved by the best-of-the-best, why is a second approval needed, particularly if the sticker means a guarantee bid price and the second approval doesn't? Could these dealers be shooting themselves in the proverbial foot by providing these services at a much lower price point albeit with lower dealer risk?

 

Mike, I believe that such a scenario is possible, though not likely to occur on an extremely large scale. I feel that way because there are many coins in holders which are accurately graded and perfectly nice, BUT which, for any number of reasons, are not for the tastes of a particular collector. And, even if there are strong sight-unseen bids posted by dealers, I at least hope that collectors will buy on a sight-seen basis.

[ziggy29]

It won't be as useful, however, for the very serious collector who is either comfortable with his/her own skills and/or has a trusted dealer to screen coins.

Right. And as someone who has invested a lot of time and money in becoming proficient at evaluating coins, I feel like all this will do is increase the competition for the best stuff because less skilled people with money will feel more comfortable stretching for quality if they trust the people making the quality statement.

 

I'm not for people getting ripped off by bad coins, but the day numismatics isn't more rewarding to people who take the time to read the books, learn to grade, learn to evaluate coins and such is the day when we may see fewer good numismatic educations taking place.