Dealer Profit Margins? Interesting Haggling Exchange!

I am not surprised at these profit margins, with online auctions like ebay, if you look carefully and often you can usually get some pretty good deals on coins, that you can later resell closer to FMV.

I know some dealers that sell online that wont bother listing a coin unless they can make $20-$25 on it because of the time involved to take quality pictures, time involved to write a good description, time involved to pack and ship it, and time involved to process the paperwork for the sale. I honestly don't see that as being unreasonable when you factor in the ebay and Paypal fees.

I didn't read the article but your point is valid trdhrdr. I used to collect sportscards back in the day, and most shops bought around 1/2 of the book value and sold at retail. No one seemed to complain. When people buy groceries, shoes, clothes, other miscellaneous items from different stores, there are double digit or higher markups. Why do people have no problem with that but trash dealers who have markups? I've often made the point that people who work for companies that sell a product or service are getting paychecks because there is profit in the items/services that their companies sell. Where's the outrage with that?

There may be no middle man, but they still have overhead. After overhead is factored in, how much of that 50% will they net out? Keep in mind that for a sole proprietorship or partnership, the net profit is what the owner(s) rely on as their income to put food on their table, keep a roof over their head, etc.

I am going to go out on a limb and guess that most people on this forum have never been 100% self employed, so dont fully understand the other side of the business. Is that a fair assesment?

I know that many retail products are marked up considerably. But I do think it is a fair amount different when you design, engineer, manufacture a product, market it, etc. versus coin dealers who are only a middle man entirely. They don't have design and manufacturing etc. costs like other businesses. And dealers with no B&M shop ( where most now are bullion traders entirely - and I don't think their margins are that high mostly ) don't have a lot of overhead - just a fair amount of capital locked up in their stock.

That they paid 60 didn't factor into my pass, just surprised me that they'd dismiss a chance to make a little off my offer. I once bought a coin listed at 30 for 18 from that same dealer, so the "minimum $20-$25 a coin" standard would seem moot.

Are the local dealers that say they are struggling to make 8% then lying? Or are they being poor businessmen for not demanding 50%+ PM? They seem to lament the trend toward "bullion based trading" in the business. The quick turnover of bullion, buy it one day and sell it the next, is alluring to many B&M shops as opposed to sitting on a coin for days or months possibly. IMO that is why the local shops have little inventory and what they have is mostly low-level stuff and cheapies - so they aren't sitting on a large $ inventory.

I do think many of the locals I talk to that sell at coin shows are retired from some other job, or were forced out early, and then turned a hobby into a way to make a little bread in "retirement". That seems to be a common story among them.

Perhaps unrealistically high PM desires are why ebay is loaded with listings that are 50%-100% above retail.

You never know, he may be using the old saying "I will make up the loss on another coin"...and this may be the coin that he is making up the loss on another coin that he took a loss on. Did that make sense?

Example

Coin A - sold for a loss (to entice a customer)
Coin B (the one in the OP) - dealer will have to sell for more to make up for the loss on coin "A".

A seller's cost structure should be irrelevant. It's the FMV for any particular coin that should come into play when making decisions as a buyer, as well as your personal demand for the coin and level of service provided.

For those of you bringing up the overhead issue, think of this...2 coins shops, A and B, located next to each other. Shop A has a legacy lease, he staffs with local high school kids, paying minimum wage, has natural gas heat, etc. Let's say he needs 20% of each coin's acquisition cost to cover overhead, or a $20 contribution from this coin. For a 25% profit margin, he must sell the coin at $160. Now, he sells the coin to Shop B at cost while getting one from Shop B at cost also. A deal they do from time to time. Shop B pays twice the rent of A, has oil heat, overstaffs, paying $20 an hour and his wife $40 an hour, and counts his personal gas and cable bills as business expenses. With his inefficient and questionable business model, he needs 100% of each coin's acquisition cost to cover "overhead" and must sell at $267 for a 25% profit. Numismedia FMV on the coin is $170. Same coin. Can anybody defend Shop B's pricing? He's just a businessman trying to cover overhead as HE defines it and make a reasonable 25% profit. Or not?

Conversely, would you expect Shop A to sell the coin for $0 or perhaps $27 if he found it on the sidewalk?

The point being, buyers should not accept cost plus pricing arguments as justification for pricing. It's the market that counts.

And BTW, telling you they had $60 in it was a mistake, IMO. Bad business. Why do you think pawn shops always ask how much you paid for things? It's so they can possibly use it as leverage to offer a lower amount. And a perceived high demand coin can be listed at a ridiculous price by some sellers while others in a cash flow crunch will sell at cost or below at times. That's why, to me, FMV, my demand for the coin and the level of service provided dictate what I'm willing to pay. If the seller makes 200%, good for him. If he makes nothing, oh well.