How Do Dealers Make Money?

Dealers make money on the percentage. They buy coins at X% under retail and then sell them at retail. I think the percentage between buy and sell is around 15% or so.
But they also deal in volume, so for instance, they are not paying $30 to get a single coin graded. They are paying much less, maybe just a few dollars to get lots of coins all graded at once.
For instance, let's say they pay around $30 to the mint for a coin, then have it graded for $6 and sell it for $100 plus $7 postage, insurance and handling. They made somewhere around double their investment on that one.

Okay, it's starting to make sense. Didn't realize such a discount existed for coin grading service. Have time for another question?
Vince

I would also like to point out that dealers don't make a very good profit on bullion or modern coinage. Buying from the Mint and then reselling (with or without grading) is a gamble. Some sets/series will jump in value for a little while and then drop; some will actually drop in value within a very short time without any increase.

In order to make money in coins, a dealer needs to constantly educate him-/herself on as many series as possible, watch the value trends, and buy wisely.

I have seen quite a few people who just tried to purchase some coins and sell them for the same amount they bought them for. This would be fine except that means that the time that went into it was worthless and, since most of these people have then attempted to sell on ebay, they actually lost money because of the fees. Many people don't even take that into consideration.

Spend a lot of time educating yourself. This site is a great place to start, purchase some books, watch auction prices on Heritage and ebay. If you can work part-time in a coin shop, that would be great. No better way to learn than hands-on experience.

That's some great advice. Thanks
VINCENT

Prethen, I agree 100 % with the comment on Bullion, it should not be graded and surely not slabbed, just another way for dealers to make $$$$ Then again if there are buyers what the hell. PT Barnum was right.

Tony

I think that many collectors rely on the TPG's because they don't know how to grade themselves and don't feel that they could learn. To be honest, I've looked at coins that were graded by the top TPG's and have simply disagreed with the grade. They all use different standards to grade by and, for the most part, I've seen a terrible lack of consistency. ANACS is the exception to that. Any coin that I've sent to them for grading has come back within 1 point (and mostly exactly) what I felt the grade to be.

There was a time before the TPG's that collectors graded for themselves. The Red Book and other pocket coin books had guidelines in them for how to grade. This was all prior to the Sheldon scale. I have to admit that the Sheldon scale is a good idea, however the actual standards used are not global. As a result, I do not feel that it is ever worthwhile to pay for a TPG graded 70 coin. It is also rare that I feel it to be worth having a coin graded by a TPG.

The exception to this rule would be authentication. It is helpful to have a rare or often counterfeited coin in a TPG slab as the authenticity is guaranteed at that point. I feel that having modern coins graded is pretty much a waste of money.

Keep in mind that this is my opinion and is based on my experience as a collector and a seller. What may be true for me may not be for others.

as far as buying by dealers goes, I was told to check the "gray sheets" to see what dealers pay, but can't remember the site they were on. When ever I am selling something, like a coin to a coin dealer, my suspicions always go up when the first question is "What are you asking for it?" I feel that my lack of expertise is about to cost me, if I give too low a price the dealer jumps on it and makes a big profit at my expense. Some dealers will actually look at the coin, check the value and make you an offer. I prefer someone who will tell me what the coin is worth and then offer me 20% less to save me the trouble of photo, listings, etc., etc. I realize the dealer has to make a profit to stay in business and that is the American Way, but good dealers should be consistent in their dealings with All customers. That means the profit is in older coins, not recent issues unless you can get some (in my opinion) bogus upgrade....by that I mean why should I pay tremendous mark up from a MS65 to a MS67 when only the person who graded it can tell the difference? Maybe I am just cynical. basicbob101

I have to admire any small business owner who can legally, morally and ethically make a living in today's economic climate. Think of the money most coin dealers have tied up in stock...all in the hopes that someone will walk through the door who wants that particular coin! And trying to keep a selection of relatively common dates and grades (for the novice and/or less well-heeled customers)along with high grade items for the more experienced collector must be daunting. They have to pay the rent on the building, hire some help (preferably honest and knowledgeable) and work long hours.

The internet provides potential added customer base, but also a healthy dose of competition. And finding a way to keep your online stock updated, etc. is time-consuming and expensive, too.

My hat is off to them!