The Coin Dealer
One of the nice things about being a coin dealer is that the profession can be entered on several levels. You can be a part-time dealer, a vest pocket dealer, or a full-time dealer. Some coin stores hire employees, but you must first have a level of expertise before most will take an interest in you. Before you consider coins as a business, take the following into consideration.
Focusing on Pleasure or Profit
There is a difference between participating in a hobby and turning it into a profession. You are in the hobby for recreation, but you enter the same activity as a profession with the goal of making money. But of course, keep in mind there is no get-rich-quick scheme in coin collecting, not unless you are planning to go to jail later!
The business of coins is different from the hobby of coins. Profit is the primary objective in the business. Turnover is the key. You have merchandise to sell, so you can't afford to fall in love with it. You can't add the inventory to your own private collection. If you can't separate the hobby from the business, don't go into numismatics as a profession.
You can derive enjoyment from being in coins as a business, but the excitement is in making deals and handling many desirable coins, but not in keeping them permanently. Let the collector have his own private museum. A coin dealer whose inventory becomes a museum is going to go broke!
Buying Is the Key
The very first thing new coin dealers must understand is that selling inventory is not that challenging. There are many venues through which coins (and bank notes) can be sold at a reasonable pace, but this isn't shoe sales. When a coin is sold, you can't telephone a manufacturer to order another truck load. Buying is the key to success in this business. But of course, that's buying for the right price so you can realize a reasonable profit later.
You have to establish price levels at which you are willing to buy, and you must stick to these prices. If you start buying at too high a level, your profit margins will suffer. But at the same time if you start buying too low, your prices won't be competitive to what other dealers will pay.
There are many different ways to purchase inventory. Some dealers advertise locally or in hobby publications that they buy coins. Other dealers offer appraisals, hoping to have the opportunity to buy what they have appraised.
Another way to purchase inventory is to visit coin shows, buying at wholesale prices from other dealers or from the public if you rent table space on the bourse. This is a very competitive but challenging way to do business. Everyone at the show is competing, doing the same thing with similar merchandise. If your prices are not competitive, people will go elsewhere with what they want to sell. You will also need a good line of credit or deep pockets to do sufficient business to make it worth your effort.
Many new coin dealers begin their business using their own collections as their initial inventory. Without a plan to purchase additional inventory, these businesses quickly fold once the initial merchandise is sold.
This is why the entry-level coin dealer must first decide the level of his participation in the business of coins. If you do not have the time or money to support this business full time, you may want to consider either buying and selling by visiting dealers with rented table space at conventions, becoming a part-time or weekend dealer, or working for someone else.
There is always some new, more imaginative way to find and purchase collectible coins, but without some way to continuously restock your inventory you will not have a business. You quickly learn the true meaning of the word “rare” when you sell a rare coin and try to replace it with another.
Museums and collectors keep their coins. Dealers do not. Like any other retail business, the velocity of turnover of the coin dealer's merchandise is the key to success. Profit margins are typically very narrow in the coin business, making the turnover even more important.
There is a common misconception that coin dealers buy for ridiculously low prices, then sell for tremendous profits. There is always a good deal out there somewhere where more profit is possible, but any honest coin dealer will let the sellers know they have valuable coins and will pay them fair wholesale prices. Dealers who are not honest with their clients risk losing their reputations and opportunities to do business once word spreads about their dealings.
A profit margin of 5 to 15 percent may not sound like much, but if you can turn over your merchandise—in any business—several times a year you will likely make a very good living. The coin business is no different.
Coin dealers understand how to turn over merchandise quickly and where to sell it quickly if need be. Once coins are purchased the dealer must decide which coins are worth the time and effort to resell to collectors, and which coins should be sold for their scrap or intrinsic metal value. It takes time and effort to prepare something for the retail market, so sometimes it's better to sell coins wholesale, or to a precious metals dealer.
As an example, there are no rare dates in the silver content Roosevelt dime series of 1946 to 1964. If someone sells a coin dealer a complete date and mint mark set, the labor to assemble the set has already been committed. The set can be purchased and sold intact. However, if someone sells a coin dealer a bag of miscellaneous silver Roosevelt dimes, the coins will likely be relegated to the melting pot at a precious metal establishment or they will be added to a silver dime bag that will be traded as a commodity. It simply isn't worth the labor and time to sort through the dimes to assemble more sets for retail purposes. The cost of labor is simply too high.
Increasing Your Knowledge
The University of Tubingen in Germany has a numismatic program, but there is no such educational system in the United States. Dealers learn about the coin trade by reading, collecting, and gathering experience. You can attend educational seminars at many major coin conventions, the annual summer seminars at the American Numismatic Association in Colorado Springs, Colorado, or forums held periodically at the American Numismatic Society in New York.
There is an old saying, “first the book, then the coin.” A surprising number of serious collectors have never invested in the books they should have in their libraries about what they are collecting. This is amazing considering that without this knowledge they are at the mercy of the person from whom they are buying and to whom they may later want to resell.
The best way to learn about collector coins is to purchase some, then resell them to judge your skill and knowledge. Always begin with inexpensive coins, graduating to the more expensive coins once you become proficient.
Do not assume you will deal only in very rare coins unless you are prepared to spend a lot of money on inventory. Common material sells as well. You will need knowledge of both, but above all you will need to learn to grade accurately.
You need to learn how to authenticate and grade coins before you become a coin dealer. Although there are third-party authentication and grading services, the vast majority of the coins (and bank notes) you will encounter will not be encapsulated by these services. You may have to authenticate and determine the grade on coins on short notice. You will also need to know which coins are more valuable than others and learn what a fair market value for each item or set of coins may be. This may sound daunting, but while it's true that there will always be something new in the coin business, a surprising number of transactions may be repetitive.
Getting into the Show Circuit
One of the major reasons coin dealers can turn over their inventory at a reasonable velocity is the coin show. There are local and regional coin shows virtually every weekend of the year, with larger conventions periodically as well. One thing coin dealers learn to do is travel, both to buy and to sell.
Collectors attend coin shows, but not usually in the great numbers that are desirable in order to do a meaningful retail business. Many collectors attending shows have only modest amounts to spend, but it can consume a lot of a dealer's time in the process. What the average collector doesn't appreciate is that dealers attend shows to maximize what they can sell. They are willing to spend time with a collector of some consequence, but they can't afford to spend inordinate amounts of time with collectors who are there more for entertainment than to spend money.
Dealers make most of their money at coin shows by selling inventory at discounted prices to other dealers. These other dealers may want this inventory because they know they have customers at home for the merchandise, or dealers may feel they can add value to their inventories by buying large amounts of merchandise at reasonable prices.
It takes time to get ready for a coin show. Merchandise to be taken to a show must be identified, graded, priced, and packaged. It must then be secured, and at the show it must be displayed.
A dealer attends a coin show to make money, not to entertain the public. Collectors not prepared to spend money on the bourse should expect dealers to concentrate on paying customers.
Many shows have a period at the beginning of the event that is for dealers only. This is the best time for dealers to engage each other over stock prior to the general public entering the show. Once the public enters the show, some dealers concentrate on the collectors, while other dealers continue to trade primarily with other dealers or combine the two depending on the foot traffic or lack of it.
Shows are competitive. Everybody has similar merchandise to sell, and collectors have limited funds with which to buy. It takes skill, showmanship, and an attractively display of merchandise to attract buying customers, while sorting them out from the tire kickers who are wasting their time.
Dealers typically guarantee the authenticity and condition of what they sell, though they often require coins or notes to be returned unsealed in the packaging in which it had been shipped. By insisting on this provision, the dealer protects himself from clients who mishandle or switch merchandise.
Considering Mail Order
One major reason some dealers attend the show bourse is to stock up on coins for their mail order list. A traditional way of doing business is offering a fixed price list to customers by mail. Potential new coin dealers should be prepared to build a mailing list of their own. This will take time and money. You can purchase lists, but the reliability of purchased lists is often questionable.
Once a dealer has established a mailing list (or similarly a Web site), the dealer must find sufficient merchandise to offer on a regularly scheduled listing. Then all of the merchandise must be fully described, fairly priced, and (ideally) illustrated. Mail order business can be very profitable, but it involves significant overhead. You must consider the cost of mailing, printing, imaging inventory, and cataloging.
Boosting Over-the-Counter Sales
The traditional way to buy and sell coins is over the counter in a store. This was a typical scenario for many years, but in more recent history it is becoming a thing of the past due to ever-increasing overhead. Today most coin stores are no longer there to sell coins, but to buy them. The major function of the storefront is to encourage people to bring in their coins and bank notes to dispose of them. The dealer will then sell most of them at coin shows, through a mail order list, at auctions, or via the Internet.
There are some imaginative ways to attract business. Some dealers hold discovery days on which they offer free appraisals (in hopes of buying what they appraise), others invite a coin club to meet at their facility, and still others hold small auctions at their establishments. This is marketing. What draws people to your shop is only limited to your imagination.
Dealers make some over-the-counter sales at local coin shops, but the same problem exists as when selling directly to the public at a coin show. How much time can a dealer afford to invest in a client if that client is not going to spend very much money? A collector who enters a store to casually browse will likely purchase very little but will require much supervision, while another collector who comes in with a specific list of what he wants will consume less time and will likely spend more money.