Two Ways Successful Dealers Process Stocks

Most American stamp dealers try to do pretty much the same thing to stock their business. They buy collection lots, usually at auction or from wholesale price lists. The way this works, when it is done properly, is to buy a collection and then break it into a number of smaller units that appeal more to collectors trying to fill spaces in their albums. Usually collections are bought in the 10% of catalog range and the component units, when they are sold, sell in the neighborhood of  20%. It’s nice work, if you can get it. This is the model that the overwhelming percentage of Ebay dealers use as their business plan. The problems are obvious—everyone is chasing nicer collections, and the price of them goes up while the selling price of the units that come from that collection remains the same. This squeezes margins.


 Most dealers are very happy with the prices they get for much of the material that they sell the first time it is offered. But if the dealer set no reserve, some of the material sells so cheaply that the overall experience becomes unprofitable. If you control the selling price through reserves you often find selling fees eating up your profit, and you are left with the parts of each lot that are either less desirable or which you overvalued. It is not to say that this method of selling does not often work well, but it does have problems.


The problem at the root of this is that virtually all American stamp dealers see themselves as “break down” people. They buy a large collection and turn it into many smaller units. There are a small number of (mostly German) dealers who do things a bit differently, often with very good results. These dealers see themselves as “re-combiners,” not “break-downers.” Here’s how they work: They buy larger, more general collections, usually in a messier format. They break the collection down by country or area throwing the pages and envelopes in boxes. To this they add other lots for which they do the same thing. Here is why this way of stamp dealing works: Messy stocks and collections can be bought at 5% or less of catalog. Each worldwide collection of this type contains little of interest for the specialized collector of a specific country. But when the, say, French Colonies, of five or ten worldwide collections are combined, there starts to be a good deal of specialty interest. The dealers who work this way see themselves as selling into a different market than do traditional stamp dealers. They understand that specialists are always looking for large specialized groups to play with and sort through in the hopes of finding a needed cancellation or specialty item or just for the fun of looking through a large mass of stamps in an area about which they are fond. And because the group can be sold as a specialty unit, the traditional relationship of sales price to catalog value becomes less exacting (meaning that you are not under as much pressure to keep prices to a lower percentage of catalog).


Stamp dealing in this way is very unusual in the United States and yet quite common in Europe and especially Germany. At the German auctions (at least going back the forty years I have been going to these auctions) there have always been numerous specialty lots sold by country and area and which were made up of pieces of numerous other collections. As a sales method, it can work well. And an American dealer can combine it with what he already does at no additional cost to himself. Every dealer has large amounts of unsold items that his customers have seen, that looks tired, or which may just have had the bad luck to have never attracted the right buyer. Take a group of your unsold and tired stock, recombine it by area (perhaps adding a bit a fresh material), and try offering it in this way. You may be surprised at the results.

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