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A Bit On The Economics Of Being A mineral Dealer
  
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Bob Harman




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PostPosted: Jan 17, 2018 22:24    Post subject: A Bit On The Economics Of Being A mineral Dealer  

For many years I have been interested in the economics of being a dealer in collectibles. Specifically the middle range dealer, neither the high end dealer nor the dealer of predominantly low end collectibles. In the 1950s thru the 1990s I collected stamps so, in the late 1980s I did a small informal and anecdotal "survey" of stamp dealers that I knew. I found that some were poor business people, either just unknowingly losing money at the stamp shows or knew it, but just "couldn't stop" attending and dealing. Those were the days before most online transactions so it was relatively simple to weigh all their expenses against all their sales.

A few years ago, I started trying to do a similar unscientific and anecdotal "study" of mid-level mineral dealers that I knew. The high end dealers and low end dealers were purposely left out. Low end dealers, I did not either know nor had I ever done business with, while the predominantly high end dealers are (for my study at least) in a different category. Before I go on, HAS THERE EVER BEEN A STUDY ON THE ECONOMICS OF BEING A MID-LEVEL MINERAL AND/OR FOSSIL DEALER: EXPENSES VS SALES ETC?

A bit about my approach to all this. I asked 9 Midwest mid-level mineral/fossil dealers, all of whom I had known, if they would answer some economic questions about the shows they attended and their business at the shows. All would be confidential by both each dealer and me. All the dealers were told that they would be privy to my findings and that has now happened. All of the dealers were men. At the start, about 4 years ago, all were over 50 years in age and now several are over 70. Two of the dealers in my "study" at its start retired from dealing so their responses are more limited than the rest. To preempt some of the perennial responders, I fully acknowledge that my simple study may be skewed or inaccurate, but for me, it still was a bit eye opening. This study was only about dealers expenses and sales at shows, having nothing to do with online mineral business.

To start, I asked the 9 dealers about the shows they attended and their expenses. None went to the Tucson show, 3 went to Denver and all attended local and Midwest regional shows. The 2 that ended their dealing went only to local and 1 regional show as they were older from the start. All dealer expenses were the usual ones: travel including food, fuel and lodging and any unexpected like car trouble or health issues. One dealer that was not in the study had both of these unexpected issues one year going to Tucson.
At the show the same expenses of food, fuel, lodging and unexpected were discussed. The bottom line was that basically, to go to a regional show, set up, tear down, eat, stay in a motel (no one stayed in a camper trailer in my study as several pulled trailers with their stock), and put fuel in their vehicle, and perhaps buy more collections or stock for sale all cost a tidy sum. WHATEVER THAT DEALER'S COSTS WERE, HE HAD TO DO BUSINESS OF THAT SAME AMOUNT OR MORE TO MAKE MONEY. SIMPLE ECONOMICS.
Off setting the expenses, each dealer's sales had to beat his expenses to make money by his return home. Again simple economics. Clearly, for nearby or local shows the dealer expenses were quite a bit less than when travel and motel expenses were included. By the end of the "study" several dealers recognized this. Not only were they older, no longer traveling, but only doing a few local shows where their expenses became relatively minimal.

So what did I find? Let me first say that a couple of dealers (3 to be exact) did well. Great but that isn't my current focus. The most interesting thing that I found (and not too unexpected) was that some mid-level mineral dealers, from an economic point of view, were rather rather poor business people. This had also been my finding years ago in the stamp dealer study. I THINK THAT MANY DEALERS IN MID-RANGE COLLECTIBLES MAY BE POOR BUSINESSMEN. For example a dealer would come to a regional show and his total expenses might be about $900 for the several day stay. Then he might do about $800 in total business. They just simply did not keep good records of everything, losing $100 and yet coming back several more years before recognizing that they were simply not making money at that show. Another example might be a dealer with $1000 in expenses and sales of $1200, making just $200 for the show. After I did the study and discussed this with those dealers, they had a better understanding of all this. They are now the older ones that no longer travel, only going to the local shows or just retiring. None of the dealers in the study said they knew they were not making money, but still went to the shows for the "socializing and ambiance". Money did matter to the dealers in my "study"

Let me again preempt other responders that dealers who seem to be better businessmen and recognize early that they are losing money, big time, might not come back to the shows so this might be one reason my "study" might be skewed and not so representative or accurate. It seems that the dealers who lose small amounts at the shows or just barely break even, are the ones that don't recognize their situation. This situation seems to repeat itself for at least several years prior to some dealers understanding their situation. Some long time dealers just can't seem to come to grips with the fact that, for them, it is small time losing game. They don't wish to end their mineral dealerships........... BOB
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Pierre Joubert




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PostPosted: Jan 18, 2018 01:33    Post subject: Re: A Bit On The Economics Of Being A mineral Dealer  

Hi Bob, what an interesting topic! Unless you have endless financial reserves or other forms of income, you will not survive in the mineral business if you are not 100% committed and do not do things right. I am not aware of any handbooks that offer to guide 'would be' mineral dealers.
In SA, we have no regular shows. Dealers are reliant on internet sales or fares. If you have a house, cars to pay off with kids at school or university, you will find it VERY difficult to survive. Dealers here, mostly carry large stock (that they spent a fortune on) with small sales. CHEERS:-)

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PostPosted: Jan 18, 2018 01:55    Post subject: Re: A Bit On The Economics Of Being A mineral Dealer  

Seems to me that the 9 dealers you interviewed were more the "hobby" dealers than "professional" dealers, so I'm not surprised that, as you say, "...for them, it is small time losing game."
The clue is that of the 9, NONE of them regularly attended Tucson! Yes, I know it's "possible" to be a dealer without going to Tucson; one could, I suppose, survive by stocking up at the Denver show, or by mining one's own specimens, or recycling old collections just from ones own region, but it sure gets a lot easier by regularly attending Tucson. Without going to Tucson, a dealer misses access to a large proportion of the primary producers/importers, then he's probably buying too much from middlemen higher up the food chain, and he's missing out on all the information one can pick up from the large numbers of other dealers both foreign and domestic, and the knowledge of current pricing one picks up from seeing what other people are asking for their rocks, and all the important social events at which one meets potential new customers. Most of the "professional" dealers I know, as opposed to the small-time hobbyists, attend every year at least two of the four big international shows (Tucson, Denver, Sainte Marie, and Munich) and many of them attend three or even all four!
So I don't think it's useful (for economic analyses) to divide dealers into high-end, low-end and mid-range groups, but more useful to divide them into those who are professional dealers and those for whom being a dealer is just a hobby and they don't really expect to make money at it.
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Peter Lemkin




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PostPosted: Jan 18, 2018 06:17    Post subject: Re: A Bit On The Economics Of Being A mineral Dealer  

While not surprised at the findings of your small but interesting study, it is my informal sense that even 'dealers' [with the exception of high-end] are as much involved in the excitement of a show as the 'profit' in cash from a show. One also 'earns' friends, contacts, information on what is new/available - and gets stock for some sales between shows [or maybe a few for one's collection] - even before the internet. High-end get the same intangibles, but have much higher investments, and really have to make some of it back, unless they are so well heeled they can lose money and just deduct it from past profits or money they have from other sources. To an extent almost all involved in minerals are a bit 'drugged' with them - and sometimes don't act rationally. I, as a buyer, have sometimes purchased much more than was logical according to my financial status. Most of us are involved in this because we love minerals. Some of us hope to make some money alongside of our love - some do; some do not. For some, it is their only income. For many it is one of two or more income flows. Lastly, I guess people think 'minerals are appreciating and if I get into dire straights, I can always sell my stock and then recoup or at least break even'. Just some thoughts. FWIW.
The mineral insane are not logical - buyers nor sellers ;-)
The few shows I sold at were local shows with very low costs [I'd camp, the entry fee was minimal]. While I made a little money, little was the operative word - but I had a great time and made some great trades - far better than any of the monetary deals I made. The people I met and friends I made, along with directions or even invitations to collecting locations were profits more than any dollar amount could compare with. I, in no way consider myself a 'seller'..although at times I do sell some of my minerals. I'm a collector first, a buyer second [as few are given to me - though some are], and a seller last and only very occasionally.
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Bob Harman




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PostPosted: Jan 18, 2018 08:17    Post subject: Re: A Bit On The Economics Of Being A mineral Dealer  

Thanks for your replies. As to ALFREDO's point, My posting was getting overly long so I had to limit it. My "study" was over about a 9 year period. Starting about 5 years prior to my beginning the "study" 4 years ago. I do know that at least 1 of the dealers attended Tucson prior to the study. I also know that none attended any show in Europe or Asia. Just too expensive for a mid level dealer to consider that. In fact how many mid level American dealers attend these major European shows in the first place? Aren't most of the American dealers attending these European shows those with at least a significant % of their stock in the hi end range?
I will ask everyone about shows they attended prior to the "study" time frame.

Actually "doing well" at any show is a complex set of conditions. I did not address the stock of the dealers. Those with the "right" stock and new stock every year probably do better than those dealers with the "wrong" or "stale" stock. No surprise. At larger shows the placement of the specific dealer probably is strongly correlated with their sales. If the dealer happens to be put in a corner or out of the traffic mainstream, it is a recipe for simply not doing well. Again no big surprise. I should also state that many younger/middle aged dealers have a regular job with family commitments. If a dealer has a regular job in addition to selling minerals, does that make the dealer a "hobby" dealer" rather than a true mineral dealer as ALFREDO suggests?

So again my main point was that some mid level dealers can lose small amounts of money or barely break even for several years prior to realizing that they are not doing so well at the shows they attend. BOB
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Joseph D'Oliveira




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PostPosted: Jan 18, 2018 10:01    Post subject: Re: A Bit On The Economics Of Being A mineral Dealer  

Hi Bob,
As simple as your little study was, I feel it is right on point as far as the conclusions. I am a low to middle end dealer and officially started as a dealer about 10 years ago. From the onset, I realized that even though I planned on using the revenue from my hobby business as a retirement supplement, it was imperative that it generate positive revenue.

I have employed a spread sheet database to track my costs and have a very tight inventory control. At times the level of work required is a bit of a pain, but in the end it generates all the information that I need to run a successful business. Over the years the numbers have dictated a change in inventory methods, types of accommodations, and even the shows that I attend, having dropped a few that were marginal.

In the end there are many non tangible benefits to participating in the hobby as a dealer but it must always be run as a business not a charity.

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PostPosted: Jan 18, 2018 10:57    Post subject: Re: A Bit On The Economics Of Being A mineral Dealer  

"At larger shows the placement of the specific dealer probably is strongly correlated with their sales. If the dealer happens to be put in a corner or out of the traffic mainstream, it is a recipe for simply not doing well."

Bob, I think the placement of mineral dealers in a show has only a very minimal or insignificant effect on sales. Having been at various times in "great" locations by the entrance, and "bad" locations almost in the janitor's broom closet, I notice no great difference in sales. Serious collectors enjoy the hunt; they poke around everywhere, and often do so even before deciding which purchases to make.

On the other hand, your point about location is indeed important for those dealers trying to sell to the general public. If the dealer is trying to sell agate earrings and plastic dinosaurs for kids then, yes, location in high traffic areas will determine success or failure. But for the dealer selling specimens to serious collectors, being in a low-traffic area is no excuse for failure. ;))
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PostPosted: Jan 19, 2018 12:13    Post subject: Re: A Bit On The Economics Of Being A mineral Dealer  

Bob, for what it's worth, from what you described about the Midwestern dealers that you surveyed, I would tend to think that these would more likely be classed as "low-end" rather than "mid-level" dealers; if they mostly just sell at local shows, don't go to Tucson, etc. I could be seeing this wrongly, of course.

But thanks for sharing your observations & insights.
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PostPosted: Jan 19, 2018 13:14    Post subject: Re: A Bit On The Economics Of Being A mineral Dealer  

Pete Modreski wrote:
Bob, for what it's worth, from what you described about the Midwestern dealers that you surveyed, I would tend to think that these would more likely be classed as "low-end" rather than "mid-level" dealers; if they mostly just sell at local shows, don't go to Tucson, etc. I could be seeing this wrongly, of course.

But thanks for sharing your observations & insights.


Interesting topic on its own. What would disqualify/qualify a dealer from/for the higher 2?

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PostPosted: Jan 19, 2018 13:39    Post subject: Re: A Bit On The Economics Of Being A mineral Dealer  

It is all very relative - where one sits on the scale of income. Having in my life started upper-middle class, then became quite wealthy, and then so poor as to be homeless for longer than I care to mention, and then again struggled my way up to lower-middle class [and never lost my mineral collection even when homeless - worth a book on its own, as it weighs about 4 tons], I think I can speak to this a bit - even though I was not a seller but a few times. When I was well off and rubbed elbows with dealers who sold high end specimens, I could see they saw those who sold specimens <only> in the few thousand to few hundred range as low end [if not the lowest end] - while those who sold specimens in that range thought of themselves as mid-range to upper mid range dealers. All is relative - and to a degree pointless to try to make categories and pigeonhole people in them. People tend to associate with others of similar financial status for a variety of reasons - and that level becomes a normal to them from which they are often unaware how skewed it is [up or down] to most others. Now, I'm more impressed by how much mineralogically a dealer knows than the fancy or not fancy prices they put on their minerals. I also don't like snobbism 'what, you can't afford this nice piece priced keystone at only $400,000?' Brothers and Sisters in stone - tear down these 'walls'.
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PostPosted: Jan 19, 2018 15:08    Post subject: Re: A Bit On The Economics Of Being A mineral Dealer  

Well said Peter Lemkin! A high-end dealer will often sell a lower end stone for a higher end price while the lower end dealer will often struggle to sell a higher end specimen.
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bob kerr




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PostPosted: Jan 19, 2018 23:46    Post subject: Re: A Bit On The Economics Of Being A mineral Dealer  

Bob H - I heard a theory many years ago when I attended my first few Tucson Shows - "if all sales taxes were properly collected and all profits on sales were properly declared, Arizona and the US would have no deficits"

The theory is clearly hyperbole, but lets face it, LOTS of cash floats around ALL shows and although Tucson started as mainly a dealer to dealer show it now has as many if not more retailers than wholesalers. I would venture to guess that all of the dealers you interviewed deal pretty much in cash, so "how well they did" has a wide range of possible answers.

It used to be that dealing in cash got one price and paying with a check got another (especially with Chinese, Indian, Russian and Moroccan dealers) - although this is still true to a fairly large extent, my observation is that difference is going away - but still few dealers ask for resale numbers and many only give receipts if asked.

The above is most accurate at the middle or low end of the business (or middle and low VOLUME dealers) - high end dealers (or high volume dealers) are much tighter as all governments know how to "follow the most money". But then again, high end dealers do so much business in the "back room" (frequently equipped with wine and cheese) who know what transpires.

Interesting topic though,
bob
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