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Do coin shops have a future?

In the past week, I have visited multiple coin shops in Michigan and in the Dallas/Fort Worth area. Then I talked with even more dealers at the Texas Numismatic Association show. A theme that often came up is what will be the future for traditional brick-and-mortar coin shops.

A coin store can serve a niche market in coin collecting - say, by focusing on Seated Liberty coinage - and expand both its customer base and national presence.

A coin store can serve a niche market in coin collecting – say, by focusing on Seated Liberty coinage – and expand both its customer base and national presence.

Going back to the 1960s and 1970s, it was not unusual for a coin shop to be humming on weekends, especially with visits by children. Then, even before the advent of the Internet the number of children shopping at coin shops fell sharply over the decades. For a time, coin shops that also handled sports cards drew in young customers, but even that market has diminished.

The decline of in-store traffic continued when digital photography and scanners made it possible to post high-resolution pictures of merchandise offered for sale on the Internet.  The Internet also brought two other kinds of competition to the brick-and-mortar coin dealers. First, the United States Mint and other world Mints could be easily found online so that purchasers could purchase directly from the source rather from a local dealer.  Second, the development of online auction sites made it possible for just about anyone to post coins and paper money for sale to a global audience, cutting out the brick-and-mortar coin shop middleman.

The expansion of online competition for once loyal customers of local coin shops squeezed profit margins all around.  Sales of expensive coin supplies such as large catalogs have declined at coin shops as 1) online sellers discount prices by more than the shipping costs, and 2) general book stores have expanded their selection of numismatic reference books.

Fifty years ago, a high percentage of coin shops also handled stamps.  Unfortunately, the philatelic hobby started to decline right after the 1980 market peak. Existing collectors have been dying and are not being replaced by today’s youngsters who prefer playing video games. Brick-and-mortar stamp shops have almost all disappeared over the past 35 years.

Last week I heard comments ranging all across the board. One dealer pretty much said that coin shops were doomed to disappear in the not-too-distant future.  Others said that they were holding steady because of the online sales volume they had developed. There was basic agreement that the number of children numismatists had declined significantly from the days when many dealers were themselves children. A couple dealers were in the process of moving, or had recently relocated to larger quarters because of growing volume.

In general, it seems that the business model of a coin shop that serves only walk-in traffic and only deals in numismatic items and precious metals bullion will no longer work in any location other than the most populous cities. So, what can dealers with brick-and-mortar coin shops in the rest of the country do to survive and maybe even thrive? Here are some suggestions.

Extend your market. If you do not already deal with customers outside your local market, consider developing a regional or national presence. This can be easier to do if you specialize in some market niche. Serve customers online, by phone, or by any means you can.

Expand the products that you buy and sell. If you don’t already, consider purchasing precious metal scrap jewelry from the public. Coin dealers generally can outbid jewelers, pawnshops, and second-hand stores and still make a higher profit margin than on bullion-priced products or many numismatic items.

Start trading foreign currency exchange. Five years ago, American Express pretty much stopped supplying banks and credit unions with foreign exchange, so there is much less competition for that niche. My company stocks about a dozen currencies plus euros for immediate delivery and will purchase about 60. This is not a high profit margin line, but we have found that banks and credit unions (as well as some travel agencies) are delighted to direct customers our way when they don’t provide this service.  As a bonus, it gets more traffic into your shop where customers then can see what else you might handle.

There are a variety of collectibles you might buy and sell, depending on your in-house expertise. Many coin shops are more like antique stores that have a small coin section. If you want to emphasize the numismatic and precious metals operations, here are some collectibles that don’t take up much space:  postcards (the older the better), financial documents (especially from your local area), historic documents, autographs, selected sports memorabilia (the older the better), refurbished or “estate” jewelry, military collectibles, books and a lot more. There are other categories you can consider if you don’t mind devoting the space.

Beyond the kinds of merchandise you buy and sell, great customer service makes a huge difference in long-term success. Did you know that there are some coin dealers who try to avoid working with young collectors as being too much trouble? A successful coin shop will provide the general public a wealth of reference information at no charge in order to earn the contacts that result in worthwhile transactions.

Remember, as far as potential customers go, there are no dumb questions. If you want to think about it so that you better understand why you welcome such inquiries, consider that you have to attract all contacts so that you receive the ones that are valuable. If you have customers in your store who might have an assortment of little or no value – be aware that they showed intelligence by seeking an expert to help them evaluate what they have – and that they picked you as the go-to expert. In other words, such customers are smart people. If you respect and appreciate their judgment, the word will get around that your coin shop is a good place to patronize.

Patrick A. Heller was the American Numismatic Association 2012 Harry Forman Numismatic Dealer of the Year Award winner.  He is the owner emeritus and communications officer of Liberty Coin Service in Lansing, Mich., and writes “Liberty’s Outlook,” a monthly newsletter on rare coins and precious metals subjects. Past newsletter issues can be viewed at http://www.libertycoinservice.com. Other commentaries are available at Coin Week (http://www.coinweek.com). He also writes a bi-monthly column on collectibles for “The Greater Lansing Business Monthly” (http://www.lansingbusinessmonthly.com/articles/department-columns). His Numismatic Literary Guild award-winning radio show “Things You ‘Know’ That Just Aren’t So, And Important News You Need To Know” can be heard at 8:45 a.m. Wednesday and Friday mornings on 1320-AM WILS in Lansing (which streams live and becomes part of the audio and text archives posted at http://www.1320wils.com).

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4 Responses to Do coin shops have a future?

  1. nextel9 says:

    Did you ask actual individual collectors or just coin dealers? Just like a coin, there are two sides.
    You stated one important point, some dealers dont want to deal with children. Which supports your thesis in the 2nd paragraph.
    Lets also look at some timeline comparisons for the dates you state, 60’s and 70’s. It wasnt until 1964 that owning bullion(except some collector coins and jewerly) the Gold Reserve Act was relaxed. Up till that point, and into the 1970’s and 1980’s; 90% silver coins were readily available in circulation. Now they have been hoarded out of circulation, which takes the “family fun” out of searching through coin rolls with your kids. You have to go to a dealer.

    Gray Sheet started publication in 1963. Which is now the sheet every dealer throws in your face when you ask for a price on a coin. Even at a coin show, when you go to think maybe you can get a deal.
    It pretty much makes the Red Book(since 1947) worthless as the Grey sheet prices change weekly.
    So how does an individual collector know what the real value is? Or what its going to be next week, a year from now?? Why am I paying grey sheet prices(or more) at a coin show? Answer, I dont. I leave.

    Dealer Hoarding has attributed to artificially inflated prices. You seek a 1996 Silver Eagle. They made 3 million of them. But a dealer will have 15 of them and want $80/ea, at a time when silver is below $17/oz, for a coin that was sold as bullion, not as a collector coin. Modern coins are the most overinflated item at a dealer. Because they each buy 100’s of them, causing the US MINT to sell out in hours online. Then, God forbid the Mint makes a strike mistake and now thats called an error and that nickel is now all of a sudden worth hundreds of dollars? It looks like crap, worse than bag marks. How do you display something you need a flipping microscope and trifocals to see? Then just shove it in the safe in fear of theft. Collectors display, hoarders hide. There is a difference.

    More and more documented events about actual dealers getting and/or distributing counterfeit coins(whether or not intentional), including known error coins(because they made millions of them) will scare away those seeking those low mintage( dont dare say rare, 10 items produced is rare, not ones in the 10’s of thousands to millions produced). So you want to pay $80 for a 1996 silver eagle that just might end up being a fake? I dont think so. Dealer will give 70-90% bullion value, despite the year, when you sell it anyways. Its not an investment.

    Dealers really have to take a long hard look in the mirror to wonder why less people, especially young people are not coming through their door. For modern coins, I almost only buy from the US mint, and bullion from APMEX directly. Mainly because of the attitude, lack of professionalism and over inflation of prices of local coin dealers, in addition to rise of distribution of counterfeits.

    Dealers are the reason the youth are almost extinct. Why? Because the baby boomers hoarded the daylights out of the coins, left their offspring’s generation with nothing to search for in standard circulation, and then it trickles down to their offspring. Look around at your next coin show. How many dealers are in their 20’s and 30’s(or even are women)? Huge generation gap. Cant blame that on this generations youth of interest in video games and social media. That just shows the generation gap thinking of blaming everyone else. My kids like to collect. But they wont go to the coin shops without me, in fear of being ripped off or being ignored by the dealers. They prefer not to go see some grumpy old man with missing teeth, untucked shirt, that hasnt showered in a month. My wife wont go with me, she finds most dealers appalling.
    Watched plenty of them really rip off women(and widows) selling off coins left to them as inheritance.
    Mirror Mirror, on the wall….

  2. kieferonline says:

    I fully agree with nextel9’s comments. I’m in my lower 30s, and still like reading about coins, but have been turned off to buying coins lately because of some experiences with slippery dealers at coin shows. Many veteran collectors may vehemently disagree with me, but after going to about 20 coin shows, I started to feel the all the value and fun of coin discovery has already been found by others and priced (marked up) accordingly. What’s the fun of buying a super expensive slabbed rare coin? I’m sure it’s fun for the dealer to make profits, but for the buyer? I found myself pondering about whether all the fun had been had by a previous generation (now dealers), and there’s not much left to be had by the youngsters (buyers).

    I also agree that coins with microscopic errors are personally not that fun. I can’t seem to convey the significance of such a finding to my non-collecting friends and family—who don’t really enjoy wearing loupes anyway. People’s interests and understanding lie within a certain physical scale—seen from three inches away to three feet away. It’s hard to believe that the minutiae of microscopic errors will be of much interest to anyone studying our culture 100 or 500 years in the future.

  3. keaxk21 says:

    I collect coins that are rare, that have intrinsic value. US coins are grossly overpriced, as are some other countries like Russia. I find gold and silver European coins from the Middle Ages and the Renaissance period certified in high grades by NGC and PCGS that cost the same or less than a “rare” US nickel, quarter or dollar coin from the late 1800s! Gold Dutch or German ducat from year 1560 (NGC AU-53) costs under a $1000, while 1889 Russian gold 5 ruble coin in the same grade is selling for over a $1000. In my opinion, there are some really huge distortions in the market when it comes to value of coins. Dealers are selling “rare” silver bullion coins with mintages in millions and even “rare” silver bars for a lot more than the value of silver in them. No wonder people are staying away! Find value, for example – 300+ year old hammered coins that are unique (no two are exactly alike!) works of art, with rarity, eye appeal, certification in high grades (so you don’t buy fakes that are flooding the market) and enjoy it, and (unless there is a local dealer that can sell you something like that and not rip you off) do not overpay! I help people all over the World find rare gems that they and their families can cherish for generations, that have historical significance and beauty. And I don’t need a store for this.

  4. barefootcoins says:

    I live in Portland, Oregon and have recently taken to talking to the few coin shops that are left in order to find out what happened to the coin collecting industry. Everything you highlight in your article seems spot on. But I would also highlight that much of what nextel9 highlights is also correct. There are a lot of old, grumpy men who dominate the business right now. Its not like it was when I was a teenager (now early 40s). My wife recently went to buy a gift for me at a local coin shop. Without bragging, my wife is a very attractive lady and one of the nicest people I have ever met. She got treated like crap and they overcharged her. I have brought my kids to coin shops and in only one of those shops were they greeted with joy and excitement.

    The bottom line, in my opinion, is that its time for the industry to reinvent itself. I think the industry has gotten too focused on high end slabbed coins and anything that can garner $100 or more price tags in the hopes of creating sustainable profit. In essence, the awe and wonder of coin collecting seems to have vanished. But, ironically, beautiful affordable coins have not.

    The problem is that mid range and lower end coins are not featured anymore and are in fact treated with disdain or even outright derision. Call me sentimental but its hard to see bags and bags of “junk” silver being sold and seeing so many beautiful coins in those bags treated with little respect. True, they are not slabbable or worth a lot by today’s slab crazy market. But, if you stop and look at them its hard not to see history, art and beauty. In essence, they carry all the things that got us all collecting.

    The problem is that there are very few focused on the “average” collector for whom lower end coins really make sense. When is the last time you saw a dealer pull out a lower end walking liberty or franklin half dollar and get excited. They don’t and instead they toss the coin in the “junk” pile. With wages being what they are these days its hard to see how the coin collecting industry can survive without focusing on much lower price points. Getting the volume of customers at that lower price point is going to require a return to valuing all coins, not just the high end slabbed kind. Through creating that excitement and value I think we can turn on a whole new generation of collectors.

    The punch line: Get lots of people excited about the joy of collecting lower grade coins and it becomes much more likely that many more people will be coming into your brick and mortar store along with their kids. In that scenario everyone wins!

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