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.
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).
This article was originally printed in Numismatic News. >> Subscribe today.
If you like what you've read here, we invite you to visit our online bookstore to learn more about Coins Magazine.
Learn more >>>