RINKER ON COLLECTIBLES — Column #1238 Copyright © Rinker Enterprises, Inc. 2010

Who Makes the Market?

Rich O’Neill e-mailed: “I am 62.  I have attended real auto auctions as a buyer for more than 30 years….I recently acquired approximately 250 Franklin Mint, Danbury Mint, Harley Davidson Motorcycles, 98 percent accompanied by their Styrofoam box.  Although condition varies, most are mint.  Because of the down economy, I am considering establishing an online used auto die-cast dealership that takes trade-ins and is modeled after a real automobile dealership.  I have consulted and served on state and local Boards of Directors in Florida, but I need expert advice.”

Although good ideas abound in the antiques and collectibles field, their practicality often leaves much to be desired.  The truism “if it is too good to be true, it probably is” applies.

New ideas in the antiques and collectibles trade are scarce.  The industry prides itself on reinventing the wheel.  The best approach to success is to copy an idea that already has proven successful.  Given the global nature of the market, there is plenty of opportunity for duplicate approaches.

I have long advocated for the application of standard business practices, such as profit centers, inventory control, and special discount sales, within the antiques and collectibles trade.  Successful dealers treat their business as a business.  Given this, are there outside business models that can be applied to the trade?

Using an auto analogy, the trade has benefited from the creation of the “Antiques Mile” similar to the “Auto Mile.”  The “mile” concept results in the concentration of a half a dozen or more sales venues within a mile to two-mile corridor.  Adamstown, Pennsylvania, is an example.  Antiquing towns, such as Lebanon, Ohio, also qualify.  The assumption is that a buyer who visits the “mile” does so with the intent to buy.  By concentrating sales venues and giving the buyer a large number of choices, he is going to buy something.  The “mile” participants understand that the market has sufficient breadth that everyone on the “mile” gains.

While O’Neill’s proposed used auto die-cast dealership first appears as an ideal component of an “Antique Mile,” it is a concept destined to fail from its inception.  The lack of high-ticket buyers is the reason.

The secondary market for Danbury Mint, Franklin Mint, and other “mint/collector edition” replica die-cast vehicles is minimal.  When sold at auction, these vehicles are usually offered in lots of five or more.  Historically selling at retail prices ranging from $75.00 to $150.00 per vehicle, most sell at auction for less than a dime on the dollar.

Most models appear on eBay on a recurring basis.  Prices realized are a little higher than those achieved at auction.  On a good day, a model will sell for 25 percent of its initial purchase cost.

The market is flooded.  However, this does not mean a model will not sell.  The good news, for what little it is worth, is there is a price at which each model will sell.  It may take several listings to establish the floor, but it eventually will be set.

Who is buying these vehicles?  The answer most certainly is not collectors or investors.  Collectors know better.  Investors already have been burned.  My best guess is males who want to fill a shelf or two for decorative purposes.  Once the requisite space is filled, the buyer withdraws from the market.

If O’Neill wants to establish a used auto die-cast dealership, I recommend he look at Hot Wheels or Matchbox.  The field already has several successful Internet dealerships such as toypeddler.com.  Further, the collector market in both collecting categories is declining.  The average collector age now exceeds 50 and is pushing 55.

O’Neill might be able to develop a part-time business selling these replica die-cast vehicles, providing he is willing to set up at toy shows throughout the country.  His pricing structure must be competitive with Internet sale results.

Before establishing his business, O’Neill needs to study the market.  Currently, he has access to a collection of over 250 vehicles.  Examining the pictures that accompanied his e-mail, none are duplicates.  When an example sells, he needs to have a plan to replace it in inventory.

Even in a depressed market, some examples are more desirable than others.  O’Neill needs to study eBay and specialized website sales and to travel to toy shows to talk with dealers selling his type of merchandise.  If he finds the merchandise scarce, the safe assumption is that it is not being displayed because there are no buyers.  It would be a major mistake to assume the replica die-cast vehicles are scarce or hard to find.

A recent series of “Rinker on Collectibles” columns explored the steps required to start an antiques and collectibles business in the 21^st century.  New dealers were urged to specialize.  However, they also were encouraged to check out the market strength of a collecting category before plunging blindly into the fray.

In the current economy, buyers determine the immediate and intermediate viability of a collecting category.  The key question is not whether there is a buyer for every object but how many buyers are there for that object.  When the buyer count is less than 50, a prospective dealer is urged to move cautiously.

Fifty is a conservative number.  My “let’s be honest” side wants to set the number at 250.  When the number of potential worldwide buyers for an object is less than 250, a dealer should consider selling something else.  If this number were strictly applied, much of the merchandise found at antiques shows and displayed in antiques malls would disappear.  In 2010, specific objects within many collecting categories survive with a potential buyer count well under 250.

While the buyer is the primary creator of the market, the dealer also plays a role.  The antiques and collectibles trade sells stories and dreams.  It also sells pizzazz, pride of ownership, and a host of other intangibles.

The best dealers in the trade are passionate about what they sell.  When they transfer that passion to their customers, they create markets.  If Mr. O’Neill is willing to invest his time and passion for collector edition replica die-cast vehicles, he can create a small but viable secondary collector market.  He would have to be a super sales person.

The difficulty is Mr. O’Neill’s conscience.  He must undertake his business knowing full well that Danbury Mint, Franklin Mint, and vehicles of a similar ilk have questionable long-term collectibility and no long-term investment potential whatsoever.  If honest, the only approach that will allow him a guilt-free conscience is to sell these vehicles as semi-expensive chotchkies.

Any antique or collectible is salable if packaged properly.  At the moment, Danbury Mint, Franklin Mint, and other die-cast replica vehicles are just dumped on the secondary market.  Auctioneers package them in lots in an attempt to make the selling process as painless as possible.  eBay sellers list them on an “any money is better than no money” basis.  The opportunity for a PT Barnum secondary market packager remains open.  Hopefully, Mr. O’Neill will think twice before answering the call.

In conclusion, Danbury Mint, Franklin Mint, and other manufacturers of collector edition material continue to offer new die-cast replica vehicles at prices considered laughable by those familiar with the secondary market. The marketing package is as slick as ever.  The mints would not make these vehicles if there were no buyers.  The Beanie Baby debacle impacted females far more heavily than males.  Hence, the lessons that should have been learned by male collectors of replica die-cast vehicles go largely unheeded.

Rinker Enterprises and Harry L. Rinker are on the Internet.  Check out www.harryrinker.com.

You can listen and participate in WHATCHA GOT?, Harry’s antiques and collectibles radio call-in show, on Sunday mornings between 8:00 AM and 10:00 AM Eastern Time.  If you cannot find it on a station in your area, WHATCHA GOT? streams live on the Internet at www.gcnlive.com.

SELL, KEEP OR TOSS?  HOW TO DOWNSIZE A HOME, SETTLE AN ESTATE, AND APPRAISE PERSONAL PROPERTY (House of Collectibles, an imprint of the Random House Information Group, $16.95), Harry’s latest book, is available at your favorite bookstore and via www.harryrinker.com.