Buying and Selling Stamps

Some Negotiation Strategies


There are a lot of books written on how to successfully negotiate anything, and it isn't my desire either to write yet another book on the subject or to try and regurgitate everything that is contained in the many excellent books out there.

Instead, I'd like to take one of the key issues that all these books contain - the need to be able to see things from the point of view of the "other person" - to be able to understand what is important to them and what is not important to them, and to then be able to frame your offer and term your negotiations in this context.

I know from years of experience in both buying and selling all sorts of things that the key obstacle to the other person in any given negotiation doing "better" in a deal with me was many times that they didn't ask me for something that I would have willingly given them.  And I suspect that the key obstacle that I've also faced has been not asking for enough - and in the right terms - from the people I've been negotiating with, too!

Part of good negotiating is never to assume that anything is impossible.  I've taken just a couple of aspects of what is involved in being a semi-professional stamp dealer and present them to you below in a context that hopefully can show you how it may well be possible that a dealer actually might end up selling stamps to you at a huge discount off "catalog value" (and, please, never let "catalog values" bully you into choosing ever to pay more for a stamp or a collection than you think you should!).  All you have to do is think like the dealer, and explain to him why it is a good thing that he sells you the stamps at such a discount!


A Fundamental Business Principle - Stock Turns

Sensible dealers understand that they make money not by holding on to stamps for a very long time, and then finally selling them for "top dollar".  They make their money the same way any other retailer does - by keeping the minimum possible amount of capital tied up in stock, and by turning that stock over as many times as possible.  Think of it this way - which is the better business plan :

(a)    To have $500,000 tied up in stock and to sell the stock once a year for a 10% profit, making an annual profit of $50,000 and requiring a half million dollar investment to do so

(b)    To have $100,000 tied up in stock and to sell the stock twelve times a year for a 5% profit, making an annual profit of $60,000 and only requiring $100,000 of capital to do so

In general terms, the second approach is the better approach.  The key for any dealer is to keep turning their stock over and over and over (at least as long as they are reasonably assured of being able to readily keep buying in more stock to resell).

There is another reason why turning over stock is very important.  Most dealers have a group of "regular" clients.  As unfair as this may seem, many times they will make more money out of their "regular" clients than out of their occasional clients, and may even sell stamps to their regular clients at bigger margins.  The benefit the regular clients get is the first opportunity to look through new stock when the dealer buys it in.  And now, here is the challenge the dealer faces.  After having had new stock on display for a reasonable amount of time, and after having had most of his regular customers look through it, what remains unsold is all of a sudden likely to remain unsold for potentially a very long time.  It becomes even more important that he turn over this slow moving stock, or else all of a sudden (using the numbers above) instead of having $100,000 of popular stock that he can quickly sell - and which he needs to quickly sell within a month to keep up his stock turns, he finds himself with $100,000 of slow moving stock which he might not be able to sell for six months or even two or three years!  What happens if his stock turn count drops from twelve a year to two a year?  His profit drops from $60,000 to $10,000!  Wow.

If you are reading this and are a dealer, you hopefully understand this, and hopefully act on it.  No dealer has limitless amounts of capital to tie up in stock, and even if you do have huge amounts of capital, you're still better off investing it in popular stock than in unpopular stock.

If you are buying from a dealer, then you are helping his business turn its stock over and to make a smaller amount of capital investment work harder and more profitably for him.  Just so long as he doesn't see the person standing in line behind you telling him that he would buy the same stamps for twice as much, the dealer should be delighted to sell stock to you at small margins so that he has moved his stock and can buy in more stock.  In particular, if you come across a dealer that has a small collection of Russian material, but who doesn't specialise in it, you might be surprised at how low a price the dealer will accept in return for you buying all of it, or most of it, because the chances are that this is "dead" stock that has sat around for a long time.

Note :  these stock turn and margin examples used above are not very realistic in the stamp dealing world.  I doubt if many dealers manage much more than a two - four times stock turn in any given year, and I also suspect that many dealers have stock turns of less than once a year.  By the same token, the profit margins are also off - it would be rare to find any dealer ever selling for as little as a 10% margin - they just couldn't pay their way at such a low level.

A Fundamental Business Principle - Stock Values

Many times a dealer will buy a complete collection that comprises a mix of stamps that he wants and stamps that he doesn't want.  A sensible dealer will calculate the value of this mixed collection based only on the stamps that he knows and wants, and will view the balance of the stamps as "bonus" material.

Here's how understanding this can work for you as a buyer.  If you find a dealer that specialises in, for example, American covers, but who also has a few trays of world wide stamps, then you can be fairly certain that these worldwide stamps are not stamps that the dealer specifically went out and purchased, but rather, they are the left over remnants of collections that he has already pulled apart and split into the key pieces that he wanted, and which he has already probably sold.  Okay, so you know that the Russian stamp set you are looking at has a catalog value of, say, $10, and you even see this marked on the set.  But you should also know that the underlying cost of these stamps to this dealer is somewhere between zero and not very much more.  Sure, the dealer would love to get $10 for the stamps - it would be a tremendous bonus and one of those things that helps keep him in business, but he doesn't actually need to sell the stamps for any money at all to cover the cost of them.  If you offered him $1, he might accept it, because it frees up space, it clears out "dead" stock that is of no value to him or his regular clients, and it cashes out $1 that he wouldn't otherwise have got from something that he sort of got "for free".


 

This page last modified on May 15, 2010