Second Chances

The pros and cons of adding secondary market pieces to your collectibles offerings

By Meredith Schwartz -- Gifts & Decorative Accessories, 2/1/2001

Selling secondary market collectibles can be a great way to expand your customer base. In addition to your regular customers, you can reach new, highly motivated collectors who will actively seek you out. If you offer them prompt, informed, courteous service and a good selection, you can capture them as permanent customers.

Reach More Channels

Naturally, the most important venue when it comes to selling secondary market collectibles is your store. If you display secondary market pieces, make sure that they are clearly marked as retired with good point-of-purchase information detailing dates of issue and retirement, limited editions, artist's signatures, and anything else that makes them rare or special. If you prefer not to display these pieces, so as not to confuse them with your primary offerings, make sure that you post good signage letting your customers know that secondary pieces are available.

Your store isn't the only place from which you can sell secondary market collectibles. Ads in collectors' magazines such as Collector's Mart, Collector Editions, or Antique Trader can generate interest. And there is at least one specialty magazine or collectors' club newsletter for each collectibles line. Some of the most popular boast several, such as Department 56's Fifty Six and the Village Chronicle magazines. Swarovski Collectors even have their own organization, the Swan Seekers Network. The major collectibles shows offer swap and sells, as do some local shows. The Collectors Information Bureau (CIB) accepts ads for its quarterly report, and maintains a roster (organized by product line) of retailers who specialize in secondary market pieces. While manufacturers' attitudes toward the secondary market vary from active encouragement to strict hands-off policies, some manufacturers will refer collectors to secondary market dealers. Manufacturer-sponsored collectors' conventions are also potentially fruitful markets. And, of course, there's the Internet and eBay. While eBay represents a new form of competition for secondary market retailers, it also represents a huge potential market.

Tap More Sources

The supply chain for primary market collectibles is pretty straightforward: Pieces go from the manufacturer to the authorized retailer to the collector. However, with the secondary market, all the eggs are no longer in one basket. Dealers can find pieces at estate or garage sales or flea markets, as well as through ads in special interest magazines, their own collector customers, and other dealers. In fact, virtually any secondary market sales outlet can be a source of product. The National Association of Limited Edition Dealers (NALED) has a mailing in which members list the items they have available for the secondary market. The Bradford Exchange offers a dealer discount on secondary market pieces.

Primary market dealers have one significant advantage over other secondary market dealers: They have the option of holding on to a few collectibles fresh from the manufacturer and waiting until the pieces are retired. However, be aware that this practice is risky. If the pieces prove popular, too much hoarding can produce resentment in the very devoted collectors you're trying to attract; if they prove unpopular, you may find yourself with too much cash tied up in nonmoving inventory, a situation that can serve as a drag on the profitability of your business.

Make More Profits

In the primary market, the price of a limited-edition collectible is strictly controlled by the manufacturer. Discounting is strongly discouraged, if not forbidden outright, and, because of the collectible's relatively wide availability, the markup can seldom rise much above keystone. In the secondary market, however, the price is literally whatever the market will bear. Of course, in many cases, the supply meets or exceeds the demand, and the piece cannot even make back its issue price. "People who bought extra pieces to resell can't even get retail out of them because prices have gone so low," says Connie Eckman, owner of Collectible Exchange Inc. in New Middletown, Ohio, a secondary market broker that makes its profits through buyer commissions.

However, some collectibles that were originally issued at $30 or $40 now command prices in the thousands. While picking a winner is far from an exact science, there are some basic guidelines to follow. "If it's ugly, it becomes better on the secondary market, because nobody bought it in the first place," says collectibles retailer Al Budin, owner of the Curio Cabinet in Worthington, Ohio.

Karen Feil, executive director of CIB, adds, "First issues and club pieces are usually the ones that are going to go up, because there's a built-in audience looking for them." Other things to keep in mind include: how old the piece is, how small the edition was, and whether the collectible has special features such as an error, a special backstamp, or an artist's signature. Good scouting can turn up some amazing diamonds in the rough. But don't forget to count the hunt's cost in time. Sourcing secondary market pieces can be labor-intensive.

Take More Risks

While the unregulated nature of the secondary market presents opportunities for the retailer, it also creates headaches. The condition of a piece is crucial, as is the original packaging and certificate of authenticity, if any. And fraud is endemic to the secondary market, particularly in business conducted by mail or via the Web. Many secondary market dealers mark pieces with something permanent before shipment to prevent customers from purchasing an item, switching it for a similar piece of inferior quality, and returning it. "Make sure you know the product you're buying, because there are a lot of people out there who are trying to pass off items that aren't quite right. It's 'buyer beware' in the secondary market," says Budin.

You may also encounter price resistance from customers who assume you got the pieces for a song. "In the secondary market, people believe that you are getting them for nothing, so they feel they can dicker with you to a greater extent," says Budin. Timely shipping, breakage, and other hassles are handled by the manufacturer in the primary market, but when you're buying from individuals, that kind of accountability is missing. Several retailers told Gifts & Dec that they were getting out of the secondary market business. Says Margorie Rosenberg of Carol's Gift Shop in Artesia, California: "I did secondary at one time, but I've just about cut it out. There's too much aggravation. If it's local people, it's fine. But when you ship, you take the chance that they switch merchandise on you or they claim it's damaged."

The biggest problem of all is that the Internet has made selling secondary market collectibles a lot less profitable. Collectors now have access to the entire world's supply of available pieces, not just the ones in their region. In addition, by eliminating the middleman, eBay has conditioned collectors to expect lower prices. Eckman of Collectible Exchange says: "Now you can buy directly from the consumer and cut out the broker. But you lose the trust, because if you are not satisfied, it's their word against yours. Everyone says that the Internet sites are dropping off the face of the earth. But I say, yeah, every one but eBay, and that's the one that killed the secondary market."

But all is not lost. Many collectors are older and less likely to feel comfortable with computers and the Internet. Others have been burned online by fraud, poor customer service, or lack of quality control. In the long run, eBay may spark a new appreciation for the role of the broker or retailer.

Setting a Price

Knowing the value of secondary market pieces is essential to trading successfully. Most retailers choose to focus on the one or two lines in which they have the strongest collector following. You can get current pricing information from a variety of sources, including guides published by CheckerBee, Schiffer Books, Krause Publications, Greenbook Guides, and the Collectors Information Bureau. Use the Web to see what certain pieces are currently selling for. The CIB price guide will soon be online at www.collectorsinfo.com, and you can check the prices on the Collectible Exchange (www.colexch.com) or on eBay (www.eBay.com). You can also visit swap and sells to see how collectors value things.

Selling to the secondary market may not be the profit center it once was, but if you have the time to do it right, it's still a good way to leverage your unique expertise. More importantly, you will build consumer loyalty by making your store a one-stop center for all of your customers' collecting needs.