Paper Views – The Changing Face of the Numismatic Marketplace
by Kevin Foley for CoinWeek ….
When I first became active as a dealer in the late 1970’s, the overall structure of the numismatic marketplace in general and the customary ways collectable paper money typically was marketed were quite different than at present. Websites were unheard of. It was a rare individual who owned a computer. The projections and predictions of how computer technology might change our personal and business lives were seen by many in a tradition bound world such as the numismatic marketplace as borderline science fiction. Cell phones were not yet in common use and the now almost obsolete FAX machine was the latest technological marvel beginning to enter our lives.
In the late 1970’s dealers issued printed price lists, advertised their offerings in traditional print media, such as Coin World or Numismatic News or attended numismatic conventions to both acquire new stock from other dealers or market their items to the same population. Auctions were largely the province of dealers and bidding was done either in person at the auction site or via mail bids typically submitted acting in reliance on a printed description, with perhaps a catalog photograph for a more expensive item that would reveal little more than the centering attributes of a note.
Information, especially about National Bank Notes, was scarce and existed at only the most rudimentary level, typically not going far beyond outstanding circulation figures as of a given date.
Grading had only the broadest of general rules and there generally was little to no consensus as to the boundaries of any given grade. Indeed, it was possible simply by knowing the grading proclivities of various dealers to make a handsome living concentrating on buying from those who tended to grade more conservatively and in turn selling to those who graded more liberally. In today’s marketplace the two primary third party certification services, PCGS Currency and Paper Money Guaranty seem to have convinced the buying public that purchasing almost any note without first having one or the other pass on its grade is just too risky to even consider.
Today’s marketplace has been radically transformed by the growing reach of technology, especially of the internet and internet based marketing mechanisms.
Where even as recently as 15 years ago it was a rare dealer, typically only the most well financed, who could afford to have a website by which to offer his material, today programs exist that enable virtually anyone to design and maintain their own website at relatively little cost. Unlike a generation ago, where a buyer could converse with a seller face to face, assess his level of knowledge, make an assessment about his ethics and generally reach an opinion about the person being dealt with based on that ongoing personal contact, in today’s world it is possible to be a dealer of some significance without ever having any direct human contact with clients at all.
Notes can be acquired and then remarketed over the internet, picked up for shipment by the postal service and paid for via electronic transfers directly from the buyer into the bank account of the seller. Indeed, the seller who appears on his website to be an accomplished numismatist might actually be sitting at home in front of his computer screen unshaven and in his pajamas.
Whereas 20 years ago the only way an auction buyer could be certain that notes being offered at auction were really as described was to view the items in person. For the typical collector, this presented a considerable economic obstacle standing in the way of auction bidding. In order to justify the cost of in person examination a potential bidder would need to make a considerable expenditure in order to meet the overhead of travel to the auction site. Additionally, the remote bidder submitting his bids via the mail always stood at a disadvantage vis a vis the floor bidder, to whom it was obvious as the bidding process unfolded just where the mail bidder had stopped. Those at the site thus always had the advantage of being able to make the last bid.
Today, most auction houses image virtually every note in their sales, with the images being incredibly clear and revealing, so that the bidder sitting at home is able on his computer screen to see images that come surprisingly close to what might be achieved by in person examination. As the third party grading services have been able to convince the universe of buyers that their opinions constitute the only assurance of knowing what a given note actually does grade, rather than just being one more opinion to be taken into consideration, the willingness of bidders to bid remotely without actual examination has increased exponentially.
To the extent that more and more people buy in to this concept, i.e. that the certified grade is the real grade – no questions asked – what the actual condition of a note is becomes almost secondary. As long as the next potential buyer is willing to accept and act on the certification firm’s opinion as if it is the only reality, there will be an increasing tendency to in effect buy the holder rather than the note.
Every major auction house now offers a real time live bidding platform via which a bidder sitting at home is able to compete on the same basis with other bidders as if he were actually in the auction room. This has resulted in a broad widening of the numbers of bidders participating in any sale, with a resultant upward pressure on prices in general. The universe of buyers is no longer limited to the few who are well financed enough and have the time to attend in person, but now encompasses anyone with a computer. It can be quite remarkable to attend even a significant auction and see just a handful of people in the room.
Over time, while more and more people are participating in auctions via the internet, fewer and fewer are actually attending in person. This widening reach of auction houses through real time internet bidding mechanisms has been an important factor in bringing new buyers into the marketplace and this maintaining the constant upward pressure on prices necessary for potential consignors and purchasers to want to continue to participate in the auction process.
The growth of E-bay has also been a transformative development in the marketplace.
Whereas a generation ago being a dealer acquired a considerable degree of specialized knowledge, today, thanks to third party grading and the ease of buying and selling via E-bay and similar sites, everyone and anyone can be a dealer. The skill set necessary to make a living as a private dealer has been reduced to the core element of literacy, i.e. being able to read a certified grade holder, consult a pricing guide or auction records and then offer the item for sale, awaiting the inevitable buyer to appear, often times with that buyer simply intending to repeat the cycle of purchase and resale.
Indeed, the ease with which both buyers and sellers can first find and then market items without ever leaving home, has also had the effect of causing in person attendance at numismatic conventions to decline, as well as booth sales over the long term. Why go to the expense and effort of attending a convention, when almost all one’s business can be done at home over the internet?
The proliferation of information available to buyer’s today has also been a significant factor in broadening the marketplace. Thanks to services such as Track and Price, actual sale records for notes are available at relatively modest cost. Gone are the days when maintaining a library of past auction catalogs and prices realize were an important part of making intelligent buying and bidding decisions. Buyers today can simply consult Track and Price to see the commercial history of an item going back many years, including who sold it, what it sold for and the claimed grade at each offering.
Also important as a source of information are the National Bank Note census figures gathered and maintained by researchers such as Martin Gengerke, John Hickman and Don Kelly and now marketed at reasonable cost by Andrew Shiva and his National Currency Foundation. Whereas 25-30 years ago a buyer might have a feeling based on years of experience that he couldn’t remember seeing many notes from a particular bank or that a $5 Brown Back from a particular institution was not something that he could readily recall, detailed population reports by serial number for each bank are now readily available so that scarcity opinions no longer need to be based on intuition, but can be arrived at on the basis of hard evidence.
An additional source of information only recently available to buyers is the population reports maintained and regularly updated by PCGS Currency and Paper Money Guaranty. Considering purchasing a “67” anything? With minimal effort it is possible to see where that note stands relative to others of the same number in the overall quality spectrum. This has opened up a whole new type of collecting activity, as collectors seek to form what are known as Registry Sets, in order to have the finest known collection quality wise of a given type of note. A very clever marketing ploy on the part of third party certification services, Registry Set collecting has created demand at the upper end of the quality spectrum that would not otherwise exist and has helped to create the very value added for certified material that is necessary in order for collectors to feel that the cost of certification is justified.
The numismatic marketplace today displays a substantially different structure than it did 25-30 years ago. The ease of conducting transactions over the internet, both for private buyers and sellers, as well as auction houses, has significantly expanded the marketplace and thus placed upward pressure on prices. The much wider availability at a relatively low cost of information about past transactions has increased the confidence of buyers that they can be reasonably well informed as to where the market actually is at any given point in time. In addition, the advent and nearly universal acceptance of third party grading by PCGS Currency and Paper Money Guaranty have also served to expand the base of the market for collectable paper money.
Perhaps the greatest irony, however, in the advance of technology expanding the marketplace and thus making a wider base of buyers and sellers more connected than ever before, is the fact that at the same time we have become more isolated from each other, tending to do less and less business in person, the “old fashioned way” and more and more via internet based mechanisms that simply didn’t exist at all 25-30 years ago.