Antique Marketplace Structure, The Business of Doing Business in Antiques, The Journal of Arts and Collectibles – November 2002
Antique Marketplace Structure
The business of the antique trade takes place in a tiered marketplace consisting of 10 levels. The difference between levels is SELLING PRICE. Generally, lower price items with a value of less than $50 are sold by level one dealers. The most expensive items are sold by level ten dealers.
Dealers at any level can find a sleeper, which they sell, usually at auction, for many times the value of the items they usually sell. However, this is the exception, not the rule.
The amount of money one can make buying and selling antiques has no relationship to the various levels. A dealer specializing in collectibles that sell for less than $50 each can literally become rich. In fact, it is the dealers of collectibles, not the dealers of antiques who tend to make the most money.
There are many differences between a low-level, mid-level, and high-level business. The knowledge required is different, operating expenses are different, and selling and buying methods are different.
Before I get into the specific differences between levels, I would like to make a few statements that are for the most part true and tend to be consistent through all levels of the trade.
It is less expensive to operate a successful lower level business. The cost of doing business increases with the level of operations.
The amount of knowledge required to run a profitable antique business is greater at levels two and three and again at levels seven and eight.
Very little knowledge is required to run a level five business. The same statement is true for levels four and six.
Most full time dealers operate at levels three, seven, nine, and ten.
Antique shops, shows, group shops, antique trade papers, and auction services fall within the same 10 levels.
Most dealers have little problem distinguishing the differences between a level one and a level ten business. Many dealers have problems distinguishing the subtle differences between levels four, five, and six.
The biggest mistake made by dealers in every level is buying outside their chosen level of operation. Usually, dealers replace items they sell with higher quality and higher priced merchandise. Such dealers literally price themselves out of their level and into a higher level. If they do not adjust their selling methods to those of a higher level, their sales will fall. Bouncing back and forth between several closely related levels is a bad business practice that usually results in a low volume of sales. This is especially true for levels four, five and six.
Level one is the flea market trade.
A few level two dealers also sell at flea markets. Their merchandise, of course, is a bit more expensive compared to level one merchandise.
Level three and a few level two dealers..
These Dealers we call “Pickers” or “wholesale dealers.” These are the dealers who purchase entire estates, collections, pound on doors, attend numerous auctions, and buy in quantity.
Before 1995, pickers traded zero selling expenses in exchange for a quick turnover of their product at a reduced price. Generally, pickers sold one day a week to a given number of dealers.
Pickers have benefited the most from the Internet, especially eBay auctions. eBay has allowed pickers to sell retail without the expense usually associated with retail selling such as booth rent at malls and antique shows, advertising, travel expenses, and the cost of running a shop.
The good news is that prices realized at eBay auctions have been falling drastically. Many pickers are beginning to return to the pre Internet method of selling only to a few dealers. I believe that the trend will continue because eBay has abandoned the secondary marketplace in favor of the primary marketplace. eBay now makes the majority of its money selling new rather than once owned merchandise. Moreover, they are increasingly catering to this new market.
Levels four, five, and six are the most common types of antique dealer.
Most dealers at these levels are part time dealers, many are collector/dealers. This is the sector of the antique trade dedicated to the new dealer, the prestige dealer, the hobbyist dealer, the dealer who needs a self employment business to hide travel and other expenses, and dealers who operate a retirement business.
Ninety percent of group shops, antique shows, auction services, and trade publications cater to these three levels of the antique trade. The price guide industry caters to these dealers. These three levels are the most cluttered, confusing, and the most difficult at which to make money. And, there is a lot of money changing hands at these levels.
Levels seven and eight are home to dealers who tend to specialize.
Such dealers specialize in one or in a few types of antiques or collectibles. If you can look at the dealer and say that he or she always buys art glass, majolica, or whatever, you are looking at a level seven or eight dealer.
Generally, level seven and eight dealers are able to sell a particular item for more money than dealers in a lower level. This is possible because such dealers have developed a clientele willing to pay more for the advantage of less work and less travel while assembling a collection. Also level seven and eight dealers are willing to guarantee the condition, rarity, and authenticity of the items they sell. This, of course, adds value.
One way to understand these levels is to consider them to be paid professional buyers. They are, in effect, shopping for a few collectors willing to pay for this service. A considerable amount of money can be made at these levels. Much depends on the number of collectors that a level seven or eight dealer is able to work for. For all practical purposes, levels seven and eight dealers are high-end pickers.
Levels nine and ten are top end and top price dealers.
They buy only the very best and the most expensive antiques and collectibles. Their chances of making large profits are considerable, and so is their chance of losing lots of money should they make a mistake.
The expense of running a level nine or ten antique business is considerable. Dealers at this level need large well decorated showrooms, a sales staff, and they must spend much money advertising. They must be seen at the best shows and at the best auctions. They must guarantee everything they sell. They must have a reserve of money so that they can buy when the opportunity presents itself. They must be willing to wait, sometimes years, to resell an item. They must invest heavily in research and in reference books so that they are able to recognize extremely rare antiques.
The proper level for a given dealer depends on the reasons he or she became a dealer, his or her personality, and the amount of work and time one is willing to devote to the business.
If you are in the antique trade for fun and for tax deductible travel, and making money is not your primary motive, levels four, five, and six are best suited for you. You can attend auctions, shows, and flea markets for fun and buy whatever suits your fancy at any price you are willing to pay.
You can sell your antiques at shows close to your home and develop friendships with other dealers and with collectors interested in the types of antiques and collectibles you carry. Because money is not your primary objective, it is not necessary to purchase and study expensive reference books. It is not necessary to do large expensive shows long distances from your home. It is not necessary to spend hours at auctions or on buying trips. Thousands of antique dealers are in the trade for fun and companionship.
If you are in the trade to make money, choose levels three, seven, nine, or ten. Dealers at levels three and seven should spend 98 percent of their time buying. They must keep their selling expenses as close to zero as possible because their buying expenses will be high. Dealers in levels three and seven should not display in group shops, at shows, or maintain a shop. They should sell one day a week. They must develop a list of buyers who will come when called. They must sell at a price low enough to keep their buyers content and willing to return for the next selling session.
Dealers at levels nine and ten should spend 98 percent of their time selling. They must keep their buying expenses as close to zero as possible because their selling expenses will be high. Dealers in levels nine and ten should display only at the finest antique shows, and maintain a well appointed shop that is open daily. They must develop a list of pickers and wholesalers who will call when they have something to sell. Dealers at these levels should hold frequent events such as wine tasting, open houses, and appraisal days.
Some antique trade analysts maintain that there are only three levels to the trade; low-level, mid-level, and high-level. Other analysts argue that my ten level approach is much to simplistic. And, there are many dozens of levels. I do not necessarily disagree with either of these criticisms.
My point is that understanding the differences between the levels and types of dealers is good for business. Study the dealers with whom you do business. Ask questions. When you encounter a dealer that has things you would like to buy but his prices are too high, try to figure out why. Without being rude, ask many questions. Maybe this person is a collector/dealer who is too emotionally involved. If you cannot buy from this person, maybe you can sell to him or her.
If you make a good purchase from a dealer at an antique show, do not walk away smiling at your good fortune. Ask many questions. Get the dealer’s name and address. How does he or she buy? Can this person become a picker for you?
Once you begin to analyze the business practices of the people with whom you buy and sell, you will find that they fit into certain categories or levels. Your levels may not be the same as mine, but they will perform the same. You can use the knowledge gained to add many dollars to your bottom line.
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