The Business of Managing Vendors

The Business of Managing Vendors – Business of Doing Business – The Journal of Antiques and Collectibles – February 2007
By Ed Welch
The business that is the antique trade is divided into two major parts – buying and selling. Both of these parts must be managed in order to achieve the best business results. I have often written about the selling of antiques and the methods and techniques employed in the selling process. A quick review would include topics like building a mailing list of customers, keeping cash flow records, sending thank you cards and sending invitations or notices to customers when you are doing a show or have made a major purchase.
The business of managing vendors, the people from whom you buy, is of equal importance. I maintain a list of vendors divided into two categories: active vendors and past vendors. Active vendors include individuals and selling locations that have produced purchases in the past five years. My past vender list includes individuals and selling events that are no longer productive. I arrange my vender list into the following categories: individual vendors, group shops, antique shows, live auctions, Internet auctions and house calls.
Individual vendors can be pickers who bring items to me personally or send photographs by U.S. mail or email when they have something I would likely buy. I also include show dealers that I see at regular scheduled shows such as Brimfield.
If I have not seen a show dealer in the past year, I send that person a letter asking how they are doing and stating the fact that I am still actively searching for items to add to my inventory. These reminder letters, as I call them, generally result in phone calls or emails. In the past, I have purchased many items as a result of my reminder letters.
Reminder letters to past vendors either produce no results or, every now and then, they can be very rewarding. One recent reminder letter to a part-time vendor resulted in a phone call. The dealer had taken a new job and was no longer active in the antique trade. He asked that I visit his home and look at the items he had stored in his garage and cellar. He wanted me to make an offer on the entire lot. I did buy the entire lot and put 99 percent of it in a local auction. After auction expenses, I more than doubled my money. I put the medical-related items in my own stock. They now belong to me free and clear. When these items are sold, I will make several more thousand dollars. The seller was happy with my offer and I was happy with my purchase. This is the result of the price of one first-class stamp and good record keeping.
Group shop purchases account for about 15 percent of my purchases each year. Not all group shops are created equal. Therefore, I use cash-flow ratio to grade my buying ability at group shops. Most antique businesses need a cash-flow ratio of one to three to stay in business. In plain English, a dealer must take in three dollars for every dollar spent on merchandise. The two-dollar mark-up pays for buying and selling expenses and taxes. The amount left over is the actual profit.
I buy from a group shop in Pennsylvania. My cash-flow ratio from this shop is 1 to 1.80. For every dollar I spend in this group shop, I get my dollar back and make 80 cents mark-up. After buying and selling expenses and taxes, I actually loose money on every item. I buy from a group shop in Fairfield, Maine. My cash-flow ratio is 1 to 4.20. I like this shop. I buy from a group shop in Sturbridge, Massachusetts. My cash-flow ratio is 1 to 7.40. I stop at this shop every time I get a chance. My most profitable group shop is in a small village. I do not want to name the village or even the state. My cash-flow ratio from this out-of-the-way shop is 1 to 12. I accidentally stumbled across this rural “Ma and Pa” owned business by accident more than 10 years ago.
Antique shows are a major a source of my purchases. I prefer large outdoor shows. I rate antique shows by cash-flow ratio. Nine large shows in Europe top the list. Next come shows such as Madison-Bouckville, Brimfield and the Metrolina in Charlotte, North Carolina. Indoor shows, even large indoor shows, tend to be less profitable. However, dealers specializing in antiques different from what I carry may find indoor shows productive. Each dealer must develop his or her own rating system for each type of buying outlet.
Internet auctions are beginning to show promise as a source for new merchandise. EBay, and eBay-type auctions, tend to be more profitable than live Internet auctions. Live Internet auctions pit Internet bidders against the bidders at the auction, against telephone bidders and left absentee bids. The result is more competition and higher prices, good which is good for the seller but bad for the buyer. In the past year, I have averaged a cash-flow ratio at eBay and eBay-type auctions of 1 to 15. Buying at live auctions on the Internet is less profitable with a cash-flow ratio of 1 to 1.5.
Live local auctions have not been good for me. Too many dealers are willing to work for very little profit. I have stopped attending local auctions unless a given auction has a large amount of the type of items that I buy.
Last fall, a local auction that takes phone bids and Internet bids proved to be a washout for me. I was interested in five items. All sold for more than the price I normally ask. One item that I buy at specialty auctions run by Sotheby’s and Christie’s sold for more than twice its normal price to an Internet bidder. Again, live auctions that take Internet bids are proving to be good for the seller but bad for the buyer.
Estate, house call purchases and the purchase of large collections have, over the years, consistently produced profits high enough to sustain my antique business. The problem with such purchases is that they require a substantial investment at the time of purchase. Also, much work is required in liquidating an entire estate and reselling a major collection.
Tracking purchases by vendors and selling locations can alert a dealer as to the most profitable method of replacing sold stock. Do not use my list as your guide. It will not work for you. Each dealer must do his or her own research, keep accurate records and analyze each buying method. The more time you spend in research, the less time you waste searching for the right antiques at the right prices in the wrong places.

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