The Best of Ed Welch: The Ten Levels of the Antiques Trade
The Business of Doing Business in Antiques
By Ed Welch
As many of you are aware, our friend Ed Welch passed away in October, 2012. His wisdom and entrepreneurial spirit will be greatly missed. At the request of many of our loyal readers we’ve decided to publish some of their favorite columns from past years.
The antiques trade is divided into ten levels, based on selling price. Low-level antiques are sold in flea markets and perpetual yard sales. Mid-level and high-level antiques are sold in individually owned shops, group shops, and at antique shows.
Businesses that provide services to the antiques trade can also be divided into the same ten levels. There are many types of auction houses. Some serve the low-levels of the trade. Other auction houses serve the mid-levels of the antiques trade and a few auction houses serve the high-end of the antiques trade.
Antique trade publications can also be divided into various levels. However, there is much overlapping of levels served by trade publications. Generally, it can be said that trade publications can be divided into three levels, low-end, mid-level, and high-end, with much overlapping.
When I entered the antique trade in the mid-1960s, there were no trade publications, no price guides, very few auction services, no group shops, no antique shows and just three levels of antiques – low, middle, and high.
I entered the antiques trade as a low-level dealer. I could not afford to purchase mid-level and high-level antiques. I did not have enough working capital. However, I made much money as a low-level dealer.
After a year or two, I gained confidence and began to buy antiques that were more expensive. However, I had an extremely difficult time selling mid-level antiques. At that time, I did not understand that each level of the antiques trade requires a different marketing strategy.
At one auction, I purchased a wonderful country made Chippendale slant front desk. An old-time antique dealer, who more or less acted as my mentor, criticized my purchase of this item. He asked how I intended to market it. He pointed out that my normal selling outlets were designed for the sale of low-end items. A Chippendale desk would be very difficult to sell for anywhere near its value at a flea market. He went on to say that this item will eat more money then it will generate. He predicted that I would have to sell the desk at the price I paid, or worst yet, at a loss. If I chose not to sell the desk at a low price, it would remain in my inventory for years.
I struggled to understand the differences in the business strategies of the different levels of the antiques trade, until I happened across a book written by Albert Sack on grading American Furniture. Fine Points of Furniture: Early American is a book that compares American Period furniture made by different cabinetmakers.
Not all cabinetmakers are capable of producing high-quality work. Give ten cabinetmakers the task of creating a slant-front desk and then compare the finished desks. Chances are that one or two of the desks will be much better than the rest. In addition, one or two of the desks will be of poor quality. The remaining desks will fall somewhere in the middle. Albert Sack, using detailed photographs, compares the quality of furniture made by different cabinetmakers and sorts his findings into good, better, and best.
Although this book was designed as a guide for evaluating furniture, the principle can be used to grade all types of antiques and collectibles such as milk bottles, Depression Glass, Old Ivory china, hard and soft paste porcelains, and even salt and pepper shakers.
After working with this book for several months, I came to the realization that just as American furniture and other collectibles could be categorized as good, better, best, so could the entire antiques trade.
Not all low-end items are the same. Some are better than others. Instead of lumping all low-end items into one category, it makes sense to divide low-end items into the categories good, better, and best.
These three categories are the basis of levels one, two, and three. Mid-level antiques can also be categorized into the categories good, better, and best. These three categories are the basis of levels four, five, and six. High-level antiques can also be categorized into the categories good, better, and best. These three categories are the basis of levels seven, eight, and nine. The last category, level ten, is reserved for the most expensive art and antiques. Very few dealers have the resources to buy and sell antiques of this value.
To consistently make profits in the antiques trade, a dealer must choose a level at which to operate. Once the level is chosen, the dealer must not buy items of a lower or higher level. Each level of the antiques trade requires a different marketing strategy. Developing a marketing strategy for any level is expensive. The higher the level, the more money it costs to effectively produce enough sales volume to generate a profit.
I do business at two levels of the antique trade. I buy and sell low-level antiques that I judge to be of level three. I also buy and sell high-level antiques that I judge to be of level eight. Out of necessity, I maintain two separate marketing strategies. I spend a considerable amount of money marketing my low-level merchandise. I spend much less money marketing my high-level merchandise.
The money spent in the selling process is only part of the cost of doing business in the antiques trade. I must also spend money acquiring new merchandise. I spend very little money buying low-level merchandise. I spend a considerable amount of money buying high-level merchandise.
Although my low-level and high-level merchandise are of the same type, I never mix the two. I sell my high-level merchandise personally, one-on-one. Customers who purchase my high-end antiques have no idea that I also sell what they would consider junk. I sell my high level antiques just two weeks each year, the first week in April and, the first week in November. I produce a catalog, much like an auction catalog, for each selling event. To purchase high-level antiques from me, you must be on my mailing list and you must be an active buyer. Most of my high-end merchandise is purchased by collectors or by dealers who specialize in high-end merchandise.
I sell my low-end merchandise 365 days a year on the Internet. I do not use eBay or eBay-type auctions. I have several websites, one each website is dedicated to a specific collectible or to closely related collectibles. To make serious money selling on the Internet, a dealer must have many websites, one for each type of merchandise sold. It is nearly impossible to sell a step-back cupboard on a website built to sell pottery. If you sell step-back cupboards and pottery, you need two websites. If you sell step-back cupboards, pottery, and sterling silver, you need three websites. If you sell stepback cupboards, pottery, sterling silver, and Early American Pattern Glass, you need four websites.
In the 1980s, I was a level six dealer specializing in country furniture, country accessories, and folk art. While making my rounds visiting group shops and dealers looking for new merchandise, I entered the shop of a highly respected folk art dealer. In my opinion, this dealer operated at level nine.
I was able, from time to time, to purchase from this dealer folk art of a low value. On this particular visit, my eye fell upon a simply wonderful folk art painting of a homestead. I expected this painting to be priced at more than $50,000. I was amazed when I discovered that it was for sale for $8,000. In my opinion, the dealer had greatly undervalued the painting. As a level six dealer, it was unrealistic of me to expect to sell this painting for $50,000.
My business experience told me that the only way I could market this expensive painting was at auction. Of course, I would have to pay the auction house twenty five percent of the selling price for their services. This I did not want to do. I bought the painting for $7,200 and tried to do the impossible – sell a level nine item from a level six business.
Two weeks later I offered the painting for sale at a mid-level country furniture show held three times a year in New Jersey. I priced the painting at $35,000. I was not surprised that this folk art painting became the talk of the show. Several potential buyers carefully inspected the painting. Two individuals, one a dealer and the other a collector, showed the most interest. The painting did not sell at the Friday night preview. On Saturday, the two potential buyers returned to have a second look. The collector brought along his wife, brother, and father-in-law. The dealer brought his business partner.
In addition to these potential buyers, three other collectors expressed an interest in the painting. My booth was not large enough to hold everyone interested in buying this item. The large crowd in my booth made it impossible to sell anything else. The painting did not sell on Saturday.
Early Sunday morning the collector returned with a folk art dealer. The collector had hired the folk art dealer to inspect the painting and offer a professional opinion on the painting’s age and any type a restoration that may have been done.
The dealer returned with his partner to have another look. One of the collectors from Saturday returned to have another look. Although this painting had generated a large amount of interest, I was beginning to believe that it would not sell. In my opinion, the reason the painting would not sell is that it was priced too high for the type of show. In addition, my other merchandise was obviously not on a par with this painting.
Things changed when the collector, who had first seen the painting Friday evening, asked me where I had purchased the painting. When I revealed the name of the folk art dealer who sold the painting to me, the collector’s body stiffened and then slowly relaxed. He looked at the dealer that he had hired and both nodded to each other almost simultaneously.
The collector then asked if I would hold the painting for an hour while he made a phone call. I replied, “no.” The show was nearing its end and I would sell the painting to the first willing buyer. The collector then opened his wallet and counted out $1,000 in hundred dollar bills. He then said, “Whether or not I buy the painting, this money is yours to keep if you will not sell it for 30 minutes.” I agreed to this offer.
The collector made his phone call and returned within fifteen minutes. He bought the painting. When the sale was complete, I asked whom he called. He replied with the name of the person that had sold the painting to me. The bottom line is that I did not sell the painting. The painting was sold by the person who sold it to me. It takes a level nine dealer to sell a level nine antique.
There are many reasons why I, as a level six dealer, could not sell a level nine painting. I will save this discussion for another article. I brought up the sale of this painting to help stress one point, dealers who buy and sell within a given price level will have a faster turnover of inventory and generate greater profits. Dealers who buy outside their level are not putting their money to the best possible use.
The urge to replace sold merchandise with antiques of a higher quality is common to all dealers. This urge is a trap that snares many new and inexperienced dealers. Merchandise that is outside a dealer’s chosen level, either of lesser or greater value, is difficult to resell. Such merchandise acts as a sponge soaking up and retaining working capital.