Turnaround Time – Business of Doing Business – The Journal of Antiques and Collectibles – June 2004
By Ed Welch
How long should an antiques dealer keep an item that does not sell?
The answer to this question is not simple and the answer is not the same for all dealers. There are two schools of thought regarding turnaround time in the antiques trade. One method is to buy an item, put a price on it, and then keep the item until it sells at that price, even if it takes five, ten, or fifteen years. A second method is to set a time limit (120 days, for example) for the resale of all items purchased. There are, of course, advantages and disadvantages to both methods.
Not all antique dealers are in the trade to make money. Some dealers use the antique trade as a hobby, a fun thing to do. They enjoy going to auctions and doing flea markets and antique shows. The goals and objectives of a person who chooses antiques as a retirement business are different from those of a hobbyist, or full-time dealer. A collector/dealer is in the trade to build a collection that will be worth a considerable amount of money in years to come.
Turnaround time for items purchased by a collector/dealer should be 10, 20, or 30 years. True collector/dealers must purchase the best examples they can find. Such antiques are always priced high. Generally, collector/dealers will lose money on any item resold in less than 10 years. For the collector/dealer, quick turnaround time is not an option.
Turnaround time for items purchased by a retirement dealer should be no more than three years. One year or less, in my opinion, would result in greater profits. Retirement dealers have a window of between ten and fifteen years in which to generate income that can be used to enhance retirement living. Rapid turnaround time can produce more money to cover living, vacation, and travel expenses.
Turnaround time for merchandise purchased by full-time and by part-time dealers in the trade to make money should be between 90 and 180 days.
Dealers who subscribed to the “keep it until it sells” school eventually have a barn full of hard to sell items. Some dealers carry this method to extremes and have garages, basements, and attics filled from the floor to the ceiling. The accumulated merchandise is not only clutter, it represents money. Moreover, in my opinion, it is wasted money that could be put to better use.
The last sentence gave me away. I subscribe to the school of fast selling. I want no merchandise in my stock that is more than 180 days old. If an item does not sell in six months, it is on my hit list. Items on my hit list are heavily discounted, sometimes to a price below the amount that I paid.
Twice a year I clean house. Items that are 360 days old are placed in local auctions. Generally, I break even after paying auction expenses. Every now and then, I will make a 10 percent profit. Sometimes I can lose 10 percent. The money I receive from such auctions increases the amount I have available to purchase new merchandise.
I make one exception to this rule. If I believe that an item still has the potential to make me a profit, I place that item in long-term storage for five years. I carefully package the item, date it, and place it in my warehouse. I do not touch that item until it has rested five years. I do this for two reasons. Inflation over five years will generate some profit but, of more in importance, my regular customers will have forgotten about this item. When I display it five years later, it is, for all practical purposes, a new item in my inventory.
Last November I sold a firearm that I had purchased six years ago at a Gray, Maine auction. I sold this item for $1,325. When I first offered the firearm for sale six years ago, it generated much interest but no buyer. The asking price was $750. My decision to store this firearm for five years proved to be profitable. About 60 percent of items I put in long-term storage generate enough profit to warrant tying up the amount of money they cost. The remaining forty percent does make a small profit. But, I could have put the money they represent to a more profitable use.
I have a good friend who operates a major antiques business out of a five-story barn. The first two floors are open to the public. The top three floors are for storing and rotating stock. This dealer out bid me 25 years ago for a New Hampshire made Chippendale desk. He still owns the desk. It has rotated between his selling floors and his storage floors at least five times. Every time the desk comes out of storage, he adds several hundred dollars to its price. He paid $1,500 to buy the desk. It is now priced at $6,250. Suppose he sells the desk tomorrow. His net gain will be $4,750.
I purchased $826 worth of antiques at this auction. Most of my purchases were resold within 180 days. Theoretically, I have reinvested my original $826 fifty times in the last 25 years. My cash-flow average is close to one to four. In other words, every dollar I spend on antiques producers four dollars in income. I, of course, do not get to keep all four dollars. I have expenses and taxes to pay. However, $826 times four equals $3,304 in income every six months or $6,608 each year. Six thousand dollars times 25 years equals $150,000.
The speedy resale of antiques allows small dealers with little money to generate large profits by using the same money over and over again. I keep excellent records. However, I cannot prove that my $826 has generated $150,000 in sales over the past 25 years. I do know for a fact that my good friend has made zero profit on his investment of $1,500.
Marie C. was a remarkable antiques dealer. She had a pleasant personality, she was honest, and she was fair. She understood the antique trade and educated herself in the types of antiques she carried. Marie was a hoarder. She kept everything she purchased until she got the price she wanted.
I was a young dealer when I met Marie. She took me under her wing and gave me advice and direction. Marie sold to me 700 pieces of Blue Willow China that she had had in storage more than 10 years. Her original prices were still on each item. Dinner plates were priced at 25 cents each, covered serving dishes were marked $3.50, and a soup tureen, complete with ladle and under platter, was priced at $23. She, of course, charged me much more than her old prices.
My memory of this purchase is as clear as if this sale took place yesterday. I remember going into her barn, removing the boxes from the shelves, and my enthusiasm at discovering so many pieces of Blue Willow China. I did not have enough money to purchase the entire lot. Marie allowed me to take everything with the understanding that I pay for each piece as it sold. I do not know how much money Marie made on the sale. I sold the entire lot in less then one year for six times the purchase price.
This was my first large purchase. I credit this purchase and a quick resale of all items for guiding me into becoming a fast turnaround dealer. Before this purchase, I was of the opinion that I should keep everything until I received the price I wanted.
I was not comfortable owing so much money to Marie. The fast reselling of this lot allowed me to pay off my debt plus provided me with additional money to purchase more items.
Marie was a successful antiques dealer. Hoarding worked for her. My friend with the five-story barn is a successful antiques dealer. Hoarding works for him. Hoarding does not work for me. After 90 days, I began to question an unsold item. After 180 days, I hate the thing. Six months later, I am of the opinion that I would be better off selling this item for a substantial loss and reinvesting whatever money I am able to salvage.
I have friends who are dumpers and I have friends who are hoarders. I personally believe that dumping, even at a loss, generates more profits in the long run. However, I cannot ignore the fact that many hoarders have been in businesses as long as I have and own successful and profitable businesses.
I have noticed that successful hoarders tend to do several things in common. They rotate merchandise to and from storage. They increase prices each time they rotate stock. They do not sell an item until they get their current asking price.
I would like to make one more observation regarding hoarding. The total value of acclimated inventory can be impressive. A lifetime of hoarding can produce an inventory valued into the six and even seven figures. Of course, much of this inventory is tied up in hard sell items.
A good friend told me, after a heated discussion on the merits of hoarding vs. dumping, that items hoarded do not represent wasted money, they represent saved money. This may be true. However, I would prefer to argue that if the money represented by the inventory of a lifetime of hoarding had been reinvested over and over again, the total amount of money generated would be much greater. Moreover, the dealer would not have a lot of money tied up in hard to sell stock.
Any readers who may have information about this item are invited to contact Edward Welch. He can be reached via telephone by calling (207) 872-5849, by mail at RR # 3 Box 1290, Winslow, Maine 04901, or by email at edwelch@metiques.com
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