Can Dealers Compete With Ebay?

Here in SillyNoise, resale shops, pawn shops, thrift stores, etc., all charge sales tax. I don't think that an item being new or used has anything to do with sales tax. No matter how many times an item changes hands, it is still a "sale" each time and the state/municipality/whatever wants its cut.

Some exceptions to this are (1) when a business purchases merchandise wholesale from another business for resale purposes and the purchaser can provide a reseller's permit to the seller, then that transaction is tax exempt, or (2) the purchasing entity is a nonprofit or other tax-exempt organization, e.g., 501(c)(3) organizations like most charities and public educational institutions.

It doesn't matter if it is new or used or how many times it has been resold there is tax. The Thrift store is a 501c and still charges taxes but not on clothing. Some food is also exempt but things like paper goods, pop and candy are taxable. The license is also if a dealer buys from another dealer. Then no tax has to be charged but a copy of the license has to be kept on file. As far as I know there is no minimum amount of sales because I helped them with there accounting and the sales were under $40,000. They had to pay tax. Shipping is a service so I don't think it has to be taxed.

So the question that comes after "Can dealers compete with ebay?" is "Can stamp auctions compete with ebay?". I'm thinking particularly of the regional and provincial houses that don't necessarily get 'name' collections or very high value material.

ebay already gives the auctions a run for their money where sets and singles are concerned but I'm starting to see an increasing number of collections being put on ebay, once the preserve of the local auction house. Yes, there's plenty of junk but no shortage of worthwhile collections also.

Can auctions still compete with ebay...or is it just a question of time...?

I think local auctions can compete with e-bay, especially on large collections where the cost of shipping would be prohibitive. In person viewing is still key on large lots as well.

He really IS a dealer if he is doubling his money. It is NOT income tax nor sales tax free.




If you sell something for more than you paid for it you have made a profit on it. It doesn't matter that you have other things you have bought that you have not sold.

eyeonwall

In the unlikely event that I had a conversation with the Inland Revenue about my ebay sales, I would be able to show my total sales and my total costs. The latter would far outweigh the former. Whether I made a £1 profit on an individual item would be neither here nor there.

Geoff

So if he's only making 15% he's not a dealer? Rate of profitability has nothing to do with whether someone is a "dealer" or not.





True, but when it comes to capital gains tax or income tax being due, it's an aggregate calculation for the year, not on an item-by-item basis. You don't just calculate tax on the items that made money and then ignore the items that lost money. The items sold at a loss can cumulatively offset any gains. If the total is a net gain when all calculations are done, tax is due. If the total is a net loss for the year, no tax is due, and if the seller can substantiate that they are in fact a business (the IRS has a 7-pronged test to determine business vs. hobby), the loss can be written off against other income. Consult a tax professional.

I don't need to consult a tax professional. IO agree with what you say above.

I was responding to the person who said




who seems to think that it is sales minus total purchases, not sales minus cost of the items sold. (that might be ok for the guy in the UK as I don't know the Inland Revenue rules)

And we have people saying they don't owe any taxes simply because they declare themselves to not be a dealer (that is NOT how schedule D works for non-dealers - there is a specific line for sale of collecxtyabvles and as I recal the rate is 28%).

No legit tax paying dealer can compete with those who are not paying taxes.

Having posed the Original Post...I have been traveling for these past several weeks and only now am I absorbing the many excellent shared points from our buying/selling experiences.

Great stuff!

A few rejoinders:

nick777vvv observed: "Can stamp auctions compete with ebay?"
Simple answer is that most lots and sales on ebay ARE in auction format. Bidding against other collectors has allowed me to build my collection of classic US. Actually, I think regional stamp auctions act as the industry's middle man, or wholesaler. Auctions may handle large multi-container collections or hoards, that are purchased at very low CV and then broken up into much smaller lots by country, or as separate albums and sold on ebay or in dealer's online stores.

Of all the various channels for stamp purchases, the one that is obviously in trouble the most is the brick and mortar stamp store. I have visited a couple stores. But they didn't appeal to me. In one case, the dealer gave me the bum's rush after I drove 45 minutes to introduce myself. While I'd like to build up a trusted friendly relationship with a local dealer, few have stores. Plus, I don't have personality issues when shopping online. If the dealer has material that interests me, I can bid, buy now, or make an offer (depending on the type sale).

I plan to attend more stamp auctions, shows, use the APS stamp store and sales circuits,and review mailed sell lists. But I don't expect these modes to replace ebay.

It's also worth pointing out that when really good stuff shows up on ebay it brings ALL the money.

ALL the damn money.

WOW! Catching up with the many great comments...

ecmorgan, on 10/24 you questioned the correctness of my original query. And I agree 100%. By posting "Can dealers compete with ebay?" we have shared dozens of valuable experiences about the stamp MARKET. I'm a marketing guy...and this question was posed exactly to solicit dialogue regarding the various channels that support the stamp market. I believe we've touched on all of them.

Jenny2U, you hit a home run (my baseball team the New York Mets are still on my mind :-) despite their World Series ending). Traditional stamp dealers understandably want to maintain the old status quo; near-CV inflated prices may work for some collectors, but not the majority.

shermae, you pointed out that we live in a time of evolving market trends; traditional dealers may not be Internet savvy, but the marketing train has left the station; get onboard, or "deal" with only high-value top-tier collectors who want the specialized knowledge, superb specimens and are willing to pay top prices for it.

Battlestamps, I agree totally that knowledgable dealers who provide thoughtful personalized service certainly need to charge adequately in order to maintain their business; paying prices above the minimal "bottom feeder" prices is in order when and if the collector wants/desires a high level of dependability and trustworthiness.

floortrader, your post sounds rather angry and resentful; why is that?
why makes you paint a much more democratic open marketplace such as an auction on ebay as a "Race to the Bottom"? Why is the now obvious existence of multiple price points for identical materials "a market of bottom feeders"? I couldn't disagree more. You claim that our new stamp market reality is "turning the hobby into a sewer". Are you kidding??? I'm happy as a clam that my recent purchase of the $5 Columbian #245 nicked me for only 19.4% of Scott CV.

The rise of online auctions has democratized what historically had been a stamp dealer oligarchy.
While the wealthy can still meet with the top-tier dealers and pay premium above CV prices for "rare" gems, the vast majority of us collectors wish to participate -- but with far more limited budgets.

GeoffHa, you pointed out that there is nothing more noble about collecting expensive vs. collecting cheaper less costly materials. Two thumbs up!

sdtom, you observed that this string was solely about "...money, money, money".
If you know of a stamp marketplace that is not constructed on the basis of commerce, please let me know! I'd love to request the two free Graf Zeps I am still waiting for.

billw2, you are dead on! Recently I have over spent my budget purchasing a number of better US singles. And it is the more scarce stamps that bring out the higher bids -- even on ebay.
Supply and demand is at work here. Sure, there are fewer of us collecting today than in the heyday when every school kid had a terrible mostly empty album. But I am enjoying my revived collecting at a much more fulfilling level because of the new pricing equation which makes my online buys affordable to me.

Catalog values serve their purpose and I'm usually among the first to defend Scott et. al. and how they value stamps. That being said, looking at catalog values in a vacuum can be discouraging to a new collector. When I first started back collecting, before I became wise to how catalog pricing worked vs. market pricing (particularly on ebay), I remember looking at vast swaths of the catalog thinking I'd never own those stamps. Now, after a few years and a greater understanding of how the market works, I have scores if not hundreds of those stamps I never thought I'd have. It could be just as easy for a new collector to walk away, thinking too many stamps would simply be out of their price range, so why bother. And if I had to pay full dealer price for those stamps, I probably wouldn't have bothered, so steep discounts off of catalog can be a good thing.
Really, the psychology of getting a big discount off of catalog probably makes me end up buying more.

Hi ArtfulHinger, I agree fully.

I am exhilarated when my bid wins a choice auction selection. Or when my best offer is accepted.
When I reengaged collecting in 2010 I had to learn how the online market had altered dealer sales.
As a kid (with very little budget) I was excited to receive stamps "on approval" from faraway mail order dealers. We lived in rural Central Florida, and I had no clue where I might find a stamp store and never knew about auctions. But the mail order dealers advertised in magazines!

Fast forward to 2010 and 2011, and I was just as excited to see delivery of my latest ebay win -- whether it be a 1948 Scott US album that was loaded with pre-1930's stamps, or a 1952 Minkus US album that added to my collection's foundation.

Numerous ebay auction purchases of albums, or larger lots have provided me with an invaluable, cost-effective, and fun way to quickly build a rather nice US collection -- especially of the classics. This winter I plan to organize all my US Revenues from several buys.

However, I would not have 60% to 70% of my current collection had I relied primarily on traditional dealers. Thus, the reason for my original posted question...I wanted to hear from other collectors how they rank the various stamp sales sources.

Since I see plenty of dealers' ads for their auctions and sales items, along with mind boggling stamp show sales prices published in The American Philatelist and Linn's, obviously the market includes a top-tier strata based on ability to pay.

There are the wealthy to super-wealthy collectors who will contact Gary Posner, Inc. and pay nearly $15,000 for an advertised "super scarce" MNH US #544. I'm guessing, but this top-tier is likely <10% of collectors worldwide. I spoke with one dealer at the NYC dealer show who does well with a short list of high-value collectors concentrated on British Commonwealth. He's happy with picking up a single regular customer at each show who may spend $1000 per month.

Then there are the millions of folks who stretch their budgets by designing and printing their own albums or rely on purchased used albums in order to apply more budget toward buying more stamps. I guess this "silent majority" is likely 60% to 70% of global collectors.

And in the middle are collectors like me -- not rich, still with a somewhat limited budget, but with some means and available time to build our collections within a moderate budget range. My guess is that the dedicated intermediate collectors may comprise 20% of the total market.

For all but the smaller top tier wealthy collectors the online market is a God send. Even if we can afford to invest a few $1000 annually, buying on ebay can reduce your average purchase of higher value stamps to 31% or less of CV. Meanwhile, most dealers who advertise via price lists seem to be asking closer to 60% CV. That's a pretty penny to pay for the knowledge and service frequently mentioned in this topic. I must conclude that some folks will gladly pay a premium to a dealer for certain materials based on their assumption that said dealer will honestly and accurately sell only correctly identified and valued goods.

I don't consider myself a "bottom feeder" in that I am willing to pay market values for stamps I want. But I am unwilling to pay INFLATED PRICES. So, if my purchased $1 US #292 bull costs me 33% of CV on ebay I am very happy and satisfied -- even if my copy isn't flawless, perfectly centered, or MNH OG. Reason is simple. I can't afford what the top-tier folks buy from their dealers.

Long live ebay! Next, I'll have to try bidstart.com.

Well summarized dcaraz1949. Count me in as one of the DIC's (!) - "Dedicated Intermediate Collectors".

The stamp market has gone decidedly two tier, although, in time, I think equilibrium will be reached once again. Ultimately, many dealers will end up being 'pushed' on to ebay as custom for their basic stock dries up. And once they are there, they'll find that stock will only sell if it is priced competitively.

Larger auction houses will probably remain as the 'clearing house' for large wholesale lots that need to be viewed and for high value rarities. Specialist dealers still have a place, as do those that focus on on the top end. But, as you say, although it's the high value material and rarities that get the marketing exposure, it's a very small proportion of collectors worldwide that are actually buying this stuff.