Here we’ll examine the chief cause of this – paying far too much for items in the first place to offer any realistic chance of a viable profit margin.
How do you value an antique?
To be clear at the outset, the views here should differ between collectors and dealers. The collector will be prepared to pay whatever they feel right about to get the object. The professional can only pay a figure that allows them to sell on for a profit.
If that sounds patronising, it’s an important distinction to make because it feeds into how one thinks about the value of an item.
What is the market value?
Broadly speaking, the value of an antique item at any given time is what you can sell it for – meaning what buyers are willing to pay for it at around that moment in time.
Experienced and successful antique dealers, of which there are now only a very small number, know this well. Inexperienced dealers often do not and it’s why they fail.
The problem is, many newbie dealers assume that an antique is worth what they paid for it plus their profit percentage. They sometimes even look up what other dealers are asking today for such items to support their valuation methodology.
The absolutely key message is, THIS TECHNIQUE IS USELESS FOR ESTABLISHING THE VALUE OF AN ANTIQUE ITEM AND THEREFORE HOW MUCH YOU SHOULD PAY FOR IT!
The reason for this is very clear. What someone else is asking only tells you that they haven’t managed to sell the item for that price so far. That should be a big warning – not an encouragement to match their expectations.
How can you tell the potential profit margin of an item prior to purchase?
This only comes about as a result of two things working in harmony:
. years of experience, which usually leads to an instinctive feeling about the ease of a quick turnaround and a probable market-realistic price. Of course, it isn’t instinct alone but something supplemented by extensive and ongoing daily research plus the monitoring of online retail operations and public auctions;
. being able to source items VERY cheaply – in other words, well below the figure you’ll have in mind from the point above.
Many inexperienced dealers operate on the basis of going to public auctions, buying items then assuming they can add 50-100% for a retail resale price. Do that and you might have the odd win but overall, you can be fairly sure that you’ll get burned badly and be bust in 2-3 years.
How should it be done?
Let’s assume you’re a dealer looking for stock.
Buying stock you either won’t be able to sell or only sell at a loss, is a total waste of your time and money. You may get a buzz at beating other dealers to it but that high will be nothing but a very distant and sour memory when you’re still looking at the item on your shelf in 2 years’ time.
. ignore what other dealers are asking for their items;
. by contrast, be sure before going out to buy, that you’re armed with extensive credible market research giving actual sale values over a sensible time period of perhaps the last 12-18 months. Use those to give you a rough average realistic resale value;
. subtract from that price, about 75% AT LEAST. That will give you the maximum figure you’ll be able to pay for the item to cover your costs, taxes and to leave even a small profit margin. You’ll need to be around 75-150% lower if you want a decent profit margin. DO NOT pay more than that for the item because you got into a bidding war with other dealers – you’ll regret it if you do.
Easy it is not!
Other top tips to achieve profitability when selling antiques
Here is the painful reality.
The single biggest factor driving antique dealers out of business is essentially that there are simply too many dealers in the marketplace and this badly affects the prices being paid at source for items.
In some European countries, there are now 5 times more antique dealer businesses registered than was the case as recently as 2019 – even though vast numbers have gone bust over the same period. That should be a very sobering thought.
Add to this the current ‘fashion-swing’, meaning a relative lack of retail buyer interest in many antique domains, and you have a case of supply vastly exceeding demand.
If that’s not bad enough, the excess supply of antique dealers engaged in all-out war with each other to try and secure stock is driving wholesale prices up and up at a time when retail prices are declining in most areas. In fact, it’s very often the case now that prices at what were once wholesale source are actually higher than a realistic achievable retail price would be for the same item.
The Top Tip to avoid disaster is therefore – whatever your business model is, you need to be aware of this background and be sure to avoid being sucked into the spiral of overpaying for your stock.