Author’s note: This article is not intended discourage interest in our hobby but rather provide a financial perspective of our hobby.
“Where do the numbers take us?” is a phrase often used in finance. The laws of economics apply even in our hobby, but are we paying attention? Many say the market will recover, but the numbers say otherwise.
Things Working Against Coins—Market Fragmentation, Supply and Demand
Markets naturally fragment over time. As a kid my choices were reconstituted OJ or frozen OJ you reconstituted yourself. Today you’ll find at least two dozen varieties at your local supermarket. Low pulp, no pulp, calcium added, low acid, and so on. Aside from a bewildering array of U.S. mint products every year the market needs to absorb new foreign series like the Panda and “Year of” coins (next year the beloved pig). We even manage to fragment the market on centuries-old coins with discoveries of a new die marriage or variety.
The market will steadily fragment as more series and supply are spread over fewer buyers. Few collect more than a half dozen series, so more series will be “discontinued.” If an OJ is discontinued people consume what they have in the fridge and move on. OJ is a consumable, whereas collectible coins are a tangible asset. Someone with “discontinued” coins has resources tied up that aren’t easily liberated without loss. The owners of these coins are at risk of leaving the hobby. Few people collect coins less than AU anymore—they don’t have to. The mint doesn’t care that PF70 silver state quarters that once went for $100 now sell for the price of the holder. The mint is no different than GM. It exists to sell new products and has little concern for the used market.
Soft demand is one problem the coin community does recognize. Observing current marketing, I’m not sure the industry recognizes that anything competing for people’s time and money is as much a competitor as another dealer or grading service. The only people actively marketing to non-collectors are the bullion guys and the late night infomercials selling overpriced baubles. I found some nicely presented base metal Marshall Island commemorative coins in my Mom’s estate. It didn’t seem economical to travel to the middle of the Pacific to spend them so I threw them away. Those characters convinced a frugal depression era woman to part with her money, but at least they made the pitch.
Things Working For Coins—Liquidity, Wealth, and the Internet
The internet brings liquidity to the hobby with easy buying and selling. A quick Google search and any coin is yours. That dynamic does assist the industry in one way—more transactions enable dealers/auction houses to survive and perhaps even thrive. That is churn, though; it doesn’t affect the problem of oversupply. The average collector has more disposable income today. That wealth helps reduce supply and increase demand at the margins. We can’t rely on the wealthy to fuel the entire market just as the art market can’t survive by only selling Rembrandt’s. The whales who come into the coin market are buying coins most will only see in a magazine—they aren’t going to help the value of your silver war nickel set.
What to Do?
Hmm, I covered the things working for coins in a single paragraph. Hopefully I missed some. The issues raised are solvable, maybe easier than any of us think. The only people with the resources to address any of this are the grading services, big auction houses, and the U.S. Mint. There is little to be done about supply, but if demand is not addressed they will be fighting over a progressively smaller market. Remember how AOL stuck with dial-up because they were making money and everything seemed to be going well? Are we in the same situation now?
“The Ship of Gold is nice, but that won’t save us.”
People grouse about glow in the dark or Star Wars coins but why not? Watch stacker videos on YouTube and you’ll see they often migrate to numismatics but I see zero marketing directed at them. There are lots of retiring baby boomers who dabbled in coins as kids, a receptive market ready for a pitch. It is the young though we need to entice to the hobby more than any other group.
Charles Morgan of CoinWeek recently mentioned something I thought brilliant. Kids love their video games. He notes the characters in these games use coins as their medium of exchange, so why not find a way to work with the gaming industry? With her shield and breast armor, Miss Liberty on the Standing Liberty quarter is a ready-made warrior princess. That would certainly generate press coverage and publicity. It may completely flop but we won’t get out of this by the ANA researching the problem and formulating careful plans. The ANA knows nothing about branding and marketing. Our hobby does not know how to connect with 15-year-old kids or non-collectors in general. We need outside professional help. The Ship of Gold is nice, but that won’t save us. Put it on a flatbed and tour the country like that giant Idaho potato and maybe you have something. I work with technology startups. They perpetually try new ideas and let the market sort out what works. With coins new ideas are few and innovation is glacial. For evidence, look no further than the phone-book-size auction catalogs in the mail every month.
Millions of kids tromp across the landscape chasing digital monsters on their phones. Would it be so hard to seed a few dozen $10 Gold Eagles around the country for kids to pursue on a treasure hunt phone app? Even the mint might buy into that one. Busing a few elementary school kids to a new state quarter launch isn’t going to get us there. I suspect thousands of impressions will be needed to convert even one kid into an avid collector. Do the math: it will require creating millions of impressions to add only a few thousand collectors.
“Maybe we could learn a thing or two from Flood Rat”
The only time coin content has recently appeared on television is on Pawn Stars and two Strange Inheritance episodes. One of those episodes enticed me back into collecting after 25 years. Two episodes beats antique tractors by one and ties with toy soldiers. Does anyone at the ANA pitch ideas to producers? Doubtful. Surely there are some interesting stories out there. Everyone in media is crying for content. Are we missing bigger than life, media savvy figures that help build brands? Singer Rod Stewart was an avid railroad modeler and promoted it. Doesn’t any celebrity collect coins? Rick Harris of Pawn Stars loves coins. Shouldn’t he be a brand ambassador?
This month a video of a rat behind a pillar in the New York subway (aka “Flood Rat”) got national press coverage and something like a million online views. Is there nothing about this hobby that can get people as excited as a rat behind a pillar? Maybe we could learn a thing or two from Flood Rat.