Acquiring in the Dark, Selling in the Light

- by Bruce E. McKinney


Jefferson: An internet collector if alive today

By Bruce McKinney

The world of books, manuscripts and ephemera enters a new stage and you can tell it is life changing by the anxiety it causes. What continues to emerge is clarity on the buy-side that is as comforting to buyers as it is discomforting to sellers because it clarifies price, value and rarity. It turns buyers into negotiators and introduces skepticism into relationships that have long been characterized by trust. As a consequence dealers increasingly encounter buyers who know not just the material but its pricing history and expect to acquire it within a logical price range consistent with condition. Such an approach is essential for the collector who pursues a passion and wishes, if not expects, their collection[s] to make economic sense - if not by comparison to stock market investing, at least as a repository of value that can eventually return to the market or be gifted for its tax benefit. Of course, if such purchases are financially unimportant, the acquirer may all but ignore references to fair or appropriate valuation. Most committed collectors however do not intend to waste money, nor do they have unlimited resources, so the emergence of valuation tools significantly alters collector attitude about price. The significance of this change is increased by the steep decline in prices since the 4th quarter of 2008.

Because prices, at auction, for books, manuscripts and ephemera have generally fallen by a third over the past sixteen months the scale of negotiation has moved from the "gentleman's 10%" into the realm of the traditional dealer discount: 20% and beyond. The difference is substantial though there are no rules about it and often no easy way to tell who is discounting, and how much.

The challenge to know who and what is negotiable is significant because perhaps 10% of dealer material has already been reduced, in some cases substantially, while most other dealers have held firm, believing their prices may be possibly high but only when judged in the short term. Even then, among those reducing prices, these reductions are not typically uniform. In other words some inventory may be negotiable while other material is not. As well, for some dealers, their costs may be uncomfortably close to current valuation and this affects their willingness to negotiate. From the acquirer's perspective a seller's cost is irrelevant but it's important to dealers, many of whom refuse to take losses irrespective of current valuation. This creates a mine field for buyers and a dilemma for dealers. What is appropriately priced? Dealers resolve this to some extent with negotiation.

These days the coded language to establish the scale of negotiation is "would you consider an offer?" That's the open door to larger discounts. If a dealer has already reduced their prices they'll explain their position immediately. If they have not they may be willing to talk. While the market is down this approach will be both common and effective. When dealers sense the market is recovering the range of negotiation will narrow.