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Managing Buying Expenses

I run ads on the Internet to buy antiques. My ads state that I am a professional dealer with 35 years experience. I am willing to travel anyplace in the United States and most European countries to purchase complete Estates and large collections.

In addition to buying more than a dozen estates and collections here in the U.S. I have purchased two collections in the UK and a major collection in Prague, the Czech Republic.

Generally, I receive four to six contacts each month offering complete estates, complete collections, or the content of retail shops that have gone out of business. About one in ten offers is for the type of antiques and collectibles I am searching for. Recently, I received two such inquiries from the Philadelphia area. After speaking with the owners of both collections, I decided to take a trip to Philadelphia.

Internet advertising is expensive. Buying trips are expensive. These expenses add money to the cost of the things that I purchase. This article will examine in detail my buying trip to the Philadelphia area and a buying trip to a major antique show.

Advertising costs: I pay Yahoo $300 each year to carry my wanted to buy page. I pay three other search engines $700 each per year to carry these pages. I also advertise in trade publications and in collect sport related publications. My annual wanted to buy advertising budget is $3,600. This advertising results in 10 buying trips each year. Therefore, each of my buying trips has a base expense of $360.

Philadelphia buying trip expenses: My trip to Philadelphia required that I stay two nights in motels. I spent the first night at Macintosh Inn in Bensalem, PA. The cost of my room was $87.20. I spent the second night in Flemington, NJ, the cost of this room was $122.10. I purchased six tanks of gas for a cost of $210. I paid $16.65 in tolls. Expenses for meals were $75.80. In total, my out-of-pocket expense for this buying trip was $511.75. The cost of my advertising that made this trip possible, $360. My total buying expense of this trip was $871.75.

I arrived at my first appointment at 8:30 a.m. I spent six hours inspecting this lot. I decided to buy approximately one-third of the collection, 121 items for a cost of $1,025 ($8.32 each). I then drove approximately 50 miles to my second appointment arriving at 3:30 p.m. This lot was in much better condition. However the price was much higher. I concentrated on the low-end items. I purchased 44 items for a total cost of $350. ($7.96 each).

The two lots produced 165 items at an average price of $8.25 each. My buying expenses were $871.75. Therefore, my total cost for each of the 165 items was $13.53.

Generally, buying expenses are between 12 and 20 percent of the cost of goods purchased. My buying expenses for these to lots were 60 percent. This is common when a dealer buys inexpensive collectibles. Had I purchased $8,000 worth of merchandise for an expense of $871.75, my buying expense would have been between 10 and 11 percent.

Dealers who carry inexpensive collectibles must pay careful attention to buying expenses. In addition, the price mark-up must be higher. Dealers who carry high-end formal and country furniture that sell for thousands of dollars each can do well with a mark up of less than fifty percent. Dealers who sell inexpensive collectibles need a mark-up of 300-500 percent.

Reducing buying expenses: The most effective method of reducing buying expenses while on a buying trip is to spend more money and buy more merchandise.

Because I was close to a flea market, the Golden Nugget, near Lambertville, NJ, I decided to get a hotel room nearby so that I could visit this flea market early the following morning. In the past, I have had great success purchasing antiques and collectibles at this location. In addition, Lambertville, NJ has nearly 60 antique shops. I planned to spend the remainder of the next day visiting these shops.

Spending a second or third day on the road is a great way for a professional dealer to lower his or her buying expenses. Because the dealer is already in the area, the only added expense is gasoline and meals. I purchased an additional tank of gas that cost $38.00. I spent $27.00 on food. My cost for a second day of possible buying was $65.00.

My visit to the Golden Nugget flea market was a great disappointment. I arrived at 7 a.m. and shopped the market until 11 a.m. Only 25 percent of the tables had been rented. The displaying dealers carried yard sale junk. I was not able to make a single purchase. I then drove to Lambertville to visit the shops. Again, I was disappointed. Only three shops were opened. Many shops had signs that advertised hours that included the time I was in Lambertville, however, even though I waited more than one hour, none of the shops opened. Last time I was in Lamberville, I spent more than $3,000. On this trip, I spent zero.

I then drove to Boonton, NJ. This small town has more than two dozen antique shops. I have, in the past, purchased many fine antiques from the dealers of this area. However none of the shops in Boonton were opened.

The extension of my buying trip was turning out to be a complete dud. I decided to head towards Maine and visit the shops in Putnam, CT on the way. All of the shops in Putnam were open and I did buy one item. However, when all of my buying expenses for the extra day on the road are added to the cost of this item, I will lose approximately $48.00. In plain English, I worked 12 hours for no income and spent $48.00 of my own money to do so.

My buying trip to Philadelphia, despite the high buying expense, will produce an acceptable profit margin. Had the shops in Lambertville and Boonton been open, I may have been able to add to my profit margin with little added expense.

Madison-Bouckville show: I have just returned from my buying trip to the antique shows at Madison-Bouckville. This buying trip requires that I stay in hotels five nights. A review of my expense records shows that I spent $486.16 for hotel rooms, $24.65 in tolls, $146.22 on gasoline, and $135.41 on food. In addition, the early buyer's fee for the big show was $40.

I am not willing to give a detailed breakdown of what I purchased. However, at such a show, to keep my buying expenses between 10 and 20 percent, I must be able to purchase $8,000 to $10,000 worth of merchandise at prices low enough to allow for a quick resale. Large shows such as Madison-Bouckville, Brinmfield, and the Metrolina show in Charlotte gather in one location enough vendors to make this type of buying possible.

Buying expense is real money. It is out-of-your-pocket money. This money must be recovered when an item is sold. For example, if I were to spend $1,000 in expenses on a buying trip and bought only $1,000 worth of antiques, each dollar that I spent buying an item would represent an investment of $2. Therefore, an antique that cost $65.00 would actually cost $130.00. To make money on such an item, the resale price would have to be marked up from the $130.00 actual cost, not the $65.00 paid to the seller.

Buying expenses can be reduced by sleeping in your car, staying in cheap motels, carrying along all or most of your food, or by buying more items.

Seven Madison-Bouckville dealers contacted me by phone, email and by post with a list of items they have in stock that I normally buy. Three of these dealers keep everything under a table until I have had a chance to look at it. I generally buy everything these dealers have set aside. I have bought from all three for more than 20 years. They are honest in their description of condition and their prices are acceptable.

Two dealers send many invitations, have all their merchandise priced and displayed, and sell on the first come first served basis. I try to visit these two dealers early in the show.

The other two dealers send letters to many buyers hoping to make more money playing one dealer against the other. They do not price their merchandise. Generally, they do not sell until several likely buyers have made offers. I do not visit these dealers early in the show. I do not want to be the first buyer to make an offer.

Profits on the items that I buy at Madison-Bouckville must be large enough to pay all my buying expenses, selling expenses (which can be as much as 20 percent), and pay income tax on profits. In addition, profits must be large enough to generate money to make my house payment, car payment, and health insurance premiums. I am self-employed. My health insurance premiums alone are more than $800 a month.

To make a living, full-time dealers in the antique trade must develop good buying skills. Such dealers must have the will power to leave behind antiques that they would love to own that are priced to high to allow for fast resale or generate adequate profits.

All buying decisions must be based on potential profits, not emotions.

This article was reprinted with permission from the The Journal of Antiques and Collectibles. Ed Welch's monthly column is entitled The Business of Doing Business in Antiques.