This article appeared in
July, 2016

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Abandon the Race to the Bottom

Most Scripophily readers know that I specialize in cataloging collectible stocks and bonds from North American railroad and coal mining companies. I don’t remember exactly when I started collecting information, but it was probably around 1988. Practically every day since, I have recorded information, images, serial numbers and prices. In that time, I have recorded well over a million certificate listings, offerings and purchases, of which 637,530 are records of confirmed sales and non-sales.

It is painfully obvious that prices in my specialties have been in a protracted downward trend since about 2001. I correlate that trend with the growth and popularity of online auctions. It is clear that online auctions allow anyone, amateur and professional alike, to sell certificates at any prices the market will bear. Unfortunately, that has resulted in a bear market.

It is also apparent that many amateur sellers are not really interested in the hobby at all. The majority seem interested only in selling at any price. The result has been what Scott Winslow describes as a “Race to the Bottom.”

All professional dealers, large and small, have been hurt. To get a piece of the pie, many have tried to chase amateur sellers’ prices downward and have thereby succeeded in driving other professionals out of businesses. What are remaining dealers to do?

After watching the process for so long, I’ve concluded that the best course of action is for professionals to separate themselves from amateurs in every way possible.

My records suggest quite strongly that sellers who act and look professional routinely fetch higher prices than most amateurs. Personally, I miss the days of printed catalogs and I am not convinced their disappearance has been good for the hobby. Nonetheless, whether we like it or not, it seems advisable for all dealers to accept that marketing to collectors is now nearly all electronic.

Thankfully for dealers yet to make the transition to electronic retailing, there are numerous examples of professionals who are doing things correctly. If dealers will spend a few hours searching the web and taking notes, they can discover exactly how to do things right and how to improve upon visible failures.

It appears to me that professionals now need a web presence and preferably one independent of eBay. I know that sounds intimidating. And I can assure reluctant dealers that development is never as cheap nor as easy as promised. Fortunately, dealers now have ever-increasing and ever-improving choices to get ecommerce sites built and running quickly. There are many possibilities to choose from, but I would start by looking at what, and their close competitors have to offer.

Driving business to web sites is truly daunting. And, yes, the siren song of using “Social Media” is a very hard song to learn, let alone harmonize with profit. Before committing cash to their marketing adventures, I suggest dealers spend time, maybe several weeks, investigating the possibilities and costs. If dealers are just now realizing they need to “up their game,” they are already behind the curve. Taking a few more weeks to understand their options is not going to hurt, but will result in wasting as little money as possible when that finally start development.

In developing web presences, dealers should probably plan to, 1) list ALL their inventory; 2) make sure sold items are removed immediately, and; 3) insure that searches are highly efficient and accurate. Fortunately, most ecommerce providers have already solved those kinds of problems.

Now to the subject of professional appearance.

Every single day, I am amazed at the lengths amateurs go to make their certificates look bad. I could spend pages describing mistakes, but let’s focus on what to do correctly.

Use a scanner. Even small scanners are better than nothing. Fortunately, there is free software available (Image Composite Editor) that will stitch multiple scans together perfectly. Display entire certificates. Make images bright and inviting. Avoid colored backgrounds.

Always orient certificate images properly. Avoid trying to look “artsy.” Clean, rectangular images usually outsell canted, poorly focused, dark, and misshapen images. If selling on eBay, make images at least 1,600 pixels wide. Post all images on the eBay site and never force potential buyers to go offsite to view offerings.

I always suggest dealers illustrate the exact certificates they are trying to sell. For years, correspondents have told me how they hate receiving certificates different than the ones they thought they were buying. Buyers who receive anything other than expected are seldom happy and unhappy buyers seldom return.

In all cases, I suggest sellers remember intent. While certificates might be historical, dealers are not selling history and they are not selling education. They are selling certificates and should focus their efforts on describing certificates. I understand that many sellers think long, exhaustive narrations about corporate histories and family genealogies are terribly interesting and will boost sales. While advertising pro, David Ogilvy, proved that, “The more you tell, the more you sell,” he worked in the print advertising era. Thousands of price records clearly suggest tight descriptive text works better online, at least for the sale of collectible certificates.

Ecommerce buyers have short attention spans. Collectors want to learn if the certificates they are buying are cancelled, torn, folded, or anything but perfect. Are getting good deals? Every day, I see proof that dealers who use large, high-quality photos and tightly focused descriptions regularly outsell those who don’t.

In closing, I see significant opportunity to push prices up, not down by abandoning the “Race to the Bottom.” Look professional, be professional, and make more money.