Is There Even Any Room In The Hobby For Professional Stamp Dealers Anymore?

Today's post is not a scheduled one. It is actually more of an appeal to all of you. For once, I am not disseminating information to you, but attempting to open a dialogue. I am trying to do this because I am honestly not sure if there is a viable place in the hobby for me anymore, and I want to find out if I am just feeling sorry for myself, or whether or not I have actually stumbled onto an uncomfortable truth that I have to work on accepting. I am hoping that some of you will read this and will actually comment, so that I can get a real sense of what I should be doing.

Ever since I discovered stamps at the age of 6 in 1977 I have been hooked, and determined to do everything I can to serve the hobby and contribute to its long-term health. I recognized, even at a very young age, that in order for the hobby to stay healthy, it needed to have new participants, and it needed to have sharing of information - to expose people to ways of collecting they hadn't thought of, to show them how to get the most out of the stamps they do have and to open up collecting possibilities. I recognized that collectors would probably not take on the role of sharing ideas and philatelic research, at least not at a level that would allow the entire philatelic world to benefit. Many do exhibit at shows and write articles for obscure philatelic journals, but most of this is so out of sight to the general population that it appeals only to collectors who are already interested, and does little to encourage entry into the hobby.

I recognized thus, that the long term health of the hobby would rest on the shoulders of professional stamp dealers, since they were the group most in a position to be able to devote their resources, time and energy to these pursuits. Indeed, I thought for the longest time that most of them did, ignoring all the signs to the contrary that I saw growing up. In my collecting lifetime, I have interacted with several dozen stamp dealers - not a lot, and I don't know if they constitute a representative sample or not. But, very, very few of those dealers made me feel welcome in this hobby. Even though I spent every week's allowance on stamps, every Christmas present and every birthday present on stamps, I was largely treated as a nuisance by the very dealers I supported.

My first foray into professional stamp dealing, my first taste if you will, came in 1990 when I worked for a stamp dealer in Vancouver by the name of Weeda. Chris Weeda was an old-school stamp dealer from the Netherlands who had come to Vancouver in 1957 and had started his stamp business in 1969. Like most dealers of his generation, he dealt in all countries. Back in the 1950's and 1960's when every country had issued less than 400 stamps, it was possible to be a world dealer and carry a full inventory. But that began to change in the 1970's, and by now, dealing in all countries from 1840 to date is almost impossible, unless you have a very large amount of capital and a large staff.

Unfortunately, the profession did not, in my observation adapt well to this change at all. At Weeda's I witnessed, what were to be the first in a long series of business practices that have damaged the long term health of the hobby. It wasn't full blown though: Chris still did make time to explain philatelic terms to young children, and he did give packets of stamps to kids for free who came into his shop. He also had a penny box and sold packets of stamps like a 1000 different world, etc. to beginners. But his focus was still on his older customers - the ones with money to spend. The problem with being a worldwide dealer by this time was that there was just too much material to keep up with it all and be an expert in all of it. So Chris did, what a lot of dealers who were overwhelmed by the volume of modern material did: he eschewed it. Every opportunity he had, he would talk about how unworthy of a collector's attention this material was, how uninteresting it was and how it was a "drug on the market". This meant that he often turned collections of modern stamps away, and when he did agree to buy them, he would only offer an arbitrary percentage of face value.

The major problem with this approach to stamp dealing was threefold:

1. It started, or at very least fueled the discount postage craze. Dealers like Chris started using stamps as far back as the 1940's on their mail. Over time they have largely depleted the supply of certain mint stamps, while at the same time sending the consistent, reinforced message that any stamps issued after the War are basically worthless, which has, in turn, lowered the demand for this material, and has set in motion a never ending vicious circle that simply did not operate or exist back in the 1950's and 60's when most collectors bought and collected modern material because it was available, and they were collecting for fun.
2. It started the decline of retail stamp dealing. Dealers were not knowledgeable about the new issues anymore because they didn't see them as being worthy of their time, so they devoted little to no time learning about them or promoting them. Instead, their only interest was in selling the modern stamps in large bulk lots.
3. Young collectors can only afford the modern material when they are starting out. So, when you take away the individual retailing of single stamps and sets and replace it with a model that is only focused on auctions of bulk lots and sales of stamps costing tens, hundreds or thousands of dollars, you effectively shut out the young collectors who have moved past the penny stamps and want to get a bit more serious. So, eventually they leave and take up other interests. 

I have seen this time and time again in clubs and shows, where there are plenty of young kids who want to collect modern topicals, but go go shows and get told that there is nothing for them to see, or the adults act with such disdain at the idea of collecting modern issues that the kids are turned off. So, that was the first thing I noticed about professional stamp dealing back then, and carrying on into the present. 

The second trend that I saw being born, which has now become a runaway, out of control freight train is the unreserved auction, or bidboard. Chris thought it would be a good idea to run a weekly auction of 40 lots in which there were no minimum bids! It was a welcome change from auction houses that actually required you to pay a minimum amount to participate in auctions, and saw themselves as having a responsibility to maintain an orderly market. While it may have seemed to Chris and other dealers at the time like a good idea it was based on a flawed understanding of economics and it only succeeded because Chris, and most of the dealers did not own the stamps they were auctioning, or if they did, it was limited to a few lots out of the total. How were the economics flawed?

In economic theory, unfettered capitalist markets are supposed to function perfectly. They are supposed to achieve a market price in which supply meets demand, and the prevailing market price is sufficient to ensure that every person who wants a particular good or service can acquire it. The problem in practice is that this theory is based on perfect flow of information. It is based on the assumption that every potential participant in the demand side of the market is both aware of the sale and in a position to act on their desire. Of course, this is not even remotely true in most markets, and certainly not for stamps. Indeed, this is why government regulations and controls exist in many markets, and why business instituted controls exist in others. If Chris had an auction that ran for a week, then the only people who were aware of that auction and who could participate in it was an extremely narrow and limited group of people: those who came into the store that week. That's it. It was a group of about 50-60 people - that was his market. This was before the internet, so there was no additional exposure. Yet, he and his customers somehow thought that the realizations achieved in those no-minimum-bid auctions actually represented real market values, which of course they didn't - they couldn't possibly, because 99.9999% of the broader market for those stamps weren't even aware that there was an auction!

And so was borne the runaway train. It spread first to other dealers, and then when E-bay became a thing, to the internet. I call it a runaway train because it started a process of rampant price deflation: as stamps began to sell for mere fractions of what dealers were charging and what the same stamps sold by established auction houses would have sold for, collectors started to believe that market values had declined drastically, when the decline was likely not as drastic as everyone thought. Looking at realizations at auction houses that promote their material, have strong mailing lists and reserves on every lot, yet manage to sell most lots with sell through rates in the 85-95% range is the strongest evidence that I can see to support the notion that the values of collectible stamps are not that much different from what they have always been. If anything, many values have trended upward. I can hear you asking "Yes, but with worldwide exposure on the internet, wouldn't that guarantee a fair market realization?". Well, it would if the internet wasn't so cluttered with billions of websites that all the market participants knew about and acted on all the sales they were interested in. But the problem now is there is so much on the internet that it is all background noise for the most part, and a lot of the content is invisible to most viewers. To view and keep up with all the listings on E-bay every week, for even an obscure topic requires hours. So, we are almost back to where we started before the internet existed in terms of awareness of the sales of interest. Couple this with E-bay's manipulation of their search results, and you can pretty much guarantee that the number of buyers at any given time for stamps sold online is just as narrow as the 50-60 people who used to attend Chris's auctions every week. 

Why is this happening? Because E-bay makes more money this way in the long run. They get to attract buyers who keep coming back for more and more deals. "Disruptive Innovation" is a term that E-bay's top leaders tout all the time. So, far from seeing themselves as having a responsibility to maintain an orderly market, E-bay actually sees their mission as being to disrupt and destabilize the markets as much as humanly possible for the gain of their shareholders. They are not interested in showing a seller's listings to every potentially interested buyer, because if they did, stuff would sell for much higher prices and much of the appeal that E-bay has would disappear. 

The main reason that these auctions exist and can function as they have is that professional stamp dealers have largely stopped retailing individual stamps to collectors, preferring instead to run auctions where they can make more on commissions for doing very little work comparatively speaking, than they made retailing. Because they have largely stopped retailing, or have significantly curtailed it, they aren't buying as much as they used to, or if they are, they aren't offering very much, well because thanks to the perception that these online auctions have created, they can't sell stuff anymore for reasonable margins. Thus, from a collector standpoint, the liquidity that dealers used to provide is now largely gone and these auctions are the only way for most collectors to sell. So it becomes a self-perpetuating vicious cycle. 

There is, in my mind, no reason why it had to be this way. If dealers as a whole had understood the broader economic ramifications of what they were doing in the 1980's and not done it, then I do believe that the hobby would be in a much healthier place than it is now. There will be many of you who will vehemently disagree with me and say that the decline of retail professional stamp dealing has been good for collectors because it has made everything cheaper and more affordable, so how can it be a bad thing?

My answer to that is that it is only good temporarily, and only for the people who are currently buying, and even then, only for the people who aren't particularly picky about what they buy, so long as it is cheap. It is very bad for anyone that spent good money building their collection and were counting on selling it to help fund their retirement. You can criticize these people all you want, but the fact is that for a very long time prices were stable enough and demand was stable enough that you can't really blame then for expecting to be able to collect, invest and then realize their investment when the time came. It is very bad for any collector who actually wants to be able to buy specific, individually priced and graded stamps in the $0-$20 price range, because most of that material is now only sold in bulk. It has also, as I have said earlier, largely led to the young collectors being completely ignored, and to little to nothing being done to promote the hobby. I hear the old collectors complaining all the time about how kids just aren't interested in stamps, but it never seems to occur to them that maybe that has less to do with stamps being inherently unappealing and more to do with how they aren't doing anything to entice younger people and introduce them to the hobby on their terms, instead trying to force them to become interested in what interests them.

So, I say all of this because I believe that I understand where much of the anti-dealer sentiment that I see on the various Facebook groups and online forums comes from. I do believe that there is a lot of this sentiment. It ranges from comments about how dealers rip collectors off, to boards not allowing dealers to join or promote their businesses.

But the truth is, there are some of us who do care fiercely about the future of this hobby. I am one of those dealers. I was a partner at a Toronto accounting firm in July 2015 and I had a decision to make: do I buy in and commit to a lifetime in public accounting, or do I follow my dream of becoming a stamp dealer and publishing philatelic articles online where everyone who cares to can read them? I chose to leave behind a six figure lifestyle and become poor, so that I could attempt to undo some of the damage that I have seen done to this amazing hobby. Every week without fail, I have spent an entire Tuesday or Wednesday, researching, writing and sharing my stamp knowledge with the world for free. For the first time in my adult life, I truly felt like I was doing something worthwhile. I specialized in Canada and British West Africa, and for a time my business on E-bay seemed to be growing. 

But then, a few months ago, it all just stopped growing and started shrinking. I started posting my blog articles again on Facebook groups to try and reach more collectors and hopefully turn the tide, but it hasn't really helped much. I have started my own website and re-focused my area of specialization because it seems to me as though maybe I wasn't serving the collectors as well as I thought. But the problem is, I simply don't know what collectors want, and I wish I did. My posts get plenty of likes on Facebook, but very little real engagement from readers. So, I am left guessing. 

My fear though, is that the relationship between professional stamp dealers and collectors is just so damaged now that collectors, as a group simply don't care if we survive or not. We have become irrelevant to them - mere unwanted middlemen, who provide no perceived value. It seems to me as though most collectors would rather just trade with one another or sell direct to one another, one stamp or set at a time than to buy from a professional dealer. I don't know if this is true or not, and I would like to know. Because, if it is true, then I really am wasting my time and going further and further into debt for nothing. 

If collectors would engage me and tell me what they want from a stamp dealer, and it is actually possible to deliver it, I would do my level best to do that thing, even if it meant having to take on more debt, turn the ship around and completely change my business model. I am not trying to whine here, although I am sure that my post is filled with a lot of unpleasant emotion. I am just frustrated and at the end of my rope: I want to do something meaningful with my life and for me it is serving collectors. But, I just don't know if it is possible anymore. So, I am asking you, the larger body of collectors for your insights.