Where Yesterday Meets Tomorrow
We are all barraged with a constant stream of offers for every imaginable kind of collectible -- from Beanie Babies to Marilyn Monroe Postage Stamps to Star Wars Collector plates to Elvis Presley porcelain dolls. People often ask us which ones are good investments. The answer is simple -- none of them! The resale value of such items rarely comes close even to the initial cost, let alone producing a premium and a profit. If resale value is a factor in your buying (and it certainly should be) then avoid "limited edition collectibles" like the plague. Invest your money in antiques and early 20th century items that were created for use, not for speculative investment. They have a proven history of holding their value or increasing in value over time.
To understand the collectibles market you only have to comprehend the fundamental principle of economics. If supply exceeds demand, the price will be low. If demand exceeds supply, the price will be high.
Most "Collector" items are produced in runs of hundreds of thousands or even millions. This is true even for most of the so called "Limited Edition" items. They are called "limited editions" because that phrase carries the implied promise of increased value. In nearly every case, however, the "limitation" is not some predetermined finite number -- it is the number that can be sold through intensive marketing! Unless the producers make an explicit unequivocal promise in their advertising to limit production to some fixed (and small) number of item, you should consider the item as having open unlimited production.
The marketeers are often very clever in their advertising. They will proclaim almost anything a "limited edition" but tie themselves into pretzels to avoid telling you what the "limitation" is. For example, they'll claim that production of a "Limited Edition" collector plate will be limited to "150 firing days." But they don't tell you how many plates will be produced each day. The answer, of course, is as many as they can sell! Other times, they will pledge that "Americans will have the opportunity to purchase only 10,000 of these beautiful dolls." But Canadians can also buy 10,000 as can the English, the Germans, the Australians, etc. So the true limit is many hundreds of thousands. And if they happen to reach their American limit, "I'm sure we can get you one of the handful of Ukrainian dolls that are still left!"
Collector editions are issued with very heavy advertising campaigns. Their promoters keep pushing the item until they can't sell any more. Only when they've totally saturated the market do they drop their production and advertising. That means that the item is not "retired" until everyone who wants one and is willing to pay the initial offering price has one. If you've bought the item as an investment, you can't expect to sell it above your purchase price until production ends. So now, finally, they end production after saturating the market. What demand do you now find for your "investment?" The only significant group of people who still want the item are those who were NOT willing to pay the issue price. They will only begin to buy as the price drops!
The promoters say that once they stop producing the item, the supply drops almost to zero because the people who bought them wanted them and will keep them rather than offering them for sale. That would be true if they were promoting the item only as a nice thing to have and to hold or if there was spontaneous unfilled demand for the item. But instead, they are touting it as an investment intended to be resold at a profit. People will immediate begin offering the plate or the silver medallion or whatever for sale (because that's why they purchased it) and supply will quickly overwhelm demand.
The occasional exception to this rule is when a series of items is issued over time. If the series proves popular, many more copies of later issues in the series will be created than of the early issues. Some of the later collectors will want earlier issues so there will be at least a little demand for the early items in the series. To ply that circumstance into profits, however, is difficult. You have to buy the initial item now at considerable cost and then wait to see if the series is successful enough to cause the promoters to produce the promised follow-up items in greatly increased numbers.
The fact is, there will almost always be far more examples of "Collector Editions" available than there are collectors for the item. Therefore, the price almost never climbs above a nominal value of a few dollars. Rarely does the resale value even approached the initial purchase price. Eventually, perhaps in 25 years or even more, supply might shrink enough and interest might develop enough for values to begin to increase. If you've got some of these items, don't sell them now. Hold them for the long haul and hope for renewed interest.
Of course, there are true limited editions. If production is limited to 2,000 plates or 10,000 sets of cards or whatever without a lot of weasel words, then you know what you're dealing with, at least on the supply side. Then you only need to figure out the other half of the equation - demand. Will there, in the future, be a more people who want the item than there will be copies available.
Will the Marilyn Monroe and Elvis Presley crazes continue? Probably... at least for a while ... but who knows for how long!?! Interest already seems less frenzied than a few years ago. (Who's Elvis Presley, Mommy?) How many people today are seriously collecting Maud Adams and Rudolph Valentino?
For prices to rise, demand must exceed supply. Where will the demand come from? Who are the Elvis and Marilyn Collectors? They are the people who lived with them as major parts of their lives. Will today's teenagers, steeped in punk rock and rap music, be as fanatic in their devotion to Elvis as are their mothers? Will today's teenaged boys fall in love with Marilyn when they grew up exposed to Madonna? Probably not. If there is not a steady inflow of new collectors, then demand dwindles and prices fall.
Not every collectible goes through this boom and bust cycle. Millions of people have loved roses for many hundreds of years. It is hard to imagine that they won't continue to love them for hundreds more. A Rose Society collectors plate limited to 8,000 pieces has a finite supply and at least a potential demand far exceeding that. Likewise, a collector plate featuring an nicely done cat and limited to 2,000 copies will likely have an ample group of potential buyers in the future.
The initial promoters and some major aftermarket dealers go to a lot of trouble to create the appearance of high value and rising prices. They issue "price guides" and sponsor shows. They buy and sell amongst themselves at inflated prices to create the illusion of demand and price increases. In fact the true retail market value of the items is far less than the price guide quotes and the "wholesale" price that a dealer will pay is going to be even less than that. (We have a large selection of price guides in our Reference Library at the center available for your use.)
Today, we have a very easy way to determine what the item is really worth. Get on eBay and search the recently completed auctions. They sell millions of items every week. You'll probably find exactly what you've got and it will show you the real world price. eBay has also made the problem of finding a buyer much simpler. If there's any collector interest at all, it'll be found on eBay. Just list your item and open for a $1.00. You'll probably find a buyer and the plate will sell for its true market value.
If you're lucky and your item happens to become a hot collectible then you have to decide how long the fad will last. Very few collectibles remain "hot" over the long term. Remember the Avon collecting craze of the 1970s. Today, you can't even give them away. Remember the riots caused by Cabbage Patch dolls? Today, you can buy them for a few dollars. Even recent crazes like "Tickle Me Elmo" have already faded into painful memories. Beanie Babies are fading fast. Pokemon is hot this year but don't hoard them.
To judge whether the item has long term "legs" you have to pay close attention to the public pulse. How many articles appear in the popular press? Today, Elvis is on the cover of TV Guide as Entertainer of the Century. In the last year or so, he's been on the cover of every tabloid and even on the covers of the news magazines. Marilyn? She was on a popular U.S. postage stamp. She had a big spread in Playboy magazine (again). There's an Elton John song that's still getting airplay. But keep watching that media index carefully. When the coverage starts falling off, the shrinking demand won't be far behind. The collecting fad will have peaked. It'll be time to sell.
Better than expensive collectibles are items that are not targeting the collectibles market.
We think that advertising, packaging, bottles, catalogs, are all good prospects - especially since the price (and therefore the risk) is minimal. The price is the cost of storing them for twenty or thirty or more years on the gamble that they'll become desirable and valuable. We have boxes of junk mail catalogs in our attic labeled "Open in 2042 A.D." We figure they'll be our kids inheritance (along with the 100's of auction box lots we never got unpacked and sorted.)
Of course if we really knew how to do any of this we'd be out buying up ware-houses full of the next great collecting rage instead of sitting around writing articles about it.
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