Processing a Collection: A Case Study
3/7/2012 10:23:00 AM
Other Reading on Large Acquisitons
I just acquired a friend's collection this week, because of which I spent many long hours sorting and picking. The seller kept a few pet decks and some nostalgia cards, but he wanted to reduce the ‘footprint' of his collection. This usually happens because the person is moving, has a new addition to the family, or wants to make a large purchase and needs the money. We spent a great deal of time examining the details of the collection together and I was able to meet his asking price.
MTG trading is a backwards sort of job, in which you “buy” work. When I paid the asking price for this lot of cards, I was also committing 20+ hours of my life to processing it. When debating an offer in my head, I always consider the ratio of time to profit. If the math doesn't suggest a fair hourly worker's wage, I either try to get a lower price or back down. There's nothing wrong with bowing out of a negotiation, but I'm a big fan of the whole “Always Get To Yes” school of thought. I'm the guy that'll trade brick for brick in Settlers of Catan, just to get things started.
In this case, the math worked out in my favor. It was a large collection, though fairly well-organized. Organization is a big determining factor. If the collection is pre-sorted, I save time. If the collection is documented or priced, even better. Even though I may not agree with their pricing, I can compare it to my own to better understand how my counter-party thinks. I consistently get questions about large acquisitions, and while I addressed a lot of this in my previous articles on the topic, this acquisition presents a nice case study that should help answer further questions.
I'm going to avoid discussing the contents of the collection or the price to keep focus on the process rather than the actual transaction.
The collection contained 25,000 cards (25k). About 500 of these came in a box and were individually priced against an online buy list. The rest of the 24,500 cards were broken down into ‘macro' categories, from which we derived prices. For example, we might value 100 bulk rares as 0.10 to reflect a bare minimum dealer's buy price. There were also bulk foils, which can easily command 0.05. Though nickels and dimes don't sound particularly lucrative, consider the two advantages of bulk rates:
You lock in a maximum loss. I got this rule from my friend JR, an derivative trading tutor. I realized that I had been letting my MTG trades run without any control over how much I might win or lose. Because bulk cards sell for a flat rate, the spread is 0.00. Financially, bulk is as good as liquid. The cost of handling bulk are transportation, sorting/picking time and capital opportunity cost. A good workflow will cut down all of these liabilities significantly.
With little or no risk involved, you get to cherry-pick thousands of Magic cards worth more than you paid. Essentially, you are “renting” the bulk cards and simply keeping those you believe you can sell for more. Once you've picked it (twice, at the very least), you can just pass it along to the next buyer. If they refuse to buy your bulk next time, you'll know you're not missing much when you pick. Picking is an art unto itself, and greatness can only be achieved with extensive and grueling practice. It helps to have a two-person team cross-picking and selling together, since the competitive nature of things will naturally lead to quicker improvement. Assuming a competent picker and a well-formed order processing workflow, the act of buying and selling bulk becomes a matter of logistics more so than anything else.
Keep these two advantages in mind when handling a collection, and try to determine how much of the bulk you anticipate filtering out and keeping. Locate a nearby dealer who will agree to buy the cards off you and let them know you'll be contacting them in about a month with 25k bulk cards. Buyer before seller. Always.
In reality, we ended up breaking out the collection into a few core parts:
The Good Stuff
These were individually documented and priced according to an online buy list. It was very easy to work with the good stuff because I could just add some numbers and find my max loss.
The Good Stuff will have tighter margins than anything else in the collection. Whereas the upside of bulk is high percentage returns on small sums, The Good Stuff usually yields the opposite - low percentage returns on large sums. Both are agreeable, since the net gain is positive, but they have vastly different time and opportunity costs. Regardless, the best of the Good Stuff will serve as binder anchors, ensuring that you always have enough trade fodder to “get there.”
Bulk Rares, Foils, etc.
We set a fixed amount for this to roughly account for an agreed-upon value. It was imprecise but in the scheme of things, won't matter at all. Bulk rates for these cards are posted on most buy lists online. Most of the stores that sell on TCGplayer also maintain buy lists, so check them out and let us know what bulk rates you come across, and where.
We set bulk rares at 0.15, bulk foils at 0.05, bulk foil rares at 0.25. There were some other misc cards from Beta included, those were mostly counted as bulk rares, since bulk Beta commons have the same rate as bulk rares.
Bulk Commons and Uncommons
This comprised the vast physical majority of the collection, and scattered throughout are usually hidden gems for a buyer. I don't mean “OMG BLACK LOTUS” gem. I mean “oh hey a playable card”. When you process thousands of cards, these tiny wins add up. It's a useful service to the market as well.
Most reasonable people don't feel like rooting through 25,000 magic cards 3 or 4 times to gain an extra 5 cents, and that's very understandable. They want to get some fair market value for their cards, but do not want to spend the time to document it or pick through it. They accept that they may lose value, but overall the service of removal and compensation is more important.
Once these cards are sold, suddenly loads of new cards are introduced into the local community. This is especially true if a collection's brought in from elsewhere, but the influx of ‘fresh' cards is always welcome in any playgroup. Once they hit the trader's binder, they're available to the group at large. The trader serves as a very primitive market-maker to his network, and the margins on each transaction are enough to offset the addition work of carrying a large stock.
After the Hand Off
After you've checked it all out and closed the sale, do not just sit down and start sorting cards. I know I rant about Pareto's Principle all the time, but this is a perfect time to apply the 80/20 filter. A pass through the Good Stuff with an eye for the top 20% in value will basically build a ‘lean' trade binder. You can work with these high-end items without having to even touch the rest of the collection. The vital components are already in their own trade binder doing work on the trade floor while the bulk sits unfiltered for days. Weeks if you're lazy.
If you're eager to pick and flip the bulk however, you're still not just allowed to sit and sort. Take a pass through the goods and build that binder. Relegate as much as possible to ‘dealer trash' status, if you don't think it'll be in demand at all. Better to sell a card for 0.50 than to waste space in a binder when no one trades for it. Once you've built the binder and started a ‘dealer trash' box (sorted by set, of course), you can start picking the bulk stuff.
First, attack the bulk foils and rares. If you're a novice and don't know how to pick, be thorough and look everything up. Guess the price before you look. That's the best way to train your brain. The British used the same method when they taught civilians to spot and report German bombers. They handed a bloke a pair of binoculars and said, “guess.” Keep calm and carry on indeed. You'll be surprised at some of the cards that are worth money. I've been playing this game all my life, and I'm still surprised on a regular basis.
Once you've picked the high end bulk, mark the box with a P or something to indicate that you've seen it once. I like to use my initials, just in case it comes back around somehow. Then get started on the commons and uncommons.
This will take forever and it will destroy your mind.
I'm an experienced picker with an encyclopedic knowledge of Magic: The Gathering and it still takes me a long time to thoroughly pick a collection. The newer you are, the longer this will take and the more picks you'll need to do before you reach max value. Rather than explain how best to pick these vast tracts of cardboard - the answer is “just keep doing it” - I can only offer help on how to keep your sanity as you flick past Pearled Unicorn #347.
Things to Prevent Brainrot While Filtering Bulk
Note the lack of music on this list. You really need something to engage your mind while you just flick through cards instinctively. I always like to double up on my time efficiency, so I've been listening to Stanford's online lecture series on model thinking. Great stuff, those classes. So much great knowledge for free. If you're a newer picker and need to look up a lot of stuff, I'd go with the ‘fun movie' option rather than something heady or new.
Once you've finished the horrible task of picking the bulk, start sorting. Use the binary process as described in the prior articles to shave some time off the process. I like to sort each classification of card separately and only combine them when ready to box up. That way, the best cards in any given set's section are in the front. Makes it easier to do a ‘quick' order, in which you just grab a handful of the best cards in each set to get a quick cash infusion.
Don't think you've escaped Bulk Hell yet. Just because you picked those 25k cards once doesn't mean you're done. Oh no, no way. Always pick your bulk twice. I have saved hundreds of dollars by doing this, on many occasions. If you have the means to store bulk unobtrusively, just sit on it forever and pick it monthly. Prices change, unused cards get brought to life, and you learn things. The bulk is never as empty as it seems. I enjoy the second pick, since it is often just ‘free money.' I've paid off the collection ages ago, or I'm sitting on the profits in a binder, and this is just a bonus.
As the good cards rotate into trade binders and out into the wild, the middling chaff will be sold off to a series of dealers across the country for small sums of cash. You can torment the bulk one last time, making promises to the blasphemous old gods if they'll just give you one more ten cent uncommon. Eventually, you can sell off the remaining ‘true bulk' for the original purchase price. Ideally, it will leave your trade binder better off, and your wallet fatter.
In the end, always remember that trading is a service, not a fair value exchange. While 100,000 copies of Beast Hunt might equal a Black Lotus ‘on the books', you'd be hard-pressed to find someone willing (or able...) to make that deal. If I'm taking on a stack of boxes as high as my kitchen counter, I'd jolly well better be making a nice margin on some of the low-end dealer trash. Otherwise I'm just paying money to move other peoples' boxes.
- Your favorite podcasts
- Frank Lepore drafting
- Stanford's online lectures
- A fun movie you've already seen
A Fun Afterthought
I enjoy examining the series of containers and storage devices used when receiving a collection. Though I have seen many practical, absurd, dangerous and ill-conceived methods of transporting Magic cards, the Lululemon shopping bag is at once the most absurd and most practical containers ever given to me in a collection. Though hilariously contrary to its contents, it remains a rugged, effective bag capable of hauling large quantities of Magic cards. Unfortunately, it is littered with glib, new-agey commentary like “creativity is maximized when you're living in the moment” and requires you to fill complete a small survey on the inside of the bag. It's a shame that the bag is so obnoxious, because it's a fundamentally great bag for carrying heavy rectangular things. Someone enterprising should copy their bag and feature licensed Magic imagery.