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Friday, January 16, 2009

The Auction Model

An astute reader pointed out that maybe Topps could address the direct model and lack of the chase by using auctions to sell their goods. While I agree that this model would be more viable than a simple direct sales model, I do not think this is a long term solution.

I don't want to be misunderstood, I think that Topps could sell these direct sales patch cards, but not at a price that would support the model. The other day The Sports Card Files told us that Prince Albert charges $200 for his auto. He has every right to charge whatever the market will bear or is it bare, but I think the Prince might find companies not willing to pay this amount. It is clear that Al's signature does not bring this type of return. Although there are many of the signed cards that sell in excess of $200, there are many that don't. Thus if Topps had a direct sales model of a Pujols auto/patch card, it would have to be priced in excess of $200 and possibly $250. Obviously, given current auction results, this model would be a failure.

Maybe Topps could do exclusives so that P-job's auto/patch cards are only available through the direct offer. Given the number of current cards on the market, I do not believe there is enough product differentiation for someone to pay more for an 09 that is only available direct and limited to 50 copies than for an 03-08 that is widely available at a much lower cost. For many collectors Topps' auctions would be competing with ebay auctions of cards from past years.

Think about it this way, if the autos are produced proportionately to the cost of the auto, that pricing differential is probably built into the secondary market already. Thus even a lesser player that charges less would not make Topps any money because the cards are more plentiful and in less demand than El Pujolsio.

If MVPujols charges $200 for an auto and so Topps makes 100 of them due to the cost, and Randy Johnson charges a $20 for an auto and Topps makes 1000 R-Dog autos, the secondary market would yield sale prices in proportion with the supply and demand. Randalina does not see the same demand and has a lot higher supply so the sale prices. The bottom line is Topps would still not make any money this way no matter what the player. Plus Topps would have to have too many exclusives to make it work.

I realize that GU cards may go away do to the overproduction, so it is possible that Topps could stop inserting GU cards all together and go to a direct model exclusively. This would, in essence, destroy the higher end pack market because a pack product with no GU or nothing but third and fourth tier GU would be an entry level product at best. Topps would have to weigh the scenarios and decide whether that model is viable. Maybe they could make A and G with nothing but fake 1/1's that are nothing more than an extra layer of parallelism, Dinosaur Teeth, and capsules of Abraham Lincoln farts, but I just don't think that would fly for more than one or two years.

That's why I don't think the direct model would work in either fashion. What we need is for Topps, Upper Deck, and Donruss (on the football side) to limit the number of products to 3-5 at most. That would save the hobby. How much do the companies spend on development on the 400 sets they put out every year? They could cut their costs substantially if they cut down to a few products. Say Topps produced Bowman for prospects, Topps as their workhorse, Chrome for the midlevel, Finest for mid high, and every year issue a developmental product. Like on the SAT's where the testing company tries out different questions and sections. Finest's price point could increase by 20% and contain all of the high end hits.

Just a thought

3 comments:

Captain Canuck said...

Hey!
Don't go making too much sense now.. it might catch on.

stevenljudd said...

If the companies cut down to 3-5 products per year then they would need to sell 5 times more of each than they currently sell which is not going to happen.
Randy Johnson charges $80 for his autograph and nobody puts more than 150 of them in any given product.
The direct model would work if set up properly. I guess since everyone had misunderstood what I was writing about I will write up another post outlining the specifics of the program.

stusigpi said...

Steve

If Topps only had 3-5 products per year their sales would increase. I am not sure as to the factor, but it would increase. I realize you worked for these companies, but even if you have seen their projections, they are just that projections and probably inaccurate because I doubt they are able to quantify collectors like me into those numbers. I might go from 0-1 boxes of chrome per year to a case or more because my dollars would not be so spread out.
I was using Johnson as an example only as I have no idea as to how much each player charges. I could have used Todd Helton, Andre Either, or anybody, the specific player was not important.
I disagree, I think the direct model would fail in quite a spectacular fashion. I have yet to see anything that would convince me otherwise.