By KRYSTLE CHOW
Published in the Ottawa Business Journal newspaper and website.
July 31, 2006

Click here to view this article on OttawaBusinessJournal.com.

With the worldwide collectibles market booming, many entrepreneurs are finding success buying and selling collectors’ items online, thanks to the electronic marketing phenomenon that is eBay.

But local businesspeople caution against giving up your day job to invest full-time in Beanie Babies and rookie sports cards.

“The market is constantly changing, and you can’t count on something selling for a decent price,” says Inma Services owner Petr Maly, one Ottawa entrepreneur who does make a decent living using eBay. “The biggest obstacle is figuring out what’s coming in (in popularity).”

Mr. Maly has been selling consignments of antiques and collectibles on the auction site for eight years. However, despite his success as an online merchant, he warns that the collectibles market can be a tricky one to manoeuvre.

“You have to have a lot of knowledge, and you have to think ahead,” he says, explaining that it’s often difficult to predict which collectors’ items will sell at any time with only a general knowledge of the market.

He says eBay has played a large role in shaping this volatile market, with varying effects on the prices of collectible goods.

On the one hand, he says, the site connects buyers directly with sellers of high-end items such as antiques and artworks, and eliminates the need for the middle man, with more profits for sellers and greater ease for buyers in locating specific items.

However, eBay has also led to a decline in value for rare fad items which were once in high demand – such as Beanie Babies or Cabbage Patch Dolls – since it’s now so much easier to find rare models than before the advent of the site.

Investment strategist John Budden says, while the higher-end collectors’ items are certainly viable, fad items are a risky investment because they are in fashion for such a short period of time, and thus quickly rise and fall in value.

“What happens is that people quote you values, they say that this Beanie Baby that cost $3.95 is now worth $3,000 on eBay,” he says, “but the trick is really capturing that value, getting someone who will bid you that $3,000 for it.”

Some brick-and-mortar collectibles stores, such as Miraj Trading on Carling Avenue, find eBay has been both a blessing and a curse to business.

“eBay has really affected the industry in the fact that it tends to devalue a lot of the merchandise we’re trying to sell in the store itself, because people buy merchandise within the store and sell it on eBay at a cut-rate price,” says Kurt Hamnes, a sales representative at the sports cards store.

Nonetheless, he says Miraj Trading has also been using eBay for more than seven years as a tool to sell surplus merchandise from the physical store and provide a stream of supplemental income.

“It’s the biggest selling market in the world for sports cards,” Mr. Hamnes adds.

Mr. Budden says eBay is the equivalent of a global stock exchange in collectibles that allows collectors to quickly liquidize items which might otherwise be impossible to sell. He laughingly refers to the main character in the movie The 40-Year-Old Virgin who makes a good deal of money selling his action figures on eBay.

However, he adds that part of the difficulty in trading in collectibles is they come in all shapes and sizes, unlike stocks.

“Collectibles are very different; these things are not standardized. Whereas a stock, if you’re talking about 1,000 shares of the Canadian Imperial Bank of Commerce, that is a standardized unit. You know that it trades every day between 9:30 and 4 and it trades in high volume, so there’s no concern about the liquidity.”

Mr. Hamnes says it’s also rare for collectors to find items which will actually appreciate in value.

“If people go out today and say ‘I’m going to buy this merchandise, I’m going to make a lot of money,’ I would say no, it’s not going to happen,” he says. “I would say that about 75 per cent of sports cards that are sold today will either lose value or just hold their value and not go up.”

He says there have certainly been cases where a person has pulled out a valuable Sidney Crosby rookie card out of a pack of sports cards and sold it on eBay for USD$800, but stresses that it’s the exception rather than the norm.

As such, both Mr. Budden and Mr. Maly agree that the majority of collectors trade on eBay for fun and personal enjoyment rather than for serious investment, as an expert amount of knowledge is required if a person is to try and add low-end collectibles to their portfolio.

“If you’re doing it at the low end, these things like baseball cards, Barbie dolls and Beanie Babies, I would be extremely careful and if you’re doing that sort of collecting, you should focus on one area and be an absolute expert, and then keep your fingers crossed and hope for the best,” Mr. Budden advises.

“If you’re involved in a fad, it’s no different from a bull market in stocks – it can turn into a bear market, and so you can find that your collection is worth much, much less very quickly.”