So useful..
    So misleading ..
        So misunderstood ....
            So necessary !

Hardly a stamp collector, dealer, or auctioneer in the world can go far in their pursuits without coming across and using catalogue prices. Collectors quote them at each other. Dealers use them in price lists. Auctioneers use them as part of their auction lot descriptions. However, few collectors could truly explain what "catalogue price" actually means.
The best way of handling this subject, and of getting across any form of explanation, is probably to break this into several sections and headings, some of which will tie in with each other, some of which will be complementary, and some of which might even appear to clash - but that's what catalogue pricing is like !

DEFINITION
Back in the beginning, collectors could easily understand catalogue prices. The first priced catalogues were just that - lists of the stamps that a dealer had in stock, with the prices they were asking for them. If they didn't have it in stock, there wouldn't be a price. Prices would often vary considerably from one dealer's catalogue to another, as their stock and sales came and went. As there was little other way for a collector to find out what stamps existed (and therefore which stamps they were still looking for), the priced list of a well-stocked dealer was a very useful tool.
Those dealers that published the most comprehensive catalogues soon found that collectors were keen to acquire their latest list but had no intention of making any purchase. Dealers would charge for their lists.  Soon it became necessary to make the lists as comprehensive as possible including listings of all stamps, whether or not the dealer could supply them, and with theoretical prices if need be. The "stamp catalogue" as we know it today was born !
As most collectors looked to their catalogues as a form of reference, they became a benchmark for listings, numbers, and prices, and you would often find people try to tempt others into buying by showing how much cheaper they could sell a particular stamp. (If a collector somehow acquired ten of a stamp which was fairly scarce, and was priced in the catalogue at, say, ten shillings, he would probably find great difficulty in selling any at that full price. Perhaps the local dealers were selling them at seven shillings. But if he offered the stamps to his collector friends at four shillings, they might be tempted to buy.) On the other hand, people looking to buy scarce items might compete with each other by offering a higher percentage of catalogue.
   

IN OUR SHOP
One Saturday I did a very rough calculation based on all stamps sold in our shop during the course of a fairly typical day. As each customer left, I noted the price they had paid for stamps, and estimated the catalogue price of the items they had bought. Over the whole day, it worked out that we had sold stamps at approximately 10% of the catalogue price. However, this included a couple of items for which we had charged virtually the full quoted price, and others which had been sold at less than 1%.
One of the useful aspects of doing business in a retail shop is that it is very easy to demonstrate to visitors how much market prices vary in comparison to catalogue prices.
 

FAQ
Why do some stamps cost such a high percentage to buy, yet fetch such a small price when I try to sell ?  The most likely reason for this would be the uncertainties of supply and demand. If a dealer is offered a scarce stamp with a high catalogue price, but is not aware of ever having been asked for such a thing, and can't think of any customer who might buy it, it would be unreasonable to expect that dealer to pay much for it; he might take months or years to sell it, or in fact has the risk of never selling it at all. Would he be willing to buy an item, hold it in stock for perhaps several months and then make only a small percentage mark-up on it ?  Generally, a low supply/low demand stamp will have a large margin between buying and selling prices; if the dealer sells it quickly, he's scored, but he has to factor in the possibility of a very slow sale.
Prices are always based on the balance between supply and demand, but high supply with high demand, or low supply with low demand, can often come up with the same price.
Prices in auction for some material can also be fickle. High-throughput, standard popular material will not vary too much in price. If it goes a bit low, many people will be willing to bid for it. But if it goes a bit high, everybody knows that they can skip this opportunity, as they will surely get another chance quite soon.
A very unusual yet esoteric item turning up in an auction however could easily go very high or very low. If there are only two people who might want it, the price could still be high, as both know they might never get another chance. Yet the same item turning up with only one serious bidder will probably be cheap.
Catalogue publishers have to take all these factors into account when deciding prices, and it is clearly not always an easy job.

Cost of handling is another factor. If a stamp is catalogued at 25p, and a dealer has stocks organised by country and date, they might easily charge 15p or 20p for it. But the initial sorting of the stamp, correct filing, and then the serving of the customer, might eat up 10p to 20p in time and costs, so the average dealer needs to buy such items for next to nothing in order to make any profit. The handling costs are virtually the same on a stamp priced at 50p, or £1, or £20, so the profit margins can be much smaller. So, generally, very cheap stamps might cost a high percentage of catalogue, but can be resold for only a very small percentage.
When buying and selling through auction, the selling price as a catalogue percentage should, you would think, be the same, the only difference between one side and the other being the auctioneers charges.

How much difference can condition make to a stamp ?
The condition of a philatelic item is crucial. A stamp in a lower quality will always sell for a lower price. Generally, commoner/cheaper stamps with faults can be written off as having no value. Why would any collector pay for an item in poor condition, where a nice example can be had for a very low price ?  Scarcer stamps can often be sold even if faulty, but the damage will reduce the price - maybe just by 20% or 30%, or maybe by as much as 98% or 99%. All faults will have an effect; tears, thins, creases, stains, short or damaged perforations, cuts, pinholes, scratches, and so on.
But remember this; some of the most valuable stamps in the world are damaged, and yet get tens of thousands of pounds or more - while the very cheapest stamps, even in A1 quality are worth next to nothing. Condition is a very impoirtant factor, but not everything hangs on it.

Can I use a formula to calculate the value of my stamp collection ?
No.
Whatever formula you can come up with, even though it might be right in one instance, can be shown to be wrong with many other examples. If ever another collector tells you their method of calculation, ignore it. Professional philatelists, when carrying out valuations (whether for market values, insurance values, or whatever reason), never use a standard formula.

So what use are catalogue prices ?
They set a point from which discussions can follow. They usually get things right when making simple comparisons to show what is common and what is scarce.

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TO BE CONTINUED .......

Robert Murray Stamp Shop 5 & 6 Inverleith Gardens Edinburgh  Scotland EH3 5PU Tel. 0131 552 1220 Fax. 0131 478 7021 Homepage; www.stamp-shop.com Email; murray@stamp-shop.com

Web www.stamp-shop.com www.philatelicsoftware.com www.philatelicsociety.com

Our Shop is open five days each week, and customers are always, of course, welcome. We carry very wide stocks of the whole world - much, much more than is listed on our website. Full shop information at this link.

Last updated Sunday 22 October 2006. Copyright Robert Murray 2006.