A number of readers have written with queries regarding my blog post of January 3, 2019, entitled “Predicting Demand Using CGC Data” (see here). Reader feedback is always appreciated. In the spirit of sharing insights that can, hopefully, benefit all collectors, I’d like to reply to some of what my readers wrote in this post.
Some readers had concerns that using the CGC data the way I did, focusing on prices as an indicator of demand, potentially distorts the real measure and strength of demand. The main worry seems to have been that I was ignoring the actual number of units sold and focusing too closely on CGC submissions and sold prices.
In the words of one reader:
“Do prices REALLY matter when it comes to the issue of supply and demand? In the context of this article......I dont think so. Prices do not reflect demand. In the article, you are constantly highlighting the "supply" numbers. In other words, the books being sent in-- or slabbed. Thats incoming numbers---- but where are the OUTGOING numbers?”
Another reader offered the following observation:
“To gauge the accuracy of CGC submissions as an indicator of demand you would have to look at supply AND demand. Put another way, how many books are submitted versus how many books are sold. My guess is that this isn’t a 1:1 relationship.”
These are good points and again I thank my readers for bringing them to my attention.
Here I’ll try to offer some tentative replies to these concerns.
To start, the main worry communicated above seems to be that, in using the CGC submission data the way I did, tracking demand by looking mainly at only a sampling of selected sales, that I somehow missed the real ‘strength’ of demand because I didn’t track the ratio of supply to demand.
I had to think about that for a while, but two immediate concerns about incorporating individual number of unit sales into my model immediately struck me.
First, how would better determining demand, by knowing the exact ratio of books produced/slabbed to exact number sold, work in practice?
To begin, there would be a problem in obtaining rigorous sales data numbers.
In the case of CGC books, for example, some units are not slabbed to be sold or to be immediately sold.
Moreover, sometimes, even when sales happen, some slabs are later cracked, pressed and resubmitted (as happens with older slabs for example) only to be quickly resold.
Does CGC, in these cases, remove old serial numbers from the census or check for a book that’s been listed twice? My guess is no.
That’s the first problem involved in accurately obtaining a rigorous metric for ‘demand’ by looking at individual sales over prices.
Namely, we’d have to collect an enormous amount of data and details that are not currently available or reliable.
This is also a problem existing beyond the shortcomings of just the CGC data in relation to individual sales. Metrics for sales are problematic even where distribution data and units shipped are more meticulously recorded.
We find this to be the case, for example, with modern comics. Dealing with modern comics have more complete data regarding distribution (since all modern Marvel and DC titles have their distribution handled almost exclusively by Diamond Comic Distributors Inc. See here).
In these cases, we know exactly how many comics are published and shipped or supplied, but individual unit sales are still another matter.
Many comic shops end up not selling all the books they order and, also, often order in bulk to obtain variant copies. So, in this way, we actually get a false understanding of demand, at least in the short term.
Only when stores stop ordering, in fact, can we know that demand is weakening for a particular title. Unfortunately, with older books, we have an additional problem insofar as we’re dealing with a secondary market.
The sales of Star Wars #1, used in my previous post are, in actuality, re-sales.
Those books were originally bought for 30 cents, then, resold or bought and sent to CGC, and slabbed to be resold many years later.
Finally, I think the tactic of closely looking at individual number of unit sales instead of prices might also face another hurdle.
Namely, it’s possible that sheer numbers of units sold, if not directly connected to price levels, aren’t a sufficient metric of long-term strong demand.
To give an example, few people would be willing to currently purchase Star Wars #1 in 9.8 grade for $3000.00, since we know we can get the same product for around $975.00. The $975.00 price tag, in correlation with a steady submission of SW #1 to CGC, should somehow indicate that demand is relatively still robust, because this is still a strong price for a widely available Bronze Age book.
But how would we know that demand is weakening or strengthening? The best way is still to look at prices.
If demand is weakening we would logically see prices go down, mainly because sellers with large inventories would eventually cut prices to clearance levels in order to sell their stock.
So, if demand were weak the current [$900.00+] price tag would be deemed not worth paying by the majority of buyers. However, many might still view SW #1 in 9.8 at $500.00 as a good deal. But in this case, weaker demand is actually present even as, potentially, a higher number of units is sold.
The reason is that once those willing to spend $500.00 buy up their copies even the former price might be deemed too high by all remaining buyers. Demand would then very obviously weaken substantially. At this point, all things being equal, we would expect to see prices drop further. So, I think prices are not only a strong sign of long term demand but the best metric we can use. Especially, I’ll add, if we have the above scenarios where individual units sold can go up while actual long term demand is weakening.
Another way that this can happen is if enough sellers with existing large inventories liquidate their stock and flood the market, which would lead to a crash in prices.
The flooding of the market, by the way, would also quickly lead to a short-term higher number of sales, but it would definitely weaken demand, which may eventually fizzle out altogether. Once the bottom, in terms of prices, is reached, few would submit their books to be slabbed since it would now cost more to slab than to just sell.
Does anyone have any additional thoughts on these matters? Am I missing something important here? Write to me and let me know.
