Demographic, sales trends negatively impact Scandinavian new-issue programs

What Others Are Saying by Jay Smith

[Editor’s note: A story in the Sept. 9 issue reports on Iceland Post’s decision to close its philatelic bureau.]

First, to be clear, I don’t know enough about Iceland Post’s specific problems to speak directly to them.

However, collectively for the Scandinavian post offices with which I have had deep experience as the operator of the Scandinavian New Issue Service for 30 years (1984-2014), I can speak to overall trends and behaviors of the Scandinavian post offices.

Yes, the number of new-issue subscribers directly from post offices has declined dramatically. And I believe the declines of subscribers from privately operated new-issue services (in total) declined even more sharply.

The declines as a result of the aging of the collector population started to bite at about the same time as two other events: The post offices started to accept credit card payments, and they started to provide (at least partially) functional websites.

Those were great advantages to both the post offices and collectors, but they had the unintended consequence of starting to cut dealers and private new-issue services out of the sales process.

As some collectors moved toward buying directly from the post offices, especially because they could now use credit cards for payment, dealers’ sales declined.

All this was on top of the decreased number of collectors due to demographic trends.

For a dealer to do all the work of keeping track of what is being issued, placing orders, fighting with the post offices when the orders were not received correctly or were received damaged, and so on, a dealer has to maintain a certain minimum volume to make the effort worthwhile.

On top of that, post offices started charging for shipping to dealers in some cases, and they also started demanding payment up-front. There was a time when large dealers could have 10 days to 30 days to pay for items received from post offices.

Keep in mind that the vast majority of post offices require dealers to pay the same price that collectors pay, but often dealers don’t get many of the same benefits — discounts or free shipping or reduced-price special products — that individual collectors can receive through special membership programs.

When dealers had to make the difficult decision to drop countries from their offerings, that had two effects.

First, while some collectors switched to buying from the post office directly or from other dealers, many collectors simply stopped buying new stamps from that country.

Second, dealers were often the spark that motivated collectors to buy the new issues of a particular country. When that spark went out, the countries unknowingly lost a huge (and free) marketing network.

Over the years as the Scandinavian New Issue Service operator, I suggested to the post offices joint marketing efforts and other special projects. The vast majority of these suggestions were rejected or ignored. The post offices made it clear that they knew what they were doing, and they did not have the time or interest to discuss such matters.

There also were other very significant factors.

The face values of Scandinavian stamps have risen steeply in the last decade. This has to do with the cost of operating a postal system; it was not an attempt to grab money from collectors.

Simultaneously, the number of different types of postal products expanded greatly, including items such as prestige booklets priced by the post offices well above face value and which contained completely different versions of stamps.

Collectors needed the stamps from many of their products in order to have a complete basic set of stamps in their albums.

There was also a push toward more souvenir sheets and smaller panes of stamps.

Certainly not all collectors bought some of these new types of products. (Some now greatly regret not buying them because the market prices of some have skyrocketed).

However, the mere thought that a collector had to forgo something that had been issued by the post office caused the collector to think twice about continuing. After all, if you are not going to get the complete run of new stamps, why bother getting any of them?

To add insult to injury, there were at least four other major events that have resulted in further damage to the market.

First, the post offices began to treat their philatelic operations in a completely inappropriate manner from an accounting perspective. The accountants started to value the stamps in philatelic inventories as if they were really worth their face value, which they are not until they are sold. As any business major will tell you, reducing inventory while maintaining or increasing sales is a desirable goal.

However, the accountants who took over the operations considered stamps issued a year or two ago to be akin to last year’s clothing styles; they thought that keeping stamps in stock any longer than absolutely necessary was a bad thing.

Keep in mind that the accountants were thinking about the stamps as being costly. However, millions of kroner of face value of unsold stamps only actually cost a tiny fraction of that to print and warehouse.

The accountants sought to reduce printing quantities so that stamps would sell out quickly, often before most collectors even knew they existed. They also sped up the sales lifetime of stamps that had not yet sold out, often withdrawing and destroying perfectly good stamps before all collectors had obtained them for their collections.

There was a time when a tourist visiting one of the Scandinavian countries could go into a larger post office and buy most or all of the stamps going back several years.

Nowadays, it is often not possible to get all the new stamp issues at most post offices and certainly not those issues that are more than a couple of years old.

Collectors can’t buy stamps that the post office is not offering for sale, and new collectors can’t be made if they don’t have access to enough stamps to get them started.

Second, the Danish post office rationalized not only its philatelic operations, but the formats of its stamp issues, often issuing items in multiple formats but not making collectors aware that they existed. This confused many collectors who ended up missing out on items.

Third, the Swedish and Danish post offices combined forces into a single commercial company, PostNord, owned by the respective governments. This resulted in a great upheaval of which activities occurred in which country. All stamp production, for example, was physically moved to Sweden.

The consequences of all these changes caused further confusion and disruption for collectors.

Fourth, through a program based in Gibraltar (WOPA Stamps and Coins), many post offices have made their stamps available through a combined platform from which collectors can order.

However, the stamps are shipped separately by each country. Thus collectors typically have to pay multiple shipping costs if buying stamps from multiple countries.

This sales platform, which is paid a commission by the participating countries’ post offices, has further undercut the countries’ agents and stamp dealers. Agents do receive a commission, but dealers have to pay the same price as collectors.

All these many factors have combined to make stamp dealers and new-issue services feel abandoned, ignored and unappreciated. As a result, dealers have put their time, interest and money elsewhere.

Despite post offices’ websites, which often don’t have available all stamps and products, collectors have less access to buying stamps and having a complete collection.

For dealers who attempt to hold inventories of stamps and don’t only offer what they can sell within a few weeks as a new-issue service, there is also a significant financial element to this discussion.

With the rising face value and the increased number of different (and usually more costly) products and formats, dealers who maintain inventories have to invest a huge amount of capital.

At the time that I ceased operating the Scandinavian New Issue Service, I also maintained an inventory of every stamp and format and many other products to last about four years to five years.

I also was investing approximately $25,000 per year in inventory, and the amount was rising every year. That was just for the seven Scandinavian countries.

While the inventory did eventually sell (much in four to five years, but some took as long as 10 years), the mark-up was not great, and the annual capital amount required was rising 10 percent to 15 percent per year, which alone could not always be funded by the mark-up of the previous years’ sales.

Compared to an equal amount of money annually invested in buying and selling higher-value classic-era stamps — and not having to do all the mental and physical work associated with new issues — a dealer could have a vastly more profitable business dealing with classic stamps.

What I have witnessed over 30 years in the new-issue stamp business has been the collision of the philatelic world (where the cost of labor and time-value of money is usually not properly recognized or valued) with advancing technology and, most important, the real-world financial needs of very large postal organizations, which have become much more than stamp sellers. They are now often huge banks and enormous logistics companies as well.

Philately has always been mostly the result of a post office’s activities and operations. For roughly 150 years, things were relatively stable, with incremental change in scope and scale.

For the last 30 years, post offices have had to change as the world has changed. As a result, philatelic concerns and interests were often left at the side of the road.

As a dealer, Jay Smith has specialized in Scandinavian stamps since 1973. His company also handles the entire range of United States and worldwide philately. 

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