The business model for card grading?
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It appears CSG is already facing indigestion problems from the business they are generating and turnaround times are slipping.    This, and the similar troubles at all other grading services makes one wonder if the business model is flawed.   Thousands if not tens of thousands of cards coming in daily to these companies, none of their respective models are working.   So, some basic questions from some to answer and all to discuss.

  • What is their cost to slab a card?     A slab is a slab is a slab.   Whether submitting bulk or walkthrough, their cost to physically slab (receive/inspect/grade/slab) has to be under the bulk rate.  (Yes, handling associated with more rapid response times increases cost, but I'm just looking at the base process)   The business model (which isn't rocket science) trades time for money.   It feeds on the human desire to quickly have this service performed because the past has demonstrated a graded card (and the cost of grading) usually pays for itself many times over.
  • Why are these business underscoping the increasing demand for services?  Similarly, why aren't they scalable to the demand?  BGS/PSA started going down well before COVID.    Call Amazon....bring their muscle into this business.   Given the (I suspect) lucrative nature of this service,  they have the horsepower to fire up a grading engine in short order.   
  • Why don't the grading services understand time is the variable the customer doesn't want changed?   Change the slope of the cost versus turnaround time curve as demand changes, but hit the targets.   Anyone who slides on their promises has a busted model.  People will pay the extra $$$ if you hit your time targets.   And make your business scalable to orders of magnitude.   High volume even at bulk rates will make you rich.  

Einstein (supposedly) stated the definition of insanity is "repeating the same process over and over and expecting a different result".    Change the process or go down the rathole all of the other services have.  Somewhat joking about Amazon, but someone sooner or later is going to apply a business model similar to theirs to this niche and clean house, IMHO.  

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To me it sounds like you are some sort of economics major or something. Their cost to slab a card is probably 75% of the cost to the customer. So if it costs you $20 to grade a card, it probably cost the grader $15. Per card, it's not extremely lucrative, but they make their money in volume. The underscoping issue is that largest issue. For most businesses, they only have so much space to work with. In order for them to go larger the have to find and lease a space, furnish the space, and then find out how to quickly transfer everything seamlessly to the new location. That all takes time and if they are not grading, it costs them money and is why they are reluctant to do so until absolutely necessary. At the same time, it takes time to vet, hire, and train people to perform the various jobs and also eats into the profits, considering labor is one of your largest costs. A company will resist expansion at all costs until absolutely necessary which is detrimental to the morale of the employees. They will push and push the employees to increase production long before they look to expansion because a larger work force does not necessarily convert to larger profits. Amazon is successful because they are very streamlined. The grading companies, if they have not done so already, need to invest in Six Sigma or Lean Principles first to ensure that they are maximizing what they currently and then when they expand, they need to bring them in again early on in order to prevent bad habits.

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Lol.  Nope, a Meteorologist.   However, even in my field I know what the customers want, and I don't make promises I can't keep.   We, as paying customers, pay a price based on an expectation they will deliver on time (since their charges are based on time).    Once a company figures out if they meet their promises the customer will likely pay willingly they could turn a corner.   A balancing act to be sure, but being held hostage with little to no recourse (with any of the companies right now) does not lend itself to customer loyalty.   I do differ with your estimate of the costs...I can't see their cost as being much more than 40% (when spread across all of the service levels).  If someone in the business knows the answer......

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To me limiting the amount of submissions is the best alternative. Price of grading and turnaround time are key (with reputable grades) if you limit the # of submissions then the customer will have to be more selective on the cards they want graded. 

Edited by jwhite613
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I don't know anything about profit, but I can assure you that volume is the issue facing all of these companies.  What we need is a balance between limiting the number of submissions and limiting the kind of cards being slabbed.  I'm in a few FB groups for grading companies and it kills me when someone shows off the 200 cards they just got back (after a 10 month wait) and not a single one of them looks to be worth more than $100 (and that's being generous if they were all 10s).  It's nuts.  I can't remember submitting any card that I didn't think could end up being worth a few hundred dollars at least if its came back as a 9 or 10.  Even for just $8-$12 per card I don't see the point.

The news from PSA last night is extreme, but it's almost setting up what I would propose.  Only allow cards to be submitted if they have a current value of a certain level (maybe even a level for each grade) or I guess I can see allowing some new rookie cards to be slabbed based on speculation.  All those commons that I keep seeing out there in slabs will just have to wait their turn until some kind of new model for this business can be discovered.

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48 minutes ago, Andy Gardecki said:

I don't know anything about profit, but I can assure you that volume is the issue facing all of these companies.  What we need is a balance between limiting the number of submissions and limiting the kind of cards being slabbed.  I'm in a few FB groups for grading companies and it kills me when someone shows off the 200 cards they just got back (after a 10 month wait) and not a single one of them looks to be worth more than $100 (and that's being generous if they were all 10s).  It's nuts.  I can't remember submitting any card that I didn't think could end up being worth a few hundred dollars at least if its came back as a 9 or 10.  Even for just $8-$12 per card I don't see the point.

The news from PSA last night is extreme, but it's almost setting up what I would propose.  Only allow cards to be submitted if they have a current value of a certain level (maybe even a level for each grade) or I guess I can see allowing some new rookie cards to be slabbed based on speculation.  All those commons that I keep seeing out there in slabs will just have to wait their turn until some kind of new model for this business can be discovered.

This is the part that blows my mind. People submitting junk wax base cards for grading is the problem. They're as bad and as short sighted as the retail resellers. I've been collecting nearly 30 years and I'm putting together my first grading submission. It's only 21 cards.

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ok so i don't understand what it matters how much a card is worth has anything to do with getting graded.  I have a personal collection and I like getting them graded. Not everyone flips cards.  When I submit cards to be graded it is a small amount of cards.  I am not like the people who send in 300 cards a week to get graded so they can just turn around and sale them. To me they  are the problem.

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1 hour ago, Meierw said:

ok so i don't understand what it matters how much a card is worth has anything to do with getting graded.  I have a personal collection and I like getting them graded. Not everyone flips cards.  When I submit cards to be graded it is a small amount of cards.  I am not like the people who send in 300 cards a week to get graded so they can just turn around and sale them. To me they  are the problem.

I agree flippers are part of the problem. Hopefully, the recent actions of PSA and SGC puts most flippers out of business. I’m sure they’ll just send to CSG and create the same backlog they’ve built at the other companies.

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Some people like to have a complete set graded. I am working a set and want all cards to be above 8. A few though have come back 6-7. As long as I am paying the same fee(s) why should anyone care what I am having graded? Unless you're a flipper whose turn around times are being affected. If thats the case, than pay a higher fee to get em' back sooner. You're cards are no better than mine, so get in line.

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2 hours ago, Greg Christiansen said:

People don't like flippers or junk wax submissions Lets do all the things you want to do...WTF??????? How about mind your own business and don't worry about what is submitted or not submitted. The problem is a lack of the supply for the demand. Open a west coast submission center and one in Texas. It's not like the demand isn't there. Bottle neck opened.

Exactly!! People can send whatever they want! Heck, I saw people send in Donruss puzzle pieces to PSA..  and people who hope people to out of business cause they like to flip, or hope prices fall cause they can't get their cards instantly back, they are the worst. I personally hope everyone makes money.  I agree would love to see few more spots open up in other states. Would love to see one in Kansas, since taxes here for businesses are so low. Plenty of incentive to build one here. 

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5 minutes ago, KBost33 said:

Exactly!! People can send whatever they want! Heck, I saw people send in Donruss puzzle pieces to PSA..  and people who hope people to out of business cause they like to flip, or hope prices fall cause they can't get their cards instantly back, they are the worst. I personally hope everyone makes money.  I agree would love to see few more spots open up in other states. Would love to see one in Kansas, since taxes here for businesses are so low. Plenty of incentive to build one here. 

Imagine going to a Mall or something like that...Having your cards graded right then and there or like... come back in an hour or Tomorrow at noon. PSA would be done.

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22 hours ago, Greg Christiansen said:

Imagine going to a Mall or something like that...Having your cards graded right then and there or like... come back in an hour or Tomorrow at noon. PSA would be done.

I am gonna bet that Topps will be doing something like real soon since they are going public. Will sell slabbed cards, right on site. Just like when you buy meat, if you want guaranteed best "cut" you can buy it like a Kobe or T-Bone steak. 

What I don't think we need are more new grading companies. I think the ones we have now are sufficient. They just need to expand there locations. 

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all of this volume is going to make the first company that can really figure out AI (not just dabble in AI but really figure it out then scale up) to grade cards accurately and lightning fast the dominant grading company moving forward.  there aren't enough human graders in the world to fix this volume problem if the hobby continues to grow.  plus getting humans out of the equation gets rid of the subjectivity problems some, if not all, of these companies have.

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1 minute ago, tnoble100 said:

all of this volume is going to make the first company that can really figure out AI (not just dabble in AI but really figure it out then scale up) to grade cards accurately and lightning fast the dominant grading company moving forward.  there aren't enough human graders in the world to fix this volume problem if the hobby continues to grow.  plus getting humans out of the equation gets rid of the subjectivity problems some, if not all, of these companies have.

This is the point many in the hobby fail to understand. Grading isn’t an entry level job. It requires years of experience and expertise. It’s not a customer service or call center job. Can’t pull Joe Sixpack off the street to do it. It’s a very niche job that also requires someone with rare skills to live near a specific area. Grading supply isn’t increasing anytime soon so demand needs to chill out.

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1 minute ago, PunsRTonsOfFun said:

This is the point many in the hobby fail to understand. Grading isn’t an entry level job. It requires years of experience and expertise. It’s not a customer service or call center job. Can’t pull Joe Sixpack off the street to do it. It’s a very niche job that also requires someone with rare skills to live near a specific area. Grading supply isn’t increasing anytime soon so demand needs to chill out.

Exactly, and the potential problem is if one of the grading companies gets pressured to rush graders into these jobs due to the massive backlog.  You think the subjectivity is bad now, just wait to see how bad it can get if they push unqualified (or in-experienced) graders into these jobs too soon.

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This gets into the original reason for the initial post in this topic...what is the "cost" of grading a card?   Whether someone wants it bulk or walkthrough, there is a cost in time, materials, and labor to produce a graded card which shouldn't vary much by service level.   How long does it take an experienced grader to determine the grade of a card?   I appreciate the fact CSG is using some automation to help in this department (e.g., centering grades) but if they use many more techniques to determine authenticity and/or whether a card has been tampered with, then the cost goes up and their prices to the consumer are too low, which as a business model is the road to failing.   I also wonder when it becomes better known that it costs $$$ and time to have a card graded and some of that cost should be factored into the resale basis of the card itself.  If a grading company gains the reputation of delivering on time, does a good (fair, tough, and consistent) job of grading and keeping the submitter aware of the status from reception at the receiving department to the shipping out process, I think many, including moi will pay a significantly higher base price for grading a card, say $30-$50/card.    This might also open up a "pre-grading screening service" niche for others to build.  I used to live close to Blowout Cards, and would visit their store every so often with some cards which they would evaluate on the spot.   They would filter out some cards and recommend which cards to send on to BGS/PSA for free and I never got a grade with those cards less than "mint".    That kind of a service might put a dent into the bulk submissions by some.   Given the creep of card tampering into this hobby, the need for card grading will increase to support the authenticity evaluation basis of a card.  AI, as pointed out, could help but may never totally get the human out of the grading loop, but it might serve to flag cards which need special attention for potential tampering evaluation grading.   If someone does get AI-based grading totally automated...congrats...how do I buy stock in your company?   

Edited by Stormysweather
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22 hours ago, KBost33 said:

I am gonna bet that Topps will be doing something like real soon since they are going public. Will sell slabbed cards, right on site. Just like when you buy meat, if you want guaranteed best "cut" you can buy it like a Kobe or T-Bone steak. 

What I don't think we need are more new grading companies. I think the ones we have now are sufficient. They just need to expand there locations. 

Imagine if everyone who wanted Starbucks had to order it from Florida. Well first of all it would be cold when you received it 4 months later, It would most likely be spoiled, it would most likely be spilled. but all that isnt the point. It's supply and demand. The first company with the brains to open multiple locations through out the US win the market. I do not see how they don't get it. Also, I'm 100% down for graders needing to get a certification. Some sort of National Standard for Sports Card Grading. The last thing we all need is a grading company hiring temps. To be honest I'd like to know the graders qualifications. as in out graders are certified though... blah blah blah...what ever. Not...oh yeah...Neal has been with us 2 weeks. ???????

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I disagree with the concept of multiple locations. If anything has been learned the past year from the pandemic, Amazon and zoom, it’s that we don’t need brick and mortar locations to succeed at many things. Delivery overnight isn’t expensive and big companies have seen an emphasis on controlling costs and employee quality in a single location. Amazon breaks the norm because their size isn’t a comparable, they are a freak they are so big. 
I expect to see PSA to make the hard decision to move to Texas at some point because California is a terrible place for a business of their type. 
I sincerely hope we are seeing a true success with CSG. I like everything I see with them so far and we need the alternative. 
Whatever happens I have always done this for the fun and enjoyment as a hobby and remember - one mans ceiling is another mans floor. 
I may submit 50 cards the next guy may submit 5 cards the next guy might submit 5000 cards - don’t be critical of the reason because we all have our own reasons.

I wish everyone good luck with their grades !!

 

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