Does the Card Market Have You Scared? – Sports Card Investor

Does the Card Market Have You Scared? – Sports Card Investor

Dealers are scared. Breakers are scared. Suppliers are scared. Distributors are scared. Content creators are scared. Investors are scared.

Should you be scared? And if you are scared, what should you do about it?

Here we sit, three weeks away from Halloween, and many in the sports card industry are already seeing ghosts.

I just got back from Industry Summit 2022 in Las Vegas, and this Industry Summit was unlike any other. If you aren’t familiar, the Industry Summit is an annual gathering of many of the top dealers, breakers and sports card business owners from around the world. I’ve been to the last four, but this one felt remarkably different than the others.

There was an underlying nervousness in the room. On the surface everything appeared the same – there were speakers giving talks, companies exhibiting, people networking – but below the surface, there was a lot of fear about what the months ahead are going to be like.

Not everyone there was nervous. Some were actually very confident and looking forward to what’s about to come. And there are really important lessons you can learn from those who aren’t nervous right now – I’ll tell you about that in a moment.

But most attendees were nervous. Several dealers and breakers told me that sales were really slow over the last month. New wax products are not selling out, and wax prices are dropping as a result. For the first time in a long, long time, some dealers are worried they may get stuck with too much product that they can’t sell through.

And we’re now starting to see some products get liquidated. Suddenly there are clearance sales at Walmart and Target on some less popular retail boxes. Word on the street is that the card manufacturers overprinted releases this year compared to current demand. Print run decisions for this year’s products were made last year when wax sales were still frothy and dealers were demanding more and more. So more boxes were made this year – but now demand has dropped, and suddenly there is an oversupply of certain releases. It all seems to be coming to a head right now.

Combine that with the recent Topps Chrome Baseball debacle where some of the key chases were accidentally omitted from the product, which really hurt sales – and an NFL rookie class that isn’t generating as much interest in new football products – and we’ve suddenly hit a low point in the market for new wax releases. This isn’t good news for the many dealers who depend on wax sales as their primary source of income.

And it certainly didn’t help matters that all the rumors that Fanatics’ acquisition of Panini was a done deal and would be announced at the Industry Summit proved untrue. There is no deal right now between Fanatics and Panini. At least not yet. I still think a deal will get done very soon, but it’s not done yet, and as a result there were no answers to the million questions the dealers in attendance had.

They wanted to know about their wax allocations. And about how wholesale wax prices may change. They wanted to know what Fanatics was going to do with all the different brands and sets if they acquired Panini. And how distributors would be affected. And they wanted to hear if Fanatics was truly going to support their stores.

But no one from Fanatics Trading Cards was in the room to answer those questions. Nor was anyone from Panini or Topps on stage to answer those questions either.

Last year, at least Josh Luber was there loosely representing Fanatics Trading Cards. He didn’t have a lot of details to share, but he did speak and say he wanted to support local card shops. Panini was there last year as well, and while they weren’t certain about their own future, they at least were present. This year, the event was void of the card manufacturers – with the exception of Brian Gray from Leaf, who as always, had a lot of great wisdom to share.

There was no Halloween masquerade on the Industry Summit agenda, but many were still seeing zombies and ghosts everywhere they looked.

Now in fairness to Fanatics, Panini and Topps, they don’t have answers to share right now. If they did show up, they’d be bombarded with questions about the potential Fanatics-Panini acquisition and what all of their plans are, and I don’t think they’re ready to definitively answer those questions, yet. They’ll be ready to answer someday, and hopefully soon, but the timing of the event wasn’t right for them to reveal their plans. But this did not go over well with the many dealers who traveled across the country to this event for the purpose of learning about Fanatics’ plans and meeting with their team.

Now, let’s say that I remain extremely confident in Fanatics’ long-term strategy. I’ve met with most of Fanatics’ leaders and I understand their approach, and I think it’s going to be really, really great for the hobby in the long-term. But until the Panini acquisition gets done and until other key decisions are made, we’re going to be left with more questions than answers.

The lack of answers added anxiety to an already nervous group of dealers.

But it’s not just dealers who are worried. Some breakers are now having trouble filling breaks. And there’s an oversaturation of breakers now – it’s now not uncommon to go into live streaming apps and see only a few people in a breakers’ stream. There are more breakers than breaks that can be filled, at least at the moment.

Suppliers, distributors and other business owners are also spooked. They’re worried about how Fanatics’ future moves could affect their business. And then of course there are economic fears. Inflation is rampant. Interest rates are so high that its cooling business investing and acquisitions. And if companies start laying employees off in the months ahead, what kind of effect could that have on the secondary card market? I think it’s safe to say, it wouldn’t be good.

There was no Halloween masquerade on the Industry Summit agenda, but many were still seeing zombies and ghosts everywhere they looked. The grim reaper of hobby horrors may have been lurking in the haunted hallways of the Harrah’s casino.  

But not every creature there thought the sports card industry was about to strike midnight. In fact, some mere mortals were so upbeat that they can’t wait for what the upcoming months might bring.

Who are they? And what can we learn from their fearlessness and boldness about the current state of the sports card hobby?

Breakers who create high quality, memorable breaking experiences for their audience aren’t nervous. They’re building a strong audience and a loyal following of customers who will be with them no matter what the market does. Sure, their customers may not spend as much if the economy goes south, but they’ll still buy some because they love the experience and fun escape these breakers provide. And you can bet that’s what Fanatics wants to see when deciding who gets allocations in the future. So those breakers aren’t nervous.

The smart money sees this as their moment to gain market share. They market themselves when others don’t. They invest when others don’t.

Card shop owners and dealers who have been in the business for many years are not nervous. They’ve been through much worse before. They survived the economic collapse in 2008. They survived the economic after effects of September 11. And they survived other periods where the hobby had very little consumer interest. They’ve been through it all and they’ve survived it all. So they are not scared today. They’ve learned that in every downturn comes opportunity.

You’ve probably heard the stories of great businesses that were founded during tough economic times. Uber, AirBNB, Slack, Venmo and Warby Parker were all founded during the last recession. Even Disney and Microsoft were started during rough economic periods.

What savvy business people and investors know is that most people are going to be nervous and batten down the hatches when a downturn hits. They stop buying, they stop spending, they stop marketing, they stop investing. But the smart money sees this as their moment to gain market share. They market themselves when others don’t. They invest when others don’t. They perfect their operations and hire really good people when others don’t. Because they know that when the market rallies back – and it will rally back – that all of their investment during the downturn will put them in the lead position when the uptick happens.

Here at Sports Card Investor, we’ve already seen this start to happen. Some of our fellow content creators have slowed down their output of new YouTube videos this year. Since the market has dropped, they aren’t putting as much effort into their content. We’ve taken the opposite approach – we’re outputting more content than ever before. We believe this is our opportunity to pick up more market share so that we’re in an even more dominant position when the sports card market eventually gets hot again. And would you believe that the last three months, during a period of malaise in the sports card market, our content has been viewed far, far more than ever before? It’s been our best three-month run ever.

We’ve also been reinvesting in our products. As I’m sure you’ve seen, we launched our new version of Market Movers, called Market Movers X, a couple weeks ago. Despite the market being soft this year, we decided to reinvest heavily in making Market Movers way better than it was before. And even though people aren’t spending as much on cards today as they were in the past – would you believe that in the last two months, we’ve added more than 1,000 new paying Market Movers members?

And we’re certainly not the only small business reinvesting in the sports card market right now. At the Industry Summit, we heard from companies like Beckett, TAG Grading and Card Shop Live, who are all in the process of making very substantial investments into new technology that will better the hobby for the long-term.

There is opportunity in every type of market. No matter how you’re involved in sports cards, these next several months may be your opportunity to shine. If the market does get bad, and everyone’s darkest fears are confirmed, that’s your opportunity to do the hard work to set yourself up for greatness when the heat returns.

And the heat will return. Sports cards have a solid 50-plus year history of being a legitimate investable asset class and a great form of entertainment. And Fanatics didn’t invest billions of dollars into the sports card market to watch it widdle away. While Fanatics can’t control what the economy does this next year, they’re betting on the long-term. And they’re going to reward the people who put in the work now who position themselves as key players in the future of sports cards.

Now if you’re a collector, flipper or investor you may not be as directly affected by Fanatics and some of what I’ve talked about today. But you have the opportunity to shine right now as well.

Collectors don’t care as much about the health of the market, because they’re in it to collect. If you buy what you love, you’ll be happy with it no matter which way prices go. And collectors now have the opportunity to pick up some pretty cool grail cards at a fraction of the price they used to me. Collectors aren’t nervous.

Savvy flippers aren’t nervous either. Even in a down market, flippers can still make money. There are many more deals to be found – there are people willing to sell their cards or collections below market value to get cash. If you’re savvy about hunting for collections that scared people want to liquidate for cheap, and if you then break the collection up and flip individual cards, you can make some real money.

One key for flippers is you don’t want to hold any card for more than a short period of time. This summer, while in Los Angeles, I met a handful of guys who flip cards full-time, and I asked them how they were able to make a living doing that during a time when the card market was trending down. They said the key is to flip cards quickly, so you aren’t caught by market cycles. If you’re able to find a really good deal on a card and buy it, and then sell it a week later, it doesn’t matter if the market is going down, because you didn’t hold the card for long enough for that to really impact you.

The market will go up and down, as all markets will go up and down. But the passion for collecting will never fully go away.

Long-term investors do best in a down market, because that’s where the deals are found. You all know I’ve bought a lot of cards in recent months. I did a video at the end of August about how I invested $500,000 more in sports cards. They were mostly high-quality, rare cards of some of the greatest players of all time – cards that I think will have a lot of value and relevance in 10, 20, 30 years. That’s where your money should be going for long-term investing. Now, is this really a good time to buy? Are we at the bottom of the market right now, or could the value of cards drop another 20%, 30%, 50% or 80% over the next year? I don’t know. I’m more optimistic than most, but I can’t predict what’s going to happen. What I do believe, though, is the cards I’m buying now will be worth more in five or 10 years. And if the market does drop another 50%, you can bet I’ll double down and buy even more cards. Because I believe in where this is all headed, and history is also on my side.

Now, I have been selling some cards as well. I’ve been selling cards that I don’t think will be as relevant in 10, 20, 30 years. I’ve been getting rid of cards of prospects, younger players, and secondary players. Given the short-term economic uncertainty, I’m less willing to take a chance on them than I would have been a year or two ago. I’d rather cash out of those cards for whatever I can get, and shift the money to cards I believe will have value in the long-term.

I’m not nervous. Because I have the confidence that no matter what the months ahead may bear, I’ll work hard and find opportunities to make the most of the conditions around me. There is always opportunity – sometimes you have to think a little differently to find it.

And to be clear, I’m not advocating that you should take out loans or max out credit cards to invest in cards or start a business right now. Be smart, because the next year could be turbulent. Think long-term and make moves that are sustainable to get you there.

While I can’t be certain about what the market will do in the next year, I am certain that there will always be sports card collectors. Always. In every type of market. There will forever be tons of people who enjoy opening boxes, collecting cards and sharing memories with their friends, their dads, their sons, and their daughters. The market will go up and down, as all markets will go up and down. But the passion for collecting will never fully go away. And I also know that all the money that’s continuing to be invested into the sports card hobby – from at the very top with Fanatics, down to the new hobby businesses that are forming every day – is going to make the hobby more exciting and compelling than ever before in the years ahead.

So I’m not nervous at all. And if you position yourself to take advantage of the opportunities ahead – whatever the market might look like — you can always be confident about your future.

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Author: Jack Cook