Price Increases Hurting Annual Set Sales?
Sales of the United States Mint's two most popular annual sets, the 2010 Mint Set and the 2010 Proof Set, debuted with lower sales compared to previous years. The increased price for each set may be one of the factors contributing to the decline.
This year's annual sets included price increases of $4 and $2 for the Mint Set and Proof Set, respectively. Both increases took place despite a reduction in the number of coins included in each set.
The 2010 Mint Set went on sale July 15, 2010. In the debut sales period through July 18, the US Mint recorded sales of 200,764 sets. In the most recent sales report covering data through July 25, sales had reached 247,085. This is a far cry from the initial sales for the 2009 Mint Set. The first reported sales figures covering October 1 to October 11, 2009 were 392,007.
Besides pricing considerations, the huge drop may have also been the result of seasonal factors, since the 2009 Mint Set was released in October rather than the slow summer months. Also, the set included the popular 2009 Bicentennial Lincoln Cents struck in 95% copper and was released following a delay, which added some anticipatory demand.
For further comparison, I went back tot he 2008 Mint Set. This year's set shows a drop in sales which is less dramatic, but still apparent. Within the initial sales period covering July 30 to August 3, 2008, the US Mint recorded sales of 234,762 for the 2008 Mint Set. If this is considered a base year, this year's sales are down 14.5%.
Examining the 2010 Proof Set, a drop in sales is also apparent, although different durations for the initial sales periods hinder exact comparisons. The 2010 Proof Set recorded sales of 296,379 during the debut period from July 22 to July 25, 2010.
The prior year 2009 Proof Set sold 437,178 units in the initial sales period covering June 1 to June 7, 2009. The 2008 Proof Set sold 424,402 units in the initial sales period covering June 24 to July 6, 2008.
It's interesting to note that the 2009 annual sets both included pricing increases, which were tolerated by collectors. The key difference was that the increased prices were viewed as necessary due to the inclusion of additional coins and the special composition Lincoln Cents. In situations where price increases are necessary and justified, the US Mint has generally provided collectors with an explanation.
Most recently, the press release for the 2009 Mint Set stated: "The price increase is due to the inclusion of the two additional quarters and the special metallic content - 95 percent copper - of the eight one-cent coins."
This year, no explanations were offered for the price increases to the annual sets. Earlier in the year, I did see an explanation for the bronze medals, which had prices increased by 60% from $3.50 to $5.50. The US Mint simply mentioned higher material costs. While this might be true, it cannot fully justify the extent of the increase.
The 2010 annual sets have actually reverted back to the same contents by denomination and metallic content as the 2008 annual sets, but prices are much higher. The table below shows the number of coins and face value for the past three years annual sets, along with the original US Mint prices.
|coins||face value||issue price|
|2008 Proof Set||14||$6.91||$26.95|
|2009 Proof Set||18||$7.19||$29.95|
|2010 Proof Set||14||$6.91||$31.95|
|2008 Mint Set||28||$13.82||$22.95|
|2009 Mint Set||36||$14.38||$27.95|
|2010 Mint Set||28||$13.82||$31.95|
The only explanation for this year's price increases that I can fathom relates to the lack of precious metals numismatic products like the Proof Gold and Silver Eagles. It seems that these products carry higher profit margins that the annual sets, which sell in higher volumes.
In the latest fiscal year, the US Mint cited the shift in demand for higher margin precious metals products to lower margin recurring products as the reason behind the 50% drop in numismatic products net income and seigniorage. As bad as things were last year, they could have been worse. To some extent the damage was offset by sales of the 2009 Ultra High Relief Double Eagle Gold Coin. Overall numismatic sales were down 21%, but excluding the UHR, sales would have been down 41%. The UHR's contribution to net income was not broken out.
With this year's schedule (so far) lacking any widely popular higher ticket items and the prospects of Proof Gold and Silver Eagles still uncertain, the US Mint's product mix has shifted even further towards lower priced items with historically low margins. This year's price increases may have been established in large part to bolster margins to make up for the income lost through the lack of precious metals numismatic products. Of course, if sales volumes fall, gains made through higher margins may be lost any way.
If this is what's behind the recent price increases, the saddest part is that effectively all collectors are being asked to pay the price for the lack of Proof Gold and Silver Eagles.
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Labels: US Mint