Friday, September 08, 2006

First Strikes: A Marketing Gold Mine

I never paid much attention when the “First Strike” designation started popping up on slabs. But recently, I received a call from a dealer who offered me a chance to buy the new 24k Gold Buffalo in a “First Strike” holder with a grade of MS70. Although my collection (link) does not include “First Strike” coins, this made me curious to learn more about what “First Strike” really means. Was this some U.S. Mint designation? Boy was I surprised when I found out just what kind of marketing program the “First Strike” designation was.

I don’t know who first thought of the “First Strike” marketing concept, but I’d like to congratulate the individual who did. Good job! I wish I had thought of it first!

Do you remember when all shampoo bottles had the directions “lather, rinse, then repeat”? Do you think some doctor discovered our hair or scalp was better off if we washed it twice? No, some marketer figured out that if you changed the directions to add “then repeat”, people would do it and you would sell twice as much shampoo to those people. Maybe this marketer moved on to one of the third party grading services.

So what exactly is a “First Strike?”

In general, a third party grading service gives a “First Strike” designation to those coins packaged for shipment from the U.S. Mint within a month of their official release date. For Mint State coins, the cutoff is basically January 31 of each year. Proof coins are based on the announced release date. All coins must be submitted with their original Mint shipment packaging with accompanying documents indicating they were packaged for shipment from the U.S. Mint within the first month of their official release.

The key words here are that the coins must have been packaged for shipment from the U.S. Mint within the first month of their official release. It has nothing to do with the date of manufacture other than they obviously were manufactured before they were packaged and shipped.

So, the “First Strike” designation is a marketing program based on the principle that collectors have always sought out coins of special significance, and one way that a coin can be distinguished from another is by the date that it was struck. The perception being given by the “First Strike” designation is that somehow these coins were struck first, or at least early, in production. In general, I would agree with this statement. The problem is that, during production, the U.S. Mint does not keep track of the order in which they mint coins. Also, the U.S. Mint begins production several weeks before the coins are officially released. By the release dates for the 2005 and 2006 bullion coins, the U.S. Mint had already minted approximately 50% of the total projected mintage for these coins. The dates on shipping labels and packing slips do not necessarily correlate to the date of manufacture. This is all clearly stated on the U.S. Mint’s website under Consumer Awareness.

I have also heard the argument that the “First Strike” designation somehow implies that the strike of the earlier coins is somehow better that those struck later. This might be true if the Mint only used one set of dies during production. Since dies wear out and are replaced, this argument goes out the window. Also, a coin graded First Strike MS69 is no better than a non-First Strike coin graded MS69, regardless of what day it was minted.

But there is no arguing the fact that coins with the “First Strike” designation are commanding a premium over their non-designated counterparts. So there is demand for this designation whether you think it makes sense or not. Third party grading services are profit oriented businesses and not charities set up to benefit the hobby. If there is a demand for this designation from collectors, then it is in their interest to supply that demand. Whether or not this demand carries on into the future is something that we will have to wait and see.

For now, the “First Strike” designation has been a successful marketing campaign. So successful, in fact, that one third party grading service has come up with a another designation, “First Day of Release”. Apparently the coins were packaged and the shipping documents created on the first day of release. It doesn’t matter what day the coins were actually minted, only when they were packaged for shipment. One can only imaging what they may think of next.

So, if you get a call from a dealer offering you a “First Strike” 2006 24k Gold Buffalo graded MS70, you now know that that coin may be any one of the coins minted before the official release date that possibly represent 50% of the total mintage based upon the U.S. Mint’s projected sales numbers, plus any others minted and shipped within the first month after the release date. Do you know how many that is? . . . Neither do I. . . . But I do have to fess up, I may not have bought a “First Strike” coin, but I do still rinse and repeat.

And now, a related tale for you Philatelists . . .

Are any of you stamp collectors that collect First Day Covers? . . . Then you might be interested in this story.

When I was a kid, I loved collecting First Day Covers. I would always read the stamp column in my local newspaper watching for the next stamp to come out. I would go to my local stamp dealer to buy an Artcraft envelope for the new stamp, send it to the Postmaster of the city where the stamp was being issued along with coins, to cover the postage, taped to a piece of paper. I then waited for my First Day Cover to arrive. All this had to be done prior to the first day of issue so that your cover would be there on the first day to be cancelled.

Then the rules changed. Apparently, the Post Office no longer wanted to affix the stamps and cancel them all on that one day. So they changed the rules so that you had to wait until after the first day of issue, go buy the stamp yourself, affix it to the envelope, then mail it to the Postmaster in the city where the stamp had already been issued! Basically the covers were being backdated as First Day of Issue! What’s the point of having a First Day Cover if it was not really cancelled on the first day of issue?

So I quit collecting stamps and switched over to coins where things like this could never happen, or so I thought. . . . First Strike! First Day of Release! . . . Hmm! . . . I hear the third most collected item after coins and stamps is postcards. . . . Postcards could be cool! They don’t have any third party grading services for postcards do they?

11 Comments:

At 11:43 PM, Blogger Scott said...

I am not a fan of the FIRST STRIKE designation. There is the potential for problems. To read more, see my blog entry at coinsblog.blogspot.com.

 
At 3:30 PM, Blogger GunMuse said...

Very Good Read.

PRNN News at the speed of now

 
At 1:59 AM, Blogger A.C. Dwyer (aka The Arlington Collection) said...

It appears our blogs have hit a nerve. The "First Strike" premium may eventually wind up on the endangered species list as more people get educated as to what the designation really means.

On Friday 9/15, Goldseek.com, a precious metals news site, issued an article that basically repeats the same train of thought of our posts. The author of this article is the head of a large precious metals dealer. When I did a quick look at their website, I saw plenty of gold bullion coins, but I did not see any First Strike coins being offered. (a definite plus in my book): GoldSeek Article

So continue to spread the truth. Don't give your opinion, just give the facts and let others decide for themselves. Or better yet, just direct them to the US MInt's Consumer Awareness Hot Items Webpage. Afterall, its up to collectors to decide what really deserves a premium. Those who don't believe a premium is warranted can simply choose not to pay it. If enough people choose not to pay it, demand dries up and the premium simply fades away.

 
At 11:58 PM, Anonymous Anonymous said...

What I have learned is that PCGS has the pedigree "First Strike" which means released on the first day of release. NGC has the pedigree "First Strikes" which means from monster box with documentation on strike date.

 
At 2:30 PM, Blogger A.C. Dwyer (aka The Arlington Collection) said...

Obviously whoever posted the last Anonymous comment is in denial and has probably purchased one or more of these coins. Even NGC and PCGS don't agree with Anonymous's comment.

Here is a link to PCGS's site with their definition:
PCGS First Strike definition

And to NGC's site for their definition:
NGC First Strike definition

In both cases, they acknowledge that First Strike only has to do with when the coins were shipped, not when they were struck. Also, read the US Mint's Consumer Awareness Hot Items list on their website at www.usmint.gov if you are still in doubt.

 
At 2:21 PM, Anonymous Chris Freeman said...

While I am glad that the US Mint is warning collectors of this scam, they are perpetrating their own scam on the other hand. I really believe they are hurting the hobby with all of the gimmicks and tricks they have rolled out the last few years, (special mintmarks, reverse proofs, collector sets, proof bullion, etc). Not only are they hurting the longevity of the hobby, they are hurting the value of coins already in collectors collections, (don't you think WL halves and SG $20's would be worth more if they didn't reuse the designs?) I am a fairly longtime collector, so I know this recent fad of "graded" new coins will go away, but not until millions are permanently turned off from the hobby.

 
At 11:07 PM, Blogger A.C. Dwyer (aka The Arlington Collection) said...

Chris, I could not agree with you more. I think if the U.S. Mint keeps acting more like the Bradford Exchange than the U.S. Mint, they will certainly harm the hobby in general.

But you also have to give much of the blame to Congress too. New coin designs are supposed to last for 25 years before the mint can legally change them. The exception is when the change is authorized by congress. The success of the state quarters has clouded congress's vision with regards to our nation's coinage due to the dollar signs they are seeing. I hear a bill is before congress that would extend the state quarters program to include territories, such as Puerto Rico, Guam, etc. The Presidential dollars and First Lady commemoratives seem more like a subscription plan from The Bradford Exchange than legitimate coinage by our U.S. Mint.

I thought the state quarters program was a great idea at first. But after the recent nickle designs, the possible extension of the quarters program, the upcoming dollars program, and who knows what to the penny after 2009, I think that this, along with your list of special mintmarks, reverse proofs, collector sets, proof bullion, etc., is going to kill that initial success of bringing many new collectors into the hobby by then driving those same collectors right back out of the hobby.

 
At 11:30 PM, Blogger A.C. Dwyer (aka The Arlington Collection) said...

I guess it was only a matter of time but it appears the first class-action lawsuit has been filed against the First Strike designations.

Here the story:
First Strike Class-Action Lawsuit File in Florida

 
At 2:04 AM, Anonymous Anonymous said...

Very interesting posts here, especially the class action lawsuit agaist NGC and PCGS.

Unfortunately, being the neophyte collector that I am, it appears as though I have been duped as well, in this case by HSN (Home Shopping Network), who sold me two 2006 $50 Buffalo Gold coins, graded MS70, with the additional designation "FIRST DAY OF ISSUE"... I can only assume that this is as fraudulent as a "FIRST STRIKE" designation.

Any advice from the experts out there?

 
At 11:23 AM, Blogger A.C. Dwyer (aka The Arlington Collection) said...

Although I don't think the "First Day of Issue" designation is misleading like the "First Strike" designation, I also don't see any reason to pay a premium for it. I wrote an article about this designation with regards to the new Presidential dollars (First Day of Issue article) but my opinion would be the same with the Buffalo bullion coins.

 
At 10:15 AM, Anonymous Anonymous said...

I just purchased a GRADED first strike buffalo MS70. It has an "F" stamped on it by the date on the coin face.

 

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