New U.S. Mint Buffalo Coins' Packaging a Nightmare
When the U. Mint announced it was adding a .9999 gold bullion coin to its line of gold coins, it looked like a "golden opportunity" for the Mint to capture a big chunk of 24-karat gold coin market. When legislation was passed mandating that the new coin bear James Earle Fraser's designs that graced the legendary Buffalo/Indian Head nickels from 1913 through 1938, the new coin's future looked even brighter. However, on release of the new Buffalo gold coin, the Mint's golden opportunity has turned into a nightmare at the retail level.
While the coin itself is quite striking, having a matte finish and completely capturing the Fraser designs, the packaging makes the coins a nightmare. Although the bulk of the blame can be laid on Congress for attempting to "micro-manage" production and distribution of the coins, the Mint should accept its share of the blame for the choice of packaging, having not considered, the retail aspects of the packaging. Congress mandated that the coins be individually encapsulated to protect them from damage, apparently to avoid problems that have risen with 1-oz Canadian Maple Leafs. Further, Congress mandated that the Mint have the coins ready for distribution by the end of June. To meet the deadline, the Mint had to choose a method of packaging that was readily available and that would accommodate anticipated large volume sales.
The Mint chose a semi-rigid Mylar packaging, five coins horizontally with four coins down, making twenty coins to a sheet. With wide spacing between the coins, a "sheet of Buffalos" measures twelve inches by sixteen inches. The packaging causes several problems. Because of the rigidity of the Mylar, a sheet cannot be folded into a tall bundle. Orders for less than twenty coins have to cut out of the sheets for the coins to be packed compactly, which is desired—and expected—for gold bullion coins. Undoubtedly, the semi-rigid packaging for the Buffalos was meant to provide durable protection. However, the Mylar is so rigid that an original sheet of twenty Buffaloes cannot be conveniently stored. A sheet of twenty can be rolled like a magazine and then rubber-banded, but then storage would take a lot of space. Whereas the smallest of safe deposit boxes will hold hundreds of 1-oz Gold Eagles because they come in compact tubes, perhaps only sixty or so Gold Buffalos would fill a small safe deposit box. Another problem that has surfaced: The coins readily come out of their protective sheets when handled.
This means the coins then have to be transferred to a tube or to individual plastic sleeves, which are used so often for single coin purchases. Or, the Mylar can be mended with Scotch tape, hardly an attractive solution. Because of the problems that have arisen with the packaging, Buffalos will not appeal to many large bullion buyers but to collectors, who may want only a few coins. Investors who ordered Buffalos without knowledge of the packaging have been disappointed. With the present packaging, it is unlikely the Mint will capture much of the .9999 fine bullion coin market. While the Mint may point to early robust sales, new coins nearly always enjoy strong early sales. And, with the popular Buffalo/Indian Head design, undoubtedly Buffalos will remain favorites of collectors and people looking for gifts. However, the Buffalos were introduced to go after the .9999 fine gold bullion coin market, where investors make repeated orders.
So, the test for the Buffalos will come in the months ahead when we learn if investors make second and third orders for Buffalos. It is the opinion of this 32-year veteran of the gold bullion coin market that if the U. Mint does not make changes in Buffalo packaging, sales will erode over time, and the Mint will miss a golden opportunity to capture a big piece of the pure gold coin market, which is now dominated by the Royal Canadian Mint's Gold Maple Leafs. The solution to the problem is for the Mint to change the packaging as soon as possible, taking into consideration how large investors are likely to store the coins—in safe deposit boxes. For investors who do not store in safe deposit boxes, compactness becomes even more important, as the coins must be easy to conceal. The Mint seems to have completely ignored this aspect of the market. Additionally, the Mint needs to keep in mind that the coins have to be handled by bullion coin dealers who ship the coins to the final investors. The present packaging causes twenty-coin or larger orders to be shipped in large boxes, adding to shipping costs. The large boxes may also require more trips to the Post Office.
It also increases the cost of handling for orders less than twenty coins, as they have to be cut out of the sheets. Since Congress mandated that the coins be individually encapsulated, the Mint should go with hard plastic capsules such as those used by The Perth Mint. Then the capsulated coins should be put ten to a tube, providing compactness for ease of storage. That would also facilitate handling by coin dealers. To correct the problem—and really go after the .9999 bullion coin market—the Mint should encapsulate the coins individually and put them in tubes of ten. Then ten tubes should be put in small, sealed, and durable boxes. And, finally, five small boxes of 100 coins should be put in a larger box of 500, which is how the Mint ships its best-selling Gold Eagles. Boxes of 500 are popular with large investors, and the boxes of 100 would be attractive to medium-size investors.