Mastro has raised Buyer Premium to 20%

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Posted By: Dan Bretta

I don't know anything about Goodwin, but I have seen the Mastro headquarters in person and I can tell you that they have a lot of employees, a very nice secure building and a first class operation. I'm not trying to defend Mastro here because I think it was really crappy timing and they should have told consigners that this was coming....I'm just saying Mastronet can't be cheap to run.

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Posted By: JimB

Dan,
I think you will find with a little investigation that Mastro's opening bids are usually ridiculously low - mostly around 10-25% of what the items actually sell for.
JimB

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Posted By: Colt McClelland

I think we all know that Matro is a hugely profitable business. All of that bs about running a big first-class operation, producing the catalog, etc. just amounts to a fixed overhead number which can't really have changed much over the last several years. The bottom line is that they clearly make a huge profit and this increase will likely add to that. I say "likely add to that" because I think there is clearly a "tipping point" out there whereby if they get too greedy and raise the percentages too high, they will start to see the size of their auctions go down. They may be getting close to that point now. My guess is that they will continue to inch this thing up until they hit that point, then maybe either stay level or back it off a bit.

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Posted By: leon

I certainly agree with you on some of what you say...but "hugely profitable" is a relative term. Let's say they do 50 million a year in sales...which is probably close. If they make 23% gross margin (again, probably close)...then the total GP is $11,500,000 ...which is a lot of money but then you have to take out expenses. All of this is hypothetical but I am sure somewhere in the ballpark, relatively speaking. Let's say they have 30 employees....and their payroll is 75k ea...again, some high and some low....that's a 2.25 million dollar payroll. That's 9.25 million left over. Let's say they have another 3 million in total expenses...with advertising, printing, mortgage, etc...that again could be in the ballpark, maybe low. So now we have around 6 million a year as a net profit, before taxes which would make them very profitable but not like ExxonMobil or Wal-Mart. In the long run the market will dictate a lot of what is done. As I said before I will just factor in the extra percentage when bidding. best regards...your money grubbing Wh***

edited for spelling but I still am no English major....

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Posted By: warshawlaw

Cost to consign: 35%

Cost of watching straight men use the word "fabulous" in auction descriptions: priceless.

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Posted By: Steve M.

Yes Leon, that's nice money. But you know it's kind of like being a pro athelete . The career span is so short that they have to make it while they can. I suspect that Mastro may be doing just that. Several factors weigh heavily on his business. 1. There is a lot more competition; and 2. Can the collecting market continue at this torrid pace?

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Posted By: Jeff Lichtman

Leon, I acutally laughed out loud reading the very end of your last post...

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Posted By: Colt McClelland

Leon,

Even based on your analysis, I would still consider that to be a huge profit relative to the number of "owners" who share in it. I don't know the ownership situation for Mastro, but I would guess that the list of shareholders is relatively short and that they are each making what most on this board would consider to be a huge amount of money from the business. ExxonMobile and the like divide their profits up between millions of shares so the relative profit for an "owner" is much less. That's what I meant by a huge profit. I was speaking relative to what those on this board might consider to be profitable for a closely held business that they were participatin in. Just clarifying my postiion.

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Posted By: Jeff Lichtman

Hey, we're all capitalists here (save the Behrens boys); it's ok to make money. I just find it hilarious how Mastro is obviously the greediest of all of the auction houses yet takes the greatest pains to explain away its greed by claiming that all of the increases in costs are for the bidders' own good. Enough with the BS already.

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Posted By: Dan Koteles

can you find the material they produce constantly much or anywhere else?....very little and definetely not on ebay. There are some very intelligent buyers that know where to stop and there are many with enough money that dont care to stop. Usually the bigger bankbbook wins out on these auctions in which they are primarily geared for.

The best thing is that if you dont have much to spend focus on 1 or 2 lots that you really want and hope to win one. Dont expect a Wagner with a 25k annual income. This is what I mean by knowing when to stop. In competition ,there is always a winner and always a loser.

Better luck on the next REA or other auctions ahead.

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Posted By: Judge Dred (Fred)

I was talking to a friend today and we got on the subject of the Mastro auctions going to a 20% BP.

My friend made a lot of sense, he indicated that it could be that they may take less from the seller (seller's premium) so that they can get the consignments and they are making up the difference (of lower seller premiums) through an increase in the BP.

This would allow them to continue to get nice material (lower seller's premium) and still keep their margin by having the buyer pay for it. There is a finite supply of cards so getting the cards in a highly competitive market may take negotiating lower seller premiums.

I suppose the bottom line is that you should factor the BP into the bid amount. 20% is a pretty big chunk. We can only hope that the other auction houses with less overhead don't follow suit in raising their BPs.

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Posted By: cmoking

Fred, the problem is not the hike to 20%. The problem is that consignors in their December auction feel bamboozled because they were not told the BP would be raised to 20%. From the Mastro contract, it sounds like Mastro is covered as they state the BP will be at least 15%. 20% is at least 15%. But many consignors still feel it was unfair. I agree with them.

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Posted By: Larry

Mastro Auctions still is the best auction as far as the most diversified supply of quality auction material, they can charge anything they deem reasonable, just adjust your bidding to factor in the 20% or if you are not happy, just do not bid, this is the world of Corporate America. Luckily they do have competition so at least collectors have choices.

They still have a lot of overhead and are not as profitable as everyone thinks in ratio to the volume they do. This thread reminds me about the e bayers that complain that they pay $5 for an insured graded card(value $50)packed in bubble with insurance and delivery confirmation from a fast shipping seller and think a seller should charge $2(cost), well overhead and shipping supplies have gone way up, so has insurance, travel expenses etc. and it does not come FREE....Doug Allen maybe could have done this AFTER the auction and for those that did consign prior, I do agree they have a valid complaint for this auction, however you can pull your listing if you do not want them to carry it out if it is such a problem.

They still are a wealth of information, quality and service to the hobby.

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Posted By: Judge Dred (Fred)

King,

I absolutely agree with you about the consignors. The fair thing to do would be to allow a consignor to withdraw their lot (without penalty) if they were under the impression the BP was going to be lower. I suppose one fair compromise would be to lower the SP for those that want to withdraw their lots. One thing to remember is that we all realize that there are very few bargains in the Mastronet auctions therefore the rational is that Mastronet auctions do garnish some of the most spirited bidding amongst the large auction houses. If someone were to withdraw their lot then they would be banking on getting a few percent more from another large auction house. We'll see how it all plays out. The guys at Mastronet are pretty good people so they'll probably do something to make things right for the consignors that feel slighted.

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Posted By: jay behrens

I am a capitalist, but I believe that personal moral and ethics should not be tossed out the window in the pursuit of the all mighty dollar. This is why none of my business ventures have been huge successes. I lack the ability to screw someone over, or lie to someone to make a buck. When it comes to money, people will do things in the pursuit of a buck that they would never consider doing if it was a personal situation.

Jay

I love pinatas. You get to beat the crap of something and get rewarded with candy.

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Posted By: Jeff Lichtman

What some of you guys are not getting is that increasing the BP by percentage points only serves to reduce the seller's final take. So, it is a fiction that if Mastro reduces the consigment fee by x points but just increases the buyer's fee by the same x points that the seller is making out better. Clearly, buyers factor in the increased BP when making bids - thus reducing bids and costing the seller.

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Posted By: leon

Not sure which way your finger was pointing but I never said that I didn't think the consignor could be out something. Doug Allen told me that if any consignor has an issue they should call him to resolve it. What more could be said, that hasn't been? I think they run a fine outfit and have expressed my opinion, on this matter, elsewhere too.

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Posted By: David Vargha

I do agree they have a valid complaint for this auction, however you can pull your listing if you do not want them to carry it out if it is such a problem.

I didn't think that they contractually had this option.

DavidVargha@hotmail.com

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Posted By: Judge Dred (Fred)

Jeff,

My statements regarding BP and SP weren't meant to indicate that the auction is going to be better for the seller. My intentions were to show that the final cut for the auction house would be the same, but the buyer would end up paying more for the item. My point was that this material isn't getting easier to find and the auction houses have to get the owners of the material to sell it so enticing them with lower SPs may help out.

I understand your point of view. The higher BP lowers the overall final realized price because bidders will drop their bids a few percent to make up the difference for the increased BP. A lot of buyers get caught up in the auction and sometimes that extra BP% may not be a final factor in their bidding. As for me I usually don't get caught up in the bidding frenzy. I'll pay what I feel is a good fit for me. If I get outbid (and that is the norm for me) then I just don't get the item.

Edited to add a SMILEY FACE - I believe everyone is entitled to their opinion...

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Posted By: Jay

King is exactly right on this issue. The point isn't that Mastro chose to increase their buyer's premium. Buyers can factor that into their bidding and sellers can negotiate their seller's commissions accordingly. If this change was announced effective the next major auction then I would say it is a non issue. The fact that Mastro increased the buyer's premium without telling consignors to the December major auction and, on lower value material, to the February smaller auction was, in my opinion, just a slap in the face to consignors. This 2.5% increase spread over possible realizations of $16 million on these two auctions would generate another $400,000 for Mastro. My guess is that in the long run this move will cost them alot more than that. I would hope that they would reconsider and rescind this move.

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Posted By: warshawlaw

Mastro had the contractual right to raise the BP; I don't think anyone will win a debate over that question. The issue is whether it is a maneuver that was timed so as to not allow consignors discretion to not deal with them, which it undoubtedly was. Next time I consign, I will negotiate an overall cap to my commission and the BP instead of merely the commission.

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Posted By: Jeff Prizner

Good point Adam! Next time I consign, I will do the same. Seriously doubt I'll ever be consigning to Mastro again though.

As for Doug making good with consignors, I'll believe it when I see it. (Still waiting for him to call me back). But from the conversations that I have had with other consignors who have already spoken to him, I won't be holding my breath.

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Posted By: barrysloate

It certainly appears after the number of posts that Mastro made a public relations gaffe, but once they get through this auction the 20% will be information that everyone will have at their disposable. Not necesarily wrong to charge 20%; as has been said bidders will factor this in. But announcing it after all consignments are in is clearly a mistake, and if we know it by now they surely know it too.

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Posted By: Jeffrey Lichtman

Jeff-what is Mastro's official position regarding their bait and switch?

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Posted By: Bruce Dorskind

The real question for a seller is "where will I realize the maximum amount
of money for the items that I am selling?

If I sell through Auction House A and pay no seller's premium and they have
a 10% Buyer's Premium and I realize a 1000 on an item that is fine.

If Auction House B can sell the same item for $1300 and I have to pay them
10% and there is also a 20% Buyer's premium ($1300 becomes $1560)
as a seller I am still better off with Auction House B.

The big question is how much additional value does an auction house
that charges 15%and 20% (sellers and buyers premium) add vis a vis
one that charges 0 and 15% or 10% and 10%.

I think that the answer is determined by the item.

As for seller's premiums, I have been offered a negative premium
( a share of the buyer's premium) by two of the most distinguished
auction houses.

This is very typical of the coin business- where it is rare for a coin
auctioneer to charge a seller's premium on high quality graded material.

My experiences with Robert Edward as both a buyer and a seller is that
they have been worth every percentage they charged. Rob Lifson is
a savvy business executive and is more than reasonable if the collection
warrants an adjustment in the seller's premium.

While Mastro has every right to charge a 20% premium they are obligated
morally, if not legallly, to notify consignors of a change in terms.
in advance of accepting the items.

It is very poor form and highly unprofessional to do otherwise. It takes 20 years
to build a reputation and 20 minutes to ruin it.

Bruce Dorskind
America's Toughest Want List

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Posted By: Jeff Lichtman

Bruce, thanks for that post - very informative. Negative premium...unreal.

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Posted By: david

is there any language in the consignment contract that would allow for the seller to request an item be pulled? it seems as though the terms under which the contract was signed and under which the items will be auctioned have changed

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Posted By: Jeff Prizner

I'm still waiting for Doug to call me back, but from what others have told me, their stance is basically the same as what their email said. So they don't have to compromise their professional and efficient manner, expensive catalogs and authentication, and blah, blah, blah...

Raise your fees to whatever it takes to cover expenses, but inform your consignors before sending out contracts, not on the same day as the auction starts!

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Posted By: Jeff Prizner

the contract is worded "We will also charge the Buyer a premium of no less than 15%"

Legally they can charge whatever BP they want, just think the timing of the announcement was very unprofessional and somewhat unscrupulous, in regards to how it effects consignors for this auction.

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Posted By: Jeff Lichtman

So Doug doesn't explain why they failed to inform consignors until AFTER the catalogues were printed and mailed, on the eve of the auction? All consignors should, en masse, threaten to withdraw their lots at this late time (if their contract allows for it). I guarantee that will get Mastro to cut their seller's fee by 2.5%. (God forbid Mastro should cut back the buyer's premium to the 17.5% figure -- the previously highest fee charged in the auction world) Well, at least you can't accuse Mastro of not being groundbreaking in some aspects of its auctions....

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Posted By: ramram

delete - wrong thread

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Posted By: Griffins

<<(God forbid Mastro should cut back the buyer's premium to the 17.5% figure -- the previously highest fee charged in the auction world)>>

Heritage is 19.5% and SCP/Sotheby's is 20%. Plus 5% if they run it thru ebay live.

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Posted By: David Vargha

Just to clarify my earlier post Jeff, "they" referred to the consignors (not Mastro).

DavidVargha@hotmail.com

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Posted By: warshawlaw

Bruce: interesting insight. If the evil day comes when the whole collection goes on the block, I will not only demand a 0 commission, I will try to take a bite out of the BP too.

I hear a lot of talk of boycotts but I suspect that since such things are not subject to policing, in the end everyone will show up and Mastro will report yet another record sale.

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Posted By: Judge Dred (Fred)

Build it, they will come = Offer it, they will bid

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Posted By: leon

You hit the nail on the head. From personal experience it doesn't matter what anyone or any company does, if someone wants a card.....most of the times they don't care what the seller did/does. Sad but true....I won't deal with a few people for the way I was treated but for the most part people just don't care.. You could be a thief, liar, scoundrel, pervert (maybe)....but if you have a card someone needs...they don't care what else you did. Mastro gives good service, has great items, and had poor timing...this will blow over (for most) about the last day of their current auction, imo... regards

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Posted By: DJ

Fred did hit on the nail of the head.

It's like when you hit the thruway and your starving and you have to hit a fast food joint en route. The first thing you do is comment about how a Big Mac by your house is $2.79 and here it is $3.19. You still eat though.

How many of us (not me) said they would never deal with Lelands because they sold parts from Munson's plane?

C'mon, it's the shock and emotion of the high percentage raise, but if you want it and it's there, it may be yours regardless of how you feel at this current moment.

DJ

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Posted By: Jeff Prizner

From a bidder's POV, no big deal, and yes, it will blow over. From a consignor's, this personally won't blow over for me. I won't consign to them again.

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Posted By: davidcycleback

My opinion is the auction houses should charge the consignors, as there should be some semblence of balances in buyer/consignor charges. 100%/0% 'balance' in most anything isn't a good idea.

Also, consignors who negotiate 0% consignment fees should not with a straight face complain about the 20% winner's fee-- as the winner's fee is more than likely raised due to the dissapearing consignment fees.

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Posted By: Jeff Prizner

I'm all for charging the consignors, and 20% is fine if that's what they need to do. But to announce it AFTER all the consignments have been accepted at the presumed 17.5% is what I have a problem with. 2.5% isn't a huge amount of money, but it's the principle of it. I've always held Mastro in the highest regards, that changed somewhat this week.

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Posted By: Wesley

I understand what you are saying, Jeff, and I think most people feel the same way. If this announcement was made four months ago, then it would be no big deal at all.

But the fact that Mastro introduced the higher fees in the same email as the one announcing that the auction is now online is bad business practice. I don't think you will find anyone who does not work for Mastro that disagrees with this.

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Posted By: Harry Wallace (HW)

Jeff,

Well said. I do not think it is a problem that they raised the buyer's premium, it is how they did it that is not right.

Heritage and Sotheby's and Sportscards Plus are all at 20% and I think Mastro's product is superior to theirs.

It is the fact that they changed it without a warning is what is not right.

There again, everyone else has edged their buyer's premiums up over time and I do not remember being notified in advance by them either.