Quote:
Originally Posted by bnorth
How would a higher buyers premium help get consignments? The way I understand buyers premium is the higher it is the less cash the consignor gets with everything else being even.
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Well it's in the first part of my response that you quoted but let me give an example from the original scenario, AND an example from today that is 100% hypothetical.
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In the year 1975 BBP (Before Buyer's Premium), Sotheby's and Christies were battling for supremacy in the art world. To do that you need to get better consignments than your rival, and the best way to do that is to charge your consignor less commission, everything else being fairly equal.
Well you can only do that so far and then you're not profitable, so now we're at a stalemate. Let's say that happened around 15% commission.
Then some genius at Christie's comes up with the genius idea of a Buyer's premium. "Hey boss, let's hit the BUYERS up for 10%, and then even if we go down to 5% seller's commission we're still making our 15% nut, and we get to tell the sellers were charging them LESS than those bastards over at Sotheby's!"
Being the first adopter, this worked like a charm and Sotheby's eventually figured out why they were getting spanked on the consignment end, and in the year 1 ABP (After Buyer's Premium) Sotheby's followed suit and things equaled out again.
Of course over the years periodically one of them would raise their BP rate so they could charge their sellers even less, and the other one would quickly follow suit.
Forget that thinking people realize it doesn't matter who it's coming from they're, in essence, paying the same rate they always did. It works on the consignment end. Trust me I've tried to explain it numerous times to potential consignors and they stop listening once they find out you're "charging them more."
This was even MORE pronounced when BP was a new concept altogether.
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Now for the modern hypothetical.
Fast forward to the year 49ABP and Goldin announces a new higher BP of 22.5%. Everyone scoffs and says "We'll never buy from them again!" and Goldin promptly goes out of business.
Oh, what's that you say? That didn't happen? Right because now Goldin is telling consignors of the BEST stuff that he can give them 115% instead of 110% that is customary.
Suddenly they're getting more of the absolute top end stuff. Our friends at REA realize that they're seeing less of the top tier items because they're still at 110% to the top consignors. So, similarly to the original example, they are almost forced to follow suit to remain competitive.
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Please, ignore the fact that who pays what is basically nonsense if the total paid is ultimately the same. An entire industry doesn't do something just for grins and giggles, they do it because it works.