Posted By:
CatI wanted to repost this from the Doug Allen thread. I wrote this 11/28/06. I think it is the essence of the problem. It was written specifically to Doug, but I think it is appropriate here. Card buyers are paying for other more complicated and costly parts of the Auction House's product lines. Any mechanism to combat card inflation due to Auciton House fees is a good effort.
Doug:
I would certainly understand if you have vowed to be a lurker in this thread from this point forward. I appreciate your candor and will likely be a Mastro customer in future auctions.
When I say I will "likely" be a customer in future auctions, that qualification has nothing to do with what has been the primary discussion of this thread. What unnerves me is the buyers premium going to 20%. This was touched on a bit, mostly by Jeff Lichtman, but I don't think we were ever given an explanation. I realize you are running a reasonably sized business and really don't OWE an explanation to anybody, but I, for one, have been a decent customer and am concerned about the action. (I looked back in my check register and have spent $50,500 in Mastro auctions since the April, 2005 auction; consigned nothing). My general feeling is that I am being gouged.
You said it yourself...you never expected your $6MM auctions to turn into $12MM auctions. That's outstanding revenue growth, for Mastro, regardless of an increase in the buyers premium. Although I buy pretty freely and pay as much attention to prices as anyone, I do not know how much baseball cards have increased in the last couple years. My instinct is that the overall price increase, in cards, has went up by easily double digits. Even if we assume it is at the low end of double digits..say 10%...which I personally believe is incredibly conservative...that, again, is revenue inflation that most any firm would love to have.
I understand that perhaps the memorbilia side of your business is more complicated. Authentication is more stringent, I suppose. The items may be more obscure and harder to determine the claimed provenance. But this is not the case for cards. When I read the description for the T204 Johnson in the present auction, it was the same (or virtually the same) as the last T204 you sold about one year ago. NO PROBLEM!!! Why reinvent the wheel? But, it serves my point, cards are no more complicated now than they were when Mastro started, so why the increase in buyers premium.
With the revenue growth and revenue inflation that you have had isn't there something that could of been done to meet income goals and leave the buyers premium at a level the market thinks is fair? Your revenue has had staggering growth and you increase the buyers premium on top of that. I've heard you have a top notch office location. GREAT!!! But at some point, you are going to have to look at the cost side of the equation rather than increase costs and pass it to the buyer. (I had to laugh when Jeff Lichtman stated something to extent of "well I guess for the extra 2.5% we get paper tape with the Mastro Logo plastered all over it." Because I just received my card from the October auction about a week prior and that is exactly my thought when I saw your logo on the tape. I know that is petty, but people get that way when they think they are beginning to be treated unfair)
There is a point of diminishing return on the buyers premium....I don't know what that is for the market...but it is approximately 20% for me. Some folks say it doesn't matter just factor it in when you decide what you want to pay. I do that, at times. Other times, I just pay the price, and that's when the increase impacts me. I will tell you, I never even flip a page in a Heritage auction catalog, I just turn a cold shoulder. Their buyers premium has been to high for to long. I hope I don't come to the same final "cold shoulder" conclusion about Mastro.
Some have stated that the increase in buyers premium is simply due to the softening of the charges on the consignment fee. If the buyers premium has increased to offset the decrease in consignment fee, I would like to hear more about that.