What is the point of the "Buyer's Premium"?

[luciobar1980]

So I get it, you have to think about the Buyer's Premium and take it into account and bid accordingly. But what is the actual point? The only possible motive I can come up with is that's a psychological tactic by the auction house to make you feel like you're paying less than you actually are, or even worse, hoping for ignorance on the part of the buyer.

Sorry if this has been discussed.

[Peter_Spaeth]

It has been discussed countless times over the years. The AH has to make money somehow, no?

[G1911]

Originally Posted by luciobar1980

The only possible motive I can come up with is that's a psychological tactic by the auction house to make you feel like you're paying less than you actually are, or even worse, hoping for ignorance on the part of the buyer.
.

That’s exactly what it is, and why it’s kept separate by most of them. Otherwise it would just be your bid and they take X% as their commission as arranged with the seller. It’s not hard to calculate in and lower your bid accordingly, but surely many people don’t and they’ve learned more money is made this way than the other, straightforward way.

[icurnmedic]

Originally Posted by G1911

That’s exactly what it is, and why it’s kept separate by most of them.

That's why I prefer..., gulp, eBay auctions overall. I like to just bid and not worry about calculating the BP. I know it is "easy to calculate" but on higher priced items particularly when the bid increment jumps , it can really add up quick if you don't do your diligence .

[x2drich2000]

From a consignor prospective, would you rather pay 0% of the sale price or 20% of the sale price? Which do you think is going to convince someone to consign an item. AH's still need money to eat either way you slice it.

[BobC]

Originally Posted by luciobar1980

So I get it, you have to think about the Buyer's Premium and take it into account and bid accordingly. But what is the actual point? The only possible motive I can come up with is that's a psychological tactic by the auction house to make you feel like you're paying less than you actually are, or even worse, hoping for ignorance on the part of the buyer.

Sorry if this has been discussed.

I think you hit the nail on the head. It is sort of a psychological selling trick to make buyers feel like they aren't paying as much as they really are, so they bid a little higher in the heat of the moment. Exact same concept when you go into stores and see items priced at $1.99, $4.95, or $9.99. Why don't they simply round the prices up $0.01 or so to an even dollar amount? They do it so the buyer feels like they are somehow paying less, even though you can see what it costs right on the price tag.

And they say we humans are supposed to be smarter than all the other creatures on Earth. Really makes you wonder some times. LOL

[Lorewalker]

Personally I really do not care what the house charges me as a buyer or what they are getting, if anything from the consignor. When I am bidding I always consider my bid plus the buyer's premium and sales tax as the cost to me.

Not sure why this is so hard for so many people to grasp.

[Peter_Spaeth]

It's an accounting device. It isn't fooling anyone.

[parkplace33]

It's a moneymaker, no doubt about it. Actually, kinda shocked it hasn't gone up more for major auction houses.

[Exhibitman]

It is just a subterfuge but it works because your average American does not do arithmetic very well.

[frankbmd]

One well-respected auction house used to have a default shipping charge that wasn't changed to the actual shipping charge until hours after the auction closed. Invoices were available for review before the shipping charges were changed.

The default shipping charge for all items was $1000.00. Yikes. That will open your eyes in the middle of the night at 4AM when the auction closed.

My only experience with this practice involved two slabbed cards. The shipping charges were reduced later the same day from $1000.00 to $20.00.

[Peter_Spaeth]

So to be clear, some of you guys are accusing Board members like Scott B, Scott R, Al C and Lee B of trying to deceive buyers into overpaying?

[toppcat]

I just multiply my top bid by 1.3 to see the true cost, or close to it. Accounts for BP, tax and shipping usually doing that.

My bigger issue is eBay has almost nothing I need most days.

[raulus]

Originally Posted by Peter_Spaeth

So to be clear, some of you guys are accusing Board members like Scott B, Scott R, Al C and Lee B of trying to deceive buyers into overpaying?

I think the accusation is that AHs are savvy business operators.

[Lorewalker]

For those who cannot seem to keep the BP in mind when bidding, Heritage does the work for you. Each bid you place shows what you pay or will pay with the BP included.

[Peter_Spaeth]

Originally Posted by raulus

I think the accusation is that AHs are savvy business operators.

It was referred to as a trick.

[Exhibitman]

Originally Posted by Peter_Spaeth

So to be clear, some of you guys are accusing Board members like Scott B, Scott R, Al C and Lee B of trying to deceive buyers into overpaying?

No, the accusation is that many people are clods who cannot do math and as a result there are some who do not factor in the BP when bidding. The information is right there, they are just incapable of using it. Which is why many sites show the BP number alongside the bid number. Heritage has long done this. You click on a bid there and you see the precise total cost of the bid plus BP. More to the point, the question is why engage in a cumbersome method when a single price WYSIWYG would be cleaner and easier? The answer can only be that it grants the AH some sort of small edge to do it that way, like a casino adding another 0 space to a roulette wheel.

[perezfan]

For those who don't understand the BP.... How do you propose the auction house earn any income and have the ability to keep running? They aren't trying to "fool" anyone. The rules are clearly posted, and anyone with the ability to process information should be able to understand them.

The AH's ability to hire staff, pay internet fees and print catalogs is all contingent on the Buyers Premium. Perhaps those of you who are perplexed know of a better way for the AH to generate income and stay in business?

I guess this topic is destined to resurface at least once per year.

[Exhibitman]

Originally Posted by perezfan

... anyone with the ability to process information should be able to understand them

And therein lies the rub. Math.

[raulus]

Originally Posted by perezfan

For those who don't understand the BP.... How do you propose the auction house earn any income and have the ability to keep running? They aren't trying to "fool" anyone. The rules are clearly posted, and anyone with the ability to process information should be able to understand them.

The AH's ability to hire staff, pay internet fees and print catalogs is all contingent on the Buyers Premium. Perhaps those of you who are perplexed know of a better way for the AH to generate income and stay in business?

I guess this topic is destined to resurface at least once per year.

Certainly the AH could take it out of the consignor instead of taking it from the buyer. Our good friends at eBay do just that, and they seem to be staying in business in a reasonably successful fashion.

[HercDriver]

When I go out to eat, I have to add 20% for the tip at the end. I don't feel like I'm being deceived in any way, I just know that's how the waitstaff makes their money. Same with the AH, it's just part of the "night out." I think I'm going to start calling it a "Buyer's Premium" when I go out for dinner, instead of a "tip."

[Peter_Spaeth]

Originally Posted by raulus

Certainly the AH could take it out of the consignor instead of taking it from the buyer. Our good friends at eBay do just that, and they seem to be staying in business in a reasonably successful fashion.

And ebay final bids don't include tax, do they?

[raulus]

Originally Posted by HercDriver

When I go out to eat, I have to add 20% for the tip at the end. I don't feel like I'm being deceived in any way, I just know that's how the waitstaff makes their money. Same with the AH, it's just part of the "night out." I think I'm going to start calling it a "Buyer's Premium" when I go out for dinner, instead of a "tip."

I guess part of the question might also be how you feel about it when the airlines do it? Do you like buying at one price, and then having to pay to carry on your bag, select your seat, or check your bag?

How about when you go to the hotel nowhere close to a resort, and they charge you resort fees?

Certainly most of the time, these business practices drive people mad. I suspect that the psychological effect here is similar.

[raulus]

Originally Posted by Peter_Spaeth

And ebay final bids don't include tax, do they?

They do for those of us that live in Oregon.

[Peter_Spaeth]

Originally Posted by raulus

They do for those of us that live in Oregon.

But for most one still has to do a calculation before bidding to know the true price.

[raulus]

Originally Posted by Peter_Spaeth

But for most one still has to do a calculation before bidding to know the true price.

Agreed.

I think the big difference is that's common commercial practice. Most every vendor at every site quotes their prices before tax. You go to Walmart, Burger King, or Shoe Barn, and their prices are all before sales tax.

In the case of eBay, with eBay buyers theoretically being located just about anywhere in the world, quoting the complete price would be a challenge.

[Flintboy]

Straight money grab- nothing more, nothing less. If you explain it as anything else you probably own an auction house.

[Lorewalker]

Most AH charge 0% to consignors and in fact many give part of the BP to the consignors in an effort to bring collectors great material. That has become the hobby standard.

The AH needs to make money. They charge a fee at the end which is paid by buyers. Factor it in. If that concept is too hard for some to figure out maybe they should not be bidding. Nobody is paying more or being hoodwinked because of the fee.

If one compares the offerings on eBay auctions to those offered in a catalog type auction, there is no comparison. Fewer sellers are even doing the auction format. Since PWCC is gone there is next to nothing that gets listed in the auction format. So ya get what ya pay for. If ya like eBay better because the price you bid is essentially the price ya pay then shop there.

[raulus]

Originally Posted by Lorewalker

Most AH charge 0% to consignors and in fact many give part of the BP to the consignors in an effort to bring collectors great material. That has become the hobby standard.

I must be consigning to the wrong auction houses. Or maybe they don't like my stuff. Because the offers I have gotten are inferior to this. I pay a listing fee, and they keep the BP.

[G1911]

Originally Posted by Peter_Spaeth

So to be clear, some of you guys are accusing Board members like Scott B, Scott R, Al C and Lee B of trying to deceive buyers into overpaying?

I am accusing people who run auction houses of, generally, figuring out the obvious. That a lightly hidden fee tends to produce more money from people who are lazy or dumb or forget they have to tack on an extra 15, 17.5, 20% or whatever. It is a psychological tactic to make it look like less, and if someone forgets about the fee, I doubt there’s a single auctioneer who will turn down the profit. It clearly produces more revenue that telling bidders their bid is their bid, and they can raise their bids 15-20% because there is no buyers fee. If this offends people, they may be offended.

[Lorewalker]

Originally Posted by raulus

I must be consigning to the wrong auction houses. Or maybe they don't like my stuff. Because the offers I have gotten are inferior to this. I pay a listing fee, and they keep the BP.

Not sure who you are consigning with or what type of material you are consigning but the profit to the house, when they are not selling their own material, is heavily weighted by what we pay as buyers.

[Fullerton]

The buyer's premium does seem like a psychological "trick", but it is based more on enabling more clear cut record keeping of actual sale price of an item regardless of auction house and its fees. Historical auction records are relied on for appraisals and insurance.

[Peter_Spaeth]

Originally Posted by G1911

I am accusing people who run auction houses of, generally, figuring out the obvious. That a lightly hidden fee tends to produce more money from people who are lazy or dumb or forget they have to tack on an extra 15, 17.5, 20% or whatever. It is a psychological tactic to make it look like less, and if someone forgets about the fee, I doubt there’s a single auctioneer who will turn down the profit. It clearly produces more revenue that telling bidders their bid is their bid, and they can raise their bids 15-20% because there is no buyers fee. If this offends people, they may be offended.

So it doesn't fool you, but you're sure it fools others?

[raulus]

Originally Posted by Fullerton

The buyer's premium does seem like a psychological "trick", but it is based more on enabling more clear cut record keeping of actual sale price of an item regardless of auction house and its fees. Historical auction records are relied on for appraisals and insurance.

Those are some interesting concepts that I hadn't considered.

I figured it was as much about tradition as anything.

[Casey2296]

Originally Posted by G1911

That a lightly hidden fee tends to produce more money from people who are lazy or dumb or forget they have to tack on an extra 15, 17.5, 20% or whatever.

These people should not be making bids in an AH format.

[raulus]

Originally Posted by Casey2296

These people should not be making bids in an AH format.

I think it's less about being bad at math, and more about the psychological effect. For whatever reason, my suspicion is that bidders feel better about bidding $100 (plus 20%) than bidding $120, even though they're exactly the same thing.

[G1911]

Originally Posted by Peter_Spaeth

So it doesn't fool you, but you're sure it fools others?

Does it seem likely to you that nobody ever forgets about it? Does it seem rational to you that this complication would be added (a system is easier when there are fewer variables) if it did not produce a better result for the house?

Would you be happier if I posited instead that auctioneers are too stupid to figure out why their business model is what it is?

This isn't much to get offended over in the idea that people running businesses tend to structure them to their benefit when possible. A Buyers Premium structure, with a separate fee to tack onto the bid, is not designed to the benefit of the buyer. This seems like common sense. If you would like to take this as a personal slight on your aforementioned list for some reason, go ahead.

[Casey2296]

There's been some great collections built on good whiskey and poor decisions on auction night...

[Orioles1954]

Originally Posted by perezfan

For those who don't understand the BP.... How do you propose the auction house earn any income and have the ability to keep running? They aren't trying to "fool" anyone. The rules are clearly posted, and anyone with the ability to process information should be able to understand them.

The AH's ability to hire staff, pay internet fees and print catalogs is all contingent on the Buyers Premium. Perhaps those of you who are perplexed know of a better way for the AH to generate income and stay in business?

I guess this topic is destined to resurface at least once per year.

And countless other factors that all cost significant $$$. By the way, BP is pretty much universal and it tends to be much lesser than overseas. I participate in English record auctions and 30-35% is pretty much standard.

[Peter_Spaeth]

Originally Posted by G1911

Does it seem likely to you that nobody ever forgets about it? Does it seem rational to you that this complication would be added (a system is easier when there are fewer variables) if it did not produce a better result for the house?

Would you be happier if I posited instead that auctioneers are too stupid to figure out why their business model is what it is?

This isn't much to get offended over in the idea that people running businesses tend to structure them to their benefit when possible. A Buyers Premium structure, with a separate fee to tack onto the bid, is not designed to the benefit of the buyer. This seems like common sense. If you would like to take this as a personal slight on your aforementioned list for some reason, go ahead.

I'm not presuming I'm smarter or more careful than other people. My guess is if it happens it's very very infrequent after 20 years of this model.

[raulus]

Originally Posted by Orioles1954

And countless other factors that all cost significant $$$. By the way, BP is pretty much universal and it tends to be much lesser than overseas. I participate in English record auctions and 30-35% is pretty much standard.

I guess we should count our blessings to only get to pay 20%!

[G1911]

Originally Posted by Peter_Spaeth

I'm not presuming I'm smarter or more careful than other people. My guess is if it happens it's very very infrequent after 20 years of this model.

I never said anything about myself; that was a line you went down and I ignored. I rarely participate in auction house bidding for reasons other than the BP structure.

[Peter_Spaeth]

Originally Posted by G1911

I never said anything about myself; that was a line you went down and I ignored. I rarely participate in auction house bidding for reasons other than the BP structure.

I am certain you would not be fooled.

[Peter_Spaeth]

Originally Posted by raulus

I think it's less about being bad at math, and more about the psychological effect. For whatever reason, my suspicion is that bidders feel better about bidding $100 (plus 20%) than bidding $120, even though they're exactly the same thing.

Why are you all presuming what other people think?

[raulus]

Originally Posted by Peter_Spaeth

Why are you all presuming what other people think?

It's a suspicion, not a presumption.

[Peter_Spaeth]

Originally Posted by raulus

It's a suspicion, not a presumption.

Fine, what's your basis for suspecting what other people think, if you yourself don't think that way?

[raulus]

Originally Posted by Peter_Spaeth

Fine, what's your basis for suspecting what other people think, if you yourself don't think that way?

Never said I didn't think that way. I suspect that I myself at times feel better about bidding $100 (plus 20%) than bidding $120, even though they're the same thing.

[Peter_Spaeth]

Originally Posted by raulus

Never said I didn't think that way. I suspect that I myself at times feel better about bidding $100 (plus 20%) than bidding $120, even though they're the same thing.

But if you know it's the same thing, why on earth would you feel better about it, I really don't follow you.

[raulus]

Originally Posted by Peter_Spaeth

But if you know it's the same thing, why on earth would you feel better about it, I really don't follow you.

It's all in the psychology of being a human. Smaller numbers feel less expensive than bigger numbers, even though they're the same amount in the end.

As mentioned by others earlier, it's no different than why retailers charge $0.99 instead of a dollar. It feels like it's less psychologically, even though we all know that it's really just $1.00.

And no different than why the gas station adds $0.009 to the price of your gas by sneaking it in there at the end of the price with a small 9 that is 3 decimal places out, rather than just rounding up to a full penny.

[raulus]

Originally Posted by Peter_Spaeth

But if you know it's the same thing, why on earth would you feel better about it, I really don't follow you.

It's also okay to admit that as humans, we're sometimes irrational. I know it's uncomfortable to admit to it, but it's a feature, not a bug.