Auction Houses-Going, Going..Gone?

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Posted By: Bruce Dorskind

The Final Gavel



For the past 15 years phone, internet and live auctions have been the lifeblood of our hobby. Whilst there are no hard statistics available, our best guess is that 85% of all baseball cards valued at $2000 or greater sold during the past five years have been auctioned by one of fifteen (15) different auction houses. There is no need to post that list. And there have certainly been a handful private sales and a number of E Bay transactions.



As best as we can tell for a catalog auction the time period between the consignment closing date and the payment time is around 100 days. In some cases it is a much longer period of time, and for a few smaller auctions the period may be as short as 75 days.



We are now in an economic crisis of untold proportions. Key note speakers at a recent Wharton Private Equity crisis said there was a one in three chance of a full blown depression (banks collapses and 15%+ unemployment). Cash is king and credit is extremely difficult to obtain (several NYSE companies are paying 15% interest on their bonds). Distrust, uncertainty and panic are ever present across each and every facet of our economy. In plain English people are scared, distrusting and don't know what to do or where to turn.



We predict that by late Spring of this year, all consignors will demand at least a 50% upfront payment. Major consignors will ask auction houses to personally guarantee payment. Whilst we know of no auction house that is on the verge of closing, we predict that at least three of the hobbys top fifteen (15) auction houses will close their doors in 2009. And we predict some consignors will not be paid (at least for a very, very long time) for their consignments.

We wonder how this will affect the overall baseball card market. With tougher terms, more economic uncertainty and a lack of transparency only those auction houses with access to large amounts of ready cash will survive.

Look for more private transactions at lower levels. We welcome your comments.



Thanks for your time



Bruce Dorskind

America's Toughest Want List

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Posted By: barrysloate

Bruce- at what point does a severe recession become a depression? Is there a precise definition of what constitutes a depression?

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Posted By: leon

Hi Bruce
I might agree with your first paragraph. Your 2nd one about payment times might be close though for some small ones I think the time between consignment and payment to consignor is a bit less. I also agree we are in a very bad financial crisis as which most of us have not seen before. I do think people will know where to turn though. I think they will use ingenuity to come out of the financial mess....one by one. I pretty much completely disagree with your paragraph about 50% up front payment for consignments. I just don't think that will happen. I also don't think 3 of the top auction houses will close. Maybe one, maybe none. Personally, I doubt any of them will close. I do agree that some consignors could have to wait to get paid by some auction houses. I know of one auction house that pays within 2 weeks of auction close . I don't think this financial mess will affect the hobby anymore than the fact that there is less discrecionary funds to spend nowadays.....Not a bad thread to get some juices flowing. I prefer to be cautiously optimistic though. take care

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Posted By: rand

at the end of the day, IMO, Ebay is the best result for a seller. # 1 reason, seller can set his own price at a BIN or Best Offer Sale. depending on the card the deal could happen within hours of the listing, if the seller wants a higher amount then he can afford to wait till the right amount comes along. if a major auction can take approx 100+ days to deliver payment from consignment origin, then that card can sit on ebay for 100 days. if the owner of the sgc 40 wagner had a better idea about ebay instead of phillip wiess auctions, he could have listed the card at $1,200,000 or best offer, then would have probably sold the card for $1 Million and made more money on it. the high buyers premiums are biting heavily into the price of the lots, not for the buyers, for the sellers.

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Posted By: Rob D.

My prediction: A few new "Wanted to buy" posts by The Group on the B/S/T within the next 24 to 36 hours.

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Posted By: Doug

"At the end of the day, IMO, Ebay is the best result for a seller"

I would agree. Usually anything I list sells within a day or two unless I'm actually trying to hold out for top dollar and in that case I can afford to wait or just hold on to the item.

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Posted By: Ted Sherman

A recession is when your neighbor loses his job, a depression is when you lose yours

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Posted By: Alan

Rand -

Josh Evans & Doug Allen both said (at last years National) that the big buyers in the hobby don't want to fool with eBay. They want a nice catalog that they can read (say, while they're in the bathroom ) that has all these rare & high end cards for auction.

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Posted By: Joe D.

Barry,


Yes... there is a generally accepted specific / measurable definition of 'recession' and 'depression'


recession:
a decline in GDP for two or more consecutive quarters.


depression:
a decline in real GDP that exceeds 10% or one that lasts more than three years.
(from The Economist

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Posted By: JimCrandell

Another great post Bruce.

If I was a seller of high end cards today I don't think I would risk sending them to an auction house.

Just yesterday I got an offer to buy a 19th century rare psa 8 with the offer to make a bid and the last price one sold at was $12,000(I think its a pop 3).

Would be interesting for the hobby if this happened--more sold directly and perhaps at shows.

Jim

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Posted By: marshall barkman

Bruce....we are in a different era now so throw out the full blown depression talk. The problem right now is most folks are preaching doom and gloom so how can folks feel any confidence? America was on a roll bigtime but just like at a craps table when a hot hand holds the dice when the 7 finally hits there is a ton of money on the table and lost. My personal opinion is there is just to much competition in all aspects of business so only the strong will survie.


In my area there are 20 Ford dealerships within a 40 mile driving distance. Are you kidding me? It is no wonder the automobile industry is in trouble. There is also 7 pizza shops in my town which is ridiculous. The point i am trying to make is their are to many baseball card auction houses.

Here is a prime example of how to use common sense and research and take control of a situation and not rely on others during this economic downswing. I recently graded 48 cello pack pulled American Beauties that i found months ago, even though i was successful sending some of my tobacco cards to a major auction house i decided now is not the time to have other folks responsible for selling or paying me anything. I researched the Beauties and found Robert Edwards auction sold 7 PSA 9's for 2,000 and a couple of those cards were the first ever 9's found.

I listed three PSA 8's on E-bay and the prices are 430.00 330.00 150.00, i also sold two PSA 8's offline 350.00 and 325.00. So on 5 cards by selling the cards myself the total is 1580.00 and i never had to worry about getting paid or dealing with drama. I'm quite sure that if i sent those cards to a major auction house there is no way they would have pulled that. Alot of folks do not even try to buy cards from Mastro's or any of the big boys because they just wait for cards to hit E-bay and most of the time that is where they end up.

America is the land of the free and if you work hard success is right around the corner but folks have to become smarter in understanding competition in business. A friend of mine called me a month ago and asked me what i thought about building a storage shed unit in my area and i almost lost it, there are 10 facilites in my town already which is to many so i asked him if he did any due diligence to understand the demographics or market he was trying to reach. His reply was no but i have to put money somewhere and storage shed units are a safe bet. My advice to him was buy silver because it is going to go up and at the time it was 10.93 currently it is at 13.03 and will continue to rise. Silver will be at 30.00 a ounce by 2010 book it.

People need to start thinking outside the box and become more creative in their investing instead of just opening restaurants,car dealerships,coffe shops, buying real estate, and so on. While businesses continue to close down like Circuit City and others it should be a example of what not to do and that their is to much competition to make any serious money. The baseball card auction houses are next and when some of them fold up shop it is to be expected because of the amount of them.

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Posted By: barrysloate

Thanks Joe...and I like Ted's definition, too.

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Posted By: Alan

A recession is when a card you want goes too high for your budget, a depression is when the card you're selling goes lower than you thought.

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Posted By: jay wolt

I don't see why any auction house would close its doors due to the economy.
They retain a % of the final sale from the buyer and often from the consignor.
So even if a card lot sells below their estimated value, they still get a %
of sales even though the consignor can lose his shirt.
So they still have positive $$$ rolling in.

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Posted By: Phil

Even though they have money coming in, you have to remember that they have to pay for staff salaries, advertising/marketing their auctions, they have fixed costs (i.e. rent, etc.), and they have to pay for catalogs and or websites.

With probably overall consignments down in a down economy and overall hammer prices probably a little down (plus some items not even getting opening bids), some auction houses are probably having a hard time breaking even right now.

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Posted By: David Atkatz

Well, Jay, according to The Group, prospective consignors will want a big chunk of their money upfront. And, of course, the auction house can't afford to pony up all that dough. So, no upfront money, no consignments, no auction house.

The only way out of this disaster is to sell your cards now, for cash (although at a steep discount), to you-know-who.

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Posted By: JimCrandell

Jay,

They would have expenses associated with putting on the auction though--especially Mastro.

With all this talk about depression, prices for graded cards do not seem to be dropping--pre-war and post war. I understand T206 psa 8s have delined but that has been going on for over a year. The prices for high grade post war vintage if anything are strengthening in here--at least for the 48-69 sets I am tring to complete.

Jim

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Posted By: JimB

"Is their a precise definition of what constitutes a depression?"

Barry,
I expected more from you. What is up with "their" when it should be "there"?
JimB

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Posted By: barrysloate

Egad- thanks Jim.

It's called posting too early in the morning and not proofreading. I will fix it pronto.

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Posted By: davidcycleback

Obviously there is only one thing that can be done in this deep depression. Everyone give their cards to Bruce and he will dispose of them for you.

There's a possible upcoming report from the FDA that Pre-War cards (especially those valued at $2,000 and above) were made with arsenic-laced ink. Again, before your cards become illegal, the best thing is to give them to Bruce. He's licensed to dispose of poisonous baseball cards.

There's also a report of the undead possibly rising to reclaim their rare back T206s and uncatalogued N172s by spring, but the details on this are sketchy at this moment.

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Posted By: Dan Bretta

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Posted By: peter ullman

It looks like Brian Cataquet is getting in on the action...I mean auction! BCB ventures will be opening for business with their inaugural auction in March. What recession/depression?

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Posted By: barrysloate

Where is Bruce? He made a provocative post, then headed out on vacation.

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Posted By: Jim VB

"Where is Bruce? He made a provocative post, then headed out on vacation."

This was a rhetorical question. Right?

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Posted By: barrysloate

Basically...Bruce has a habit of not following up his posts, and I think he should. You put out a topic, you stick around to discuss it.

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Posted By: Bob

Bottom line continues to be buy cards you like, not that you want to invest in for speculation purposes. If the monetary value of cards disappear, you still have a collection you love.

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Posted By: JimCrandell

Watch out below--I don't know if we are all ready for this but Bruce says "his next post will turn the hobby upside down".

Just in time for the Philadelphia show. Sure this will create a lot of buzz.

Bruce --are you releasing this bombshell before this weekends show?

Anxiously,

Jim

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Posted By: Jason

Drama? With my cardboard? Can't wait!

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Posted By: marshall barkman

Here is a quote i found interesting in Bruce's post-In plain English people are scared, distrusting and don't know what to do or where to turn.

No matter what the economy i find this to be how a majority of people are. It really is just nature at it's best. Try petting a bird sometime. The bombshell he will drop i hope will be fact and not some hearsay rumor that has no merit.

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Posted By: Joe B.

OT - but who are the several NYSE listed companies paying 15% coupons on their bonds? That's not true at all. The yield you can earn by purchasing a bond at a discount in a secondary market is totally different than the coupon a company pays to issue debt. Only the sketchiest of companies have coupons around 10% (sure they are NYSE listed but that's a pretty low bar) and none pay 15%.

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Posted By: Scott Fandango

Bruce, is your point a few auction houses will close?

That is no big news, and surely wont affect the hobby...

There are too many now, and the buyers premiums have gone too high...

Sure when all was fine and dandy they could get away with a fee close to 20%....Maybe they overexpanded "in the hey days" and a shake out needs to occur....

In this economy, there will be less money to go around and therefore less stores (auction houses) are needed....

Bruce spices up a simple thing to make it more dramatic...

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Posted By: Alan

They better not start charging for their catalogs.

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Posted By: marshall barkman

To me it is pathetic that auction houses charge 20% to the buyer and then either 10 or 20% to the consignor. That means that the auction house makes 40% of what the item is worth. Reminds me a little of the mafia mindset. To grab a digital camera and write a description of a card to then post it online is not that difficult nor is it worth 20%. I recieved a phone call from a auction house dealing with antiques that will only charge 5% if i want to sell any art that i currently own, now that is more like it.

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Posted By: jay wolt

Many auction houses adjust their sellers premium to just 5% or zero %.

The better the lots the better % you receive.

Edited to add, as example Leon & Scott offer 0% fees on lots over $500
and 5% on lots under $500 for their auctions.

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Posted By: Scot

This is creative destruction at work. The best auction houses will thrive and the worst will die. The capitalist system does not work unless poorly run businesses are allowed to fail--a precept that unfortunately has fallen out of favor in Washington in the last six months or so.

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Posted By: Joe D.

"The capitalist system does not work unless poorly run businesses are allowed to fail"

very well said. agree 100%

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Posted By: marshall barkman

You can run a business poorly or manage it perfectly, what does that have to do with overcharging? Believe me if you think major auction houses that charge a 20 to 28% buyer premium along with any type of seller % are going to make it even if run brilliantly then watch and see what happens. Greed is the demise to business so here is two words for you BERNIE MADOFF.

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Posted By: Cat

It looks like the system may very well be shaking out the overcharging of the buyers premium. From a distance, it looks like Mastro raised their overhead and started charging more for their services to cover large overhead costs. They tried to get into other service lines (art) that didn't seem to be their primary area of expertise which undoubtedly cost money to enter. Card buyers and consigners turned away in enough numbers that it caused cash flow problems. The investors said no additions to the line of credit. Now, we just have to see what the next steps are. They will likely adjust or suffer a death of their business.

It does not look like their business model can support their high overhead costs.

The system works.

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Posted By: Bill Cornell

I'm curious to see where we are a year from now. There are too many auction houses and too little inventory for consignment fees to go up, but the practice of annual increases in buyers premiums is at an end. The squeeze is on auctioneers.

In a recession, stuff stops selling unless sellers are really motivated, usually for unfortunate reasons. The hobby isn't going to croak, it's just going to slow down a lot as people dash for the sidelines.

Agree fully with Cat that the system works. In buyers' favor, this time around.


Bill

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Posted By: davidcycleback

When the economy was humming along, I thought there were too many auction houses. I assumed a one or two or more would drop out some day. Some times it seemed there was a new auction starting every other three minutes-- and all fighting over a fine amount of quality stuff.

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Posted By: Bruce Dorskind

We have watched as the Board has commented on this thread

Here are our observations:


1. The Auction Houses, with a few notable exceptions, are too thinly capitalized. If a major Auction
House collapses- as we predicted months ago, the affect will spread across the Hobby. Most of the Auction
Houses have less than $1 million in free capital. Most are dependent on funding from one or two people.
One should not auction major material without a "deep dive" review of the Auction House's books. With three
exceptions we would only consign high-end items if the owners of the Auction House personally guaranteed
payment.Transparency and security will becomemajor factors for those auction houses attempting to secure major collections.


2. We believe that the US Economic Crisis is in a very early stage. We do not believe that our politicians and the infusion of
a trillion dollars of cash will solve this country's current problems. We are likely to face the most serious crisis in over 120 years.
Only luck and a significant external event (war?) will boost the economy during the next five years. We predicted a 7500
Stock Market on this Board in March of 2008. We now predict a 6000 stock market by September, 15% unemployment
and a number major changes in the US Government.



3. On a personal basis we are collectors. Not investors, Not Dealers. Unlike most of America, we don't
spend above our means. We seek the same cards for our collection regardless of the state of the Economy.
Whilst we consistently attempt to secure buying opportunities, we turn down 95%
of what we are offered because it does not meet our condition standards and/or it is not what
we collect. For example, we have no interest mid-grade rare T 206 backs at any price.
We will look for opportunities- but only for the items on America's Toughest Want List


Bruce Dorskind
America's Toughest Want List

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Posted By: Rick McQuillan

I think that auction houses need to update their payment methods. Most do not accept PayPal or credit cards. With ebay the auction closes, I pay with PayPal 2 minutes after the auction closes, the item is mailed the next day and I have it in my hands within a couple of days. I know up front what the shipping charges will be.

When I win an auction lot I generally wait 2 or 3 or 4 days for an email with the total charges. Then I mail a check. Then I wait for the check to clear. Then I wait for the company to ship the item. Generally the shipping charges are too high. I recently bought a $19 photo and the auction house shipped it Fed EX and charged me another $19. They could have put it in the mail for two bucks. Why ship by Fed Ex when I have already waited two weeks for this item?

In my opinion the auction houses should do the following:

1. List shipping charges up front or offer free shipping as a part of the buyers premium.

2. Have enough staff on hand to send out the invoices within 24 hours.

3. Accept PayPal and credit cards.



Rick

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Posted By: barrysloate

Rick- I think a good part of the reason that auction houses don't accept credit cards is that almost all have an "all sales are final" policy. With a credit card payment, any buyer can receive an item, decide he doesn't like it, and have the credit card company stand behind his right to return it.

Unfortunately, auctions cannot be conducted on an approval basis. Most consignors submit their material months in advance of the auction close, and don't want to find out that they are getting their stuff back after all that time.

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Posted By: rand

3. On a personal basis we are collectors. Not investors, Not Dealers. Unlike most of America, we don't
spend above our means. We seek the same cards for our collection regardless of the state of the Economy.
Whilst we consistently attempt to secure buying opportunities, we turn down 95%
of what we are offered because it does not meet our condition standards and/or it is not what
we collect. For example, we have no interest mid-grade rare T 206 backs at any price.
We will look for opportunities- but only for the items on America's Toughest Want List


***your post up to this was insightful and a good read. # 3 ... is an annoying read

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Posted By: marshall barkman

Bruce....where is this earth shattering news you promised? The predictions you are making in regards to the economy have been predicted by alot of analysists so this is not news to anyone following the current economic situation. Tell us somthing positive or make a prediction about a winner. Believe me buy silver with both hands because it will be at 30.00 by 2010 no matter what happens to the economy.

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Posted By: leon

Actually I think Bruce is right. I think there will be some fairly big news coming out very soon (days) about some happenings in our hobby. It's too early to say exactly what it will entail. I think the hobby will be just fine though. As predominantly a collector I am fine with whatever happens. I love collecting and enjoy my cards.....I think the auction business will do fine too (though I am very biased). The strong and financially sound will survive.....

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Posted By: jay wolt

Rick - I agree with your post.
Shipping is usually too high and due to no acceptance of credit cards
it takes weeks from payment to receiving your lots instead of days.

Case in point. On Monday I was alerted by Email that I won a lot in Heritage.
I then viewed their online invoice and they accepted credit cards, Paypal &
Echecks as options. I paid via an Echeck. On Tuesday I was alerted that my
lot was shipped w/ USPS tracking #, and it should be in my PO Box tomorrow.
They are radical in the way they do business in the auction world.

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Posted By: Tom Boblitt

They are unparalleled in the way they have their systems set up. It's seamless and offers SO many ways to pay. The days of just check payment should be gone. Just the way it is............

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Posted By: Robert Klevens

I hope to receive my Mastro consignment check this week from the December 18th auction.

I won an item in the HA.com auction last year and paid with Paypal, it was great. I run a small online auction and I accept credit cards and Paypal with no problems.

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Posted By: Jeff Lichtman

Robert, it's only been about two months. I'm sure once Mastro gets done using your money to pay for their current auction expenses they'll get around to paying you.