Buyers premium question

[Peter_Spaeth]

Originally Posted by Snapolit1

I think for many of us when you get caught up in the chase of really really wanting something it's easy to "forget" about the premium when bidding. I think that's human nature. Probably why most AH's don't show you what the actual purchase price was including premium till you get their bill.

I really don't understand this. Every auction house on earth has a substantial buyer's premium. I don't see how anyone could "forget" it.

[Snapolit1]

Originally Posted by Peter_Spaeth

I really don't understand this. Every auction house on earth has a substantial buyer's premium. I don't see how anyone could "forget" it.

I'm not saying I actually forget it . . .hence the word "forget" in quotes . . .but sometimes you can get caught up in the moment and not be running the numbers in your head as clearly as you should. At least I can.

[perezfan]

Regardless of who owns the item, the auction house still has related selling expenses.

The auction software, photographer, description writer, catalogue publisher, and shipping/packaging personnel are all fixed costs that are paid either partially or in-full from the AH's Buying and Selling premiums.

[RedsFan1941]

Originally Posted by perezfan

Regardless of who owns the item, the auction house still has related selling expenses.

The auction software, photographer, description writer, catalogue publisher, and shipping/packaging personnel are all fixed costs that are paid either partially or in-full from the AH's Buying and Selling premiums.

Couldn't have said it better.

[Exhibitman]

Originally Posted by perezfan

Regardless of who owns the item, the auction house still has related selling expenses.

The auction software, photographer, description writer, catalogue publisher, and shipping/packaging personnel are all fixed costs that are paid either partially or in-full from the AH's Buying and Selling premiums.

No, that is not an accurate analysis for purposes of analyzing why AH's use the selling price + BP model rather than taking a straight commission off the selling price. Mathematically, it is all one sale price for one item and one set of marketing costs for the auction; whether it is paid from BP on the sell price or a commission is mathematically irrelevant. Since what you label it and how you slice it up does not change the overall costs on either side of the equation, it means that there is a non-financial motive to cut the price of the card into a price and a BP and complicate the administration of the auction. IMO it is to set up a structure where bidders get into a fight and 'forget' the BP when bidding and therefore bid more.

The opposite model is something we use every day. eBay takes a commission on every sale, with no BP.

[mechanicalman]

Originally Posted by Exhibitman

IMO it is to set up a structure where bidders get into a fight and 'forget' the BP when bidding and therefore bid more.

.

It's hard to imagine a business model that's predicated primarily on the forgetfulness or irrationality of presumably savvy buyers. Perhaps another explanation for the existence of the BP is that is divides the huge margin that many AHs work off so the burden is shared by both the buyers and the sellers. When looking recently to consign with a couple of the major AHs, I was quoted 15% seller's commission on top of 20% BP. Yes, the commission was negotiable based on total consignment value, and yes, I realize that not all AHs have a seller's commission, but the ones about whom we create threads to show off our winnings do. It's crazy; I don't think any person here would feel good paying any entity a 35% margin for giving us access to cards, but it's happening. I guess as long as we keep getting pretty catalogs, it will continue.

[1952boyntoncollector]

Originally Posted by mechanicalman

It's hard to imagine a business model that's predicated primarily on the forgetfulness or irrationality of presumably savvy buyers. Perhaps another explanation for the existence of the BP is that is divides the huge margin that many AHs work off so the burden is shared by both the buyers and the sellers. When looking recently to consign with a couple of the major AHs, I was quoted 15% seller's commission on top of 20% BP. Yes, the commission was negotiable based on total consignment value, and yes, I realize that not all AHs have a seller's commission, but the ones about whom we create threads to show off our winnings do. It's crazy; I don't think any person here would feel good paying any entity a 35% margin for giving us access to cards, but it's happening. I guess as long as we keep getting pretty catalogs, it will continue.

Also comes down to bottom line.. For a lot of people its harder to sell at 50k card by just listing it on ebay or direct versus consigning with a AH... yes some cards you can do just as well on your own (assuming you are the average joe) as consigning but taken as a whole, most nice cards obtain a higher offer than we can do on our own...you are paying for that of course as you dont get the entire bid but lets not just pretend you are just losing 20%+ more than you would get on the card. Plus ebay you are losing 10%+ on the card.

[Peter_Spaeth]

Originally Posted by mechanicalman

It's hard to imagine a business model that's predicated primarily on the forgetfulness or irrationality of presumably savvy buyers. Perhaps another explanation for the existence of the BP is that is divides the huge margin that many AHs work off so the burden is shared by both the buyers and the sellers. When looking recently to consign with a couple of the major AHs, I was quoted 15% seller's commission on top of 20% BP. Yes, the commission was negotiable based on total consignment value, and yes, I realize that not all AHs have a seller's commission, but the ones about whom we create threads to show off our winnings do. It's crazy; I don't think any person here would feel good paying any entity a 35% margin for giving us access to cards, but it's happening. I guess as long as we keep getting pretty catalogs, it will continue.

The burden is only on the consignor though, not the buyer. Assuming rational buyers and that buyers' premiums depress hammer price, it's irrelevant to the buyer who just factors it into his total price, and the effect is on the consignor who realizes a lower price.

[mechanicalman]

Originally Posted by Peter_Spaeth

The burden is only on the consignor though, not the buyer. Assuming rational buyers and that buyers' premiums depress hammer price, it's irrelevant to the buyer who just factors it into his total price, and the effect is on the consignor who realizes a lower price.

I think you missed my point, which implies that I didn't make it clearly enough. Please allow me to clarify. Of course, it's the seller who pays for both sides of the selling fees, but I believe an AH splits the margin into seller's commission and buyer's premium to create the PERCEPTION of a lower burden on the selling side. If you went to Memory Lane with a $5k card, and they told you it would be a flat 35% sellers fee, most people would balk at that. But for some reason, a 15% free + a 20% BP seems more palatable to most, for reasons I don't understand.

[Exhibitman]

Originally Posted by mechanicalman

It's hard to imagine a business model that's predicated primarily on the forgetfulness or irrationality of presumably savvy buyers.

We pay large sums of money for pictures of dead guys on cardboard and compete for an anonymous person's assessment of who has the best ones (the registry): "irrationality" is SOP.

[Exhibitman]

With regard to commissions, many of the AHs will waive it for a good consignment or consignor. If the item is really great, some will waive it and split the BP with the consignor. You just have to call around and negotiate. If a particular AH won't budge, your consignment is probably not a desirable one for that house.

As for the phony baloney sales techniques like giving a discount and then reclaiming it with BS fees and costs, that's my point exactly: the purpose of using a hammer price + BP rather than just a single price with a commission is to confuse confusable people. Remember, 50% of the people in the bidding pool are dumber than the average of the pool and at least one of them is the dumbest one there. Just like the car sales example, the more the AH confuses them with [gasp] math, the more likely it is that someone will overbid by failing to consider the BP. FWIW I think that is also why AHs don't always use round bid increments and easily calculated BP percentages. If you gotta bid 10% compounded and then figure a 23% BP (20% if paid by check), you are doing some algebra or you are just winging it. The more difficult it is to calculate the total cost of a bid on the fly the more likely it is that some of the mathematically-challenged out there will screw up and bid that next increment over budget. If you as an AH then charge 1% of the total price for insurance even though you have a flat rate general insurance policy and tack on mega charges for 'handling' and shipping which you reduce only for the people who whine (bet they'd have demanded that '33 Lajoie too), you are making money hand over fist. And if you are really ambitious, you can even offer to finance your dealers at say a point a month collateralized by their next consignment. But I digress...

[ls7plus]

Originally Posted by perezfan

Regardless of who owns the item, the auction house still has related selling expenses.

The auction software, photographer, description writer, catalogue publisher, and shipping/packaging personnel are all fixed costs that are paid either partially or in-full from the AH's Buying and Selling premiums.

Excellent points, Mark.

Happy collecting,

Larry

[Peter_Spaeth]

Originally Posted by Snapolit1

I'm not saying I actually forget it . . .hence the word "forget" in quotes . . .but sometimes you can get caught up in the moment and not be running the numbers in your head as clearly as you should. At least I can.

I think you need a new bidding system.

[1952boyntoncollector]

Originally Posted by Snapolit1

I'm not saying I actually forget it . . .hence the word "forget" in quotes . . .but sometimes you can get caught up in the moment and not be running the numbers in your head as clearly as you should. At least I can.

some AH's actually show you what the added BP is on your bid.

Still for a cheap card for 100 bucks..it isnt much

and you would think people paying 1000s of dollars know about the bp....the only secret sometimes that annoys people is the shipping price...

[bnorth]

Originally Posted by 1952boyntoncollector

some AH's actually show you what the added BP is on your bid.

Still for a cheap card for 100 bucks..it isnt much

and you would think people paying 1000s of dollars know about the bp....the only secret sometimes that annoys people is the shipping price...

Depends on the AH how cheap the BP is on a $100 or less card. I have seen a few with a minimum BP so it alone is sometimes more than the card.

[ls7plus]

Originally Posted by Peter_Spaeth

I really don't understand this. Every auction house on earth has a substantial buyer's premium. I don't see how anyone could "forget" it.

A big +1 there--if you bid in many auctions at all, it becomes habit to factor it in with each and every bid.

Regards,

Larry