AH Blues

[x2drich2000]

Leon, while I believe Rob is coming across as complaining about paying the buyer's premiums, I think the real root of his question is why do auction houses charge a buyers premium and no sellers fee instead of charging a seller's fee and no buyer's premium. Responses such as "It doesn't matter" or it is just "semantics" address how to think about the buyer's premium from the buyer's prospective, those responses don't really give a reason or explanation for why every auction house charges a buyers premium.

Personally, I think the why is answered in the marketing strategy of the auction house to the consignor and trying to make the AH look as attractive as possible from a consignor's prospective. Charging a seller's fee when other auction houses don't I think would make getting consignments even more difficult, but I could easily be wrong. Leon, not to single you out, but you and Scott had one of the lowest BP and zero seller's fees, did you guys ever discuss lowering the BP even lower and charging a seller's fee instead? What was the driving forces in determining how you collected your commission?

[sb1]

Here are the facts of the matter:


Without consignments there will be no auction. It is much easier to get consignments for free than charging the seller to use your AH platform. The sports collectible auctions have all gone this route and don't expect them to change it anytime soon.

Without making a profit the auction house will not continue to exist. SO...
The buyers are the path of least resistance, they see something they want and are willing to pay for the right to bid and win it. As most have indicated you just have to factor in the percentage of the bp on top of your bid and you have your total cost for the item.

Other less competitive genre's still charge a buyers and sellers premium, because... wait for it... there are very few options for a seller to auction material and/or the huge costs of presenting the items for sale. So the number of additional AH's has actually lowered the overall cost of the transaction. All of these vary from genre to genre. Many more upscale antiquities, paintings, etc, garner a 20-25% seller and buyer fee(think Christies, Sotheby's, etc), as the venue's for these are farer and fewer between, if they had more competition the rates on both sides of the equation would have to give somewhat. Even Mecum and Barrett-Jackson charge sellers and buyers premium, but they are more flexible and even change at the hammer to make a deal for the house, the buyer and the seller come together.

Scott

[Peter_Spaeth]

If an AH had a 10 percent seller's fee and no buyer's premium, my guess is they would do just fine getting consignments.

[sb1]

Peter,

I think it would be an uphill battle for anyone trying to go that route at this point in time.

The buyer is the end consumer and would be happy to pay no fee, but the consignor/seller would not be so willing to pay 10% off the top when he could call the next guy and pay nothing. So again no consignments, no auction. It would take the majority of AH's making this change all at once to make this even plausible, and then one gets short of material and they are back to offering Zero consignor fees. Today's setup is just free market working it's way in the sports AH world.

I might add that the only way you would be able to garner more seller interest in having a consignor fee would be the premise of a bigger payout due to the AH being able to get more money for the client, which is where many/most of the problems of the AH's began with trying to get higher prices than their competitors, which in fact were not always legit sales/bids as we now know.

[Peter_Spaeth]

Originally Posted by sb1

Peter,

I think it would be an uphill battle for anyone trying to go that route at this point in time.

The buyer is the end consumer and would be happy to pay no fee, but the consignor/seller would not be so willing to pay 10% off the top when he could call the next guy and pay nothing. So again no consignments, no auction. It would take the majority of AH's making this change all at once to make this even plausible, and then one gets short of material and they are back to offering Zero consignor fees. Today's setup is just free market working it's way in the sports AH world.

I might add that the only way you would be able to garner more seller interest in having a consignor fee would be the premise of a bigger payout due to the AH being able to get more money for the client, which is where many/most of the problems of the AH's began with trying to get higher prices than their competitors, which in fact were not always legit sales/bids as we now know.

I don't get it. Any knowledgeable consignor would realize he is going to do better with (using my example) the AH getting a total of 10 percent of the take than with the AH getting 20, regardless of the semantics. It's just the flip side of the buyer's calculus. Even with no seller's fee the consignor isn't paying nothing, he is paying in the form of a reduced hammer price due to BP.

[sb1]

You are correct with the math, but people are not as comfortable with change as a whole and very resistant when they perceive that they are the one paying the tab. It's all psychological for most of them.

I agree, if you told me I got 90% of the take instead of 80% in the end, A. is the better option.

I would add that the larger houses would probably need much more than 10% for their cut to make it work out with larger overhead and that throws a wrench in the works and now you are back to 15-18%(minimally) for a sellers fee and the consignors just won't go for it.

As you know I charge 12 1/2% bp and no sellers fee. My biggest point to consignors is that they are netting 87 1/2% of each item(hammer+bp), which is more dollar in their pocket versus AH that charge 15-23%.

[Peter_Spaeth]

Originally Posted by sb1

You are correct with the math, but people are not as comfortable with change as a whole and very resistant when they perceive that they are the one paying the tab. It's all psychological for most of them.

I agree, if you told me I got 90% of the take instead of 80% in the end, A. is the better option.

Then if you are right why are people consigning in droves to PWCC, where the fee clearly comes directly out of the sales price? After all they could go to an AH for free.

[Peter_Spaeth]

Originally Posted by sb1

You are correct with the math, but people are not as comfortable with change as a whole and very resistant when they perceive that they are the one paying the tab. It's all psychological for most of them.

I agree, if you told me I got 90% of the take instead of 80% in the end, A. is the better option.

I would add that the larger houses would probably need much more than 10% for their cut to make it work out with larger overhead and that throws a wrench in the works and now you are back to 15-18%(minimally) for a sellers fee and the consignors just won't go for it.

As you know I charge 12 1/2% bp and no sellers fee. My biggest point to consignors is that they are netting 87 1/2% of each item(hammer+bp), which is more dollar in their pocket versus AH that charge 15-23%.

Exactly Scott. What matters is the AH's total take. You are making my point, I think.

[x2drich2000]

Peter, you are absolutely right it should not make a difference as long as the auction house is making the same commission and the consignor is getting the same amount. However, that is assuming everyone is rational, which is definitely not the case and where psychology plays a big role. As an example, when you shop online, which do you buy, an item for $10 with free shipping, or the same item for $8 and $2 shipping? Both are the same item, both cost you the same, but more people will choose the $10 with free shipping cause the price structure is simpler to understand and people are drawn to the word "free" (who doesn't like free stuff?). Obviously if the commission is not the same or the consignor is not getting the same amount, then one option is definitely better.

DJ

[sb1]

Precisely, it's all in the eye of ones perception. You can lay out several scenarios of your choosing with the same outcome, and people's choices of a, b, or c. will be greatly varied as to how to get there, even though it's the same ending.

[Fballguy]

Originally Posted by sb1

Peter,

The buyer is the end consumer and would be happy to pay no fee, but the consignor/seller would not be so willing to pay 10% off the top when he could call the next guy and pay nothing.

Why? It's all the same money isn't it? Isn't the seller going to be ecstatic to know that his bids won't be suppressed? If there's no 10% BP, that means the seller will realize 10% higher bids!

Don't believe me? Just read this thread.

[leaflover]

Winning a card at an auction is like winning a horse race. You pay the "juice".
With sports betting the loser pays the "juice".

[Aquarian Sports Cards]

Originally Posted by Peter_Spaeth

If an AH had a 10 percent seller's fee and no buyer's premium, my guess is they would do just fine getting consignments.

Maybe, but they'd go out of business!

[Fballguy]

Originally Posted by sb1

Here are the facts of the matter:


Without consignments there will be no auction. It is much easier to get consignments for free than charging the seller to use your AH platform. The sports collectible auctions have all gone this route and don't expect them to change it anytime soon.

Without making a profit the auction house will not continue to exist. SO...
The buyers are the path of least resistance, they see something they want and are willing to pay for the right to bid and win it. As most have indicated you just have to factor in the percentage of the bp on top of your bid and you have your total cost for the item.

And without buyers there would be no auction. So that argument is kind of moot.

This is one of the few honest responses in this thread. The buyer is the path of least resistance. No talk of semantics or it "all being the same in the end". It is what it is. A fee the buyer has to add on....because historically they've been conditioned to.

I'd be curious to see a comparison of sale prices for similar items sold with and without buyer's premium. I'd be willing to bet the difference in most instances is the buyer's premium...and that bidding was not surpressed to the point of equilibrium.

[Fballguy]

Originally Posted by x2drich2000

L I think the real root of his question is why do auction houses charge a buyers premium and no sellers fee instead of charging a seller's fee and no buyer's premium.

Bingo...What do you know. Finally, somebody gets it.