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

[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.

[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?

[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.

[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.

[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.

[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?

[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.

[BobC]

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?

Sorry I didn't respond earlier Peter, but I see our new CPA here on the forum, Nicolo/raulus, has been having a pretty good go at you.

But as for this comment of yours, c'mon, you seriously want to accuse people of accusing some of our auction house owning/operating brethren here on the forum of trying to deceive people to somehow cheat them out of more money? OMG, you're so much better than this. And in another post of yours you responded about making this quoted post above because someone used the word "trick" in describing what was possibly happening. Well, the OP used the term "psychological tactic" in the very first post in this thread. It was I that used the term "psychological selling trick" back in post #6 of this thread, so quite obviously you are accusing me of saying Scott, Scott, Lee, and Al are basically trying to cheat people out of money?!?!?!

Maybe you should go back and read my post #6 again, because quite frankly, after that post of mine, no one really needed to say anything else to the OP, he already had the answer. And the last line I had in that post #6 is the biggest, most important, and most applicable of all in regard to this whole thing.

First off, AHs need to make money to stay in business, so of course they're going to charge someone a commission, and that isn't deceiving or cheating anyone. And when looking for consignors, AHs know that to consignors, it always looks better when they aren't supposedly going to pay for the entire commission out of their pocket. Go ask Scott, Scott, Lee, and Al how many consignments they'd possibly lose if instead of say charging a consignor a 15% sellers commission, and then charging the purchaser a 20% buyer's premium, one of them decided to simply charge the consignor a 29% seller's commission and there is no buyer's premium at all. (I'll explain later why the AH would only have to charge the consignor a 29% seller's commission.) Meanwhile, all their AH competitors continue to offer the split seller's commission/buyer's premium concept, and only ask for a 15 % seller's commission. So a potential consignor comes to all four AH owner's with the same item and hears three will charge him a 15% seller's commission. while one will charge him a 29% seller's commission. Who do you honestly think is most likely going to get turned down first to auction the item?

Think about it, the consignor upon hearing one auction house wants to charge him almost double what everyone else is going to charge, is likely going to immediately tune out everything else that AH owner is then going to say and try explaining to them about how they'll potentially still end up with same amount of money if they consigned the item with them at the much higher SC.

See, in your perfect world, say you as the potential bidder/buyer value this consignor's item at $120. So, if it gets consigned to one of the other AHs still doing the split seller's/buyer's fees of 15% and 20%, respectively, you immediately know you'll have a 20% buyer's premium to pay in that AH's auction, so you determine up front your max bid will only be $100, because then adding the 20% buyer's premium of $20 ($100 X 20%) to your max bid gets you to the $120 amount you feel the item is worth. And let's say you do end up winning the auction for your $100 max bid. You pay the $20 buyer's premium, the consignor ends up paying a $15 seller's commission ($100 X 15%), and the AH ends up making $35 ($20 BP + $15 SC). Meanwhile you, the winner bidder, paid $120 for the item ($100 hammer price + $20 BP), ignoring S&H and sales tax charges for simplicity's sake. And the consignor gets $85 ($100 hammer price - $15 SC).

Now what if the consignor instead went with the AH charging him a 29% SC, and there was no BP? You, in your perfect world once again, still value the item at $120. But since this AH isn't charging a BP, you put in a max bid for the full value of $120, and end up winning. In this case the AH makes approximately the same $35 as in the other scenario ($120 hammer price X 29% SC = $34.80). That's where the revised SC of 29% comes from. Meanwhile, you as the buyer pay the same $120 as in the other scenario, just now all of it as the auction hammer price. And the consignor ends up getting approximately the same net cash of $85 as in the other scenario ($120 hammer price - $34.80 SC = $85.20).

But all that only works out in a perfect world that you apparently live in. Consignors most likely aren't going to want to consign with an AH charging a higher SC, even it shouldn't make a difference in what they end up netting on their item sold (ask the brethren). Not all bidders think and act like you apparently do, and can be prone to getting caught up in the heat/excitement of an auction and forgetting about the BP. Seeing or not seeing that bid commitment amount, including the BP, on your auction bid list can, and does, influence many people, whether you think so or not. Our mind's play tricks on us, and often if we don't actually see something, we can just keep ignoring it. What's the old adage, "Out of sight, out of mind!". And there's a reason old adages are old adages, because they are very often fundamentally true!

Scott, Scott, Lee, and Al aren't trying to deceive and cheat anyone. They are trying to be competitive, and still pay the bills, and offer their services and fees in at least a somewhat consistent manner with their competition. They all fully disclose the costs and fees they charge buyers in their auctions. At the same time, they are all actually working for their consignors, who are their true clients, in trying to get them the highest final sales prices possible for their items. They do not work for the bidders and buyers in trying to get them to pay the least amount possible for things that they want. So if you actually think them using techniques like not including the BP in with current bids on auction bid pages is somehow deceptive and cheating, think again. Post #6, last line.

And isn't it you who often likes to make/use the "slippery slope" reference? Well, if all the auction houses did start including those BPs with the current bid amounts on their auction pages, you know damn well someone will then come along and start bitching about how they deceptively didn't include the sales tax, the S&H, or some other fees and charges, along with the auction bids amounts as well. And God forbid, if some AH did try to include all those other costs in updating the final total costs of items being bid on, in real time during an auction, when it turns out just one time after an auction ends that a winning bidder's final actual amount due doesn't agree with the in-auction totals because of some glitch, error, or whatever, the AH will just get bitched at some more.

And if you somehow still think AHs using or following psychological practices or tricks to get better prices for their consignors are being deceptive and thus trying to cheat people, then you better go ahead and similarly accuse most every business in the world that does any kind of marketing and advertising as being a deceptive cheat as well. Everything advertised and marketed is done so as to increase sales and profits, and ultimately get the most money possible out of every buyer. What do girls with big boobs, or NFL quarterbacks, really have to do with selling cars or home/auto insurance? As I noted in post #6, why do stores sell so many items for odd prices like $1.99, $4.95, or $9.99, why not just round off things to even dollar amounts then? Or what about how stores having sales very often list not just the sales price, but the total amount you'll save. Or even how stores will put shelves with certain items or the most expensive items always at the eye level of the average female shopper. And don't forget about impulse items at checkouts, and on and on. Marketing and advertising is all about visual and other psychological tricks and influences to get people to buy this and not that, and to pay more than less for things. And those visual influences can include showing certain things right out front, or not always showing them right out front, like BPs in auctions.

And speaking of old adages and fundamental truths, there's one that maybe kind of goes along with all this. Had something to do with when certain people's lips are moving I think.

Again, post #6, last line.

[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.

[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.

[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.

[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?

[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."

[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.

[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.

[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%!

[Stupe the Second Sacker]

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 usual red herring when this topic comes up. "If you don't like the BP, you're too stupid to understand it". Do these same people also think the consignor is too stupid to realize that they're agreeing to have their bids suppressed?

Whether or not we're all stupid, I also repeatedly read this defense, "the AHs don't charge the consignor a commission so how are they supposed to make money?". For all the times this gets repeated, you ever notice that it never gets confirmed? I highly doubt the majority of consignors are gifted zero commissions. If that's wrong, let's see some data.

And as others have pointed out (and it typically gets ignored) ebay with more overhead than any of these auctions houses, manages to keep the lights on just fine.

[sb1]

Originally Posted by Stupe the Second Sacker

The usual red herring when this topic comes up. "If you don't like the BP, you're too stupid to understand it". Do these same people also think the consignor is too stupid to realize that they're agreeing to have their bids suppressed?

Whether or not we're all stupid, I also repeatedly read this defense, "the AHs don't charge the consignor a commission so how are they supposed to make money?". For all the times this gets repeated, you ever notice that it never gets confirmed? I highly doubt the majority of consignors are gifted zero commissions. If that's wrong, let's see some data.

And as others have pointed out (and it typically gets ignored) ebay with more overhead than any of these auctions houses, manages to keep the lights on just fine.

Forty-four auctions over the past fourteen years and I have never charged a sellers fee. And, in consigning over twenty-five years I have never paid a consignors fee, except for one time years ago when I paid 5% to a small AH. And further I get points back on nearly all consignments that I give to other AH's. It's not an urban myth, it's reality.

[perezfan]

Originally Posted by Stupe the Second Sacker

The usual red herring when this topic comes up. "If you don't like the BP, you're too stupid to understand it". Do these same people also think the consignor is too stupid to realize that they're agreeing to have their bids suppressed?

Whether or not we're all stupid, I also repeatedly read this defense, "the AHs don't charge the consignor a commission so how are they supposed to make money?". For all the times this gets repeated, you ever notice that it never gets confirmed? I highly doubt the majority of consignors are gifted zero commissions. If that's wrong, let's see some data.

And as others have pointed out (and it typically gets ignored) ebay with more overhead than any of these auctions houses, manages to keep the lights on just fine.

I was responding to the original post, which read as follows…

“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.”

There is no “trickery”… sorry to disappoint all of you conspiracy types. I suppose if you ran a business such as an auction house, you’d do it as a courtesy with zero fees. Very generous… Good for you!

But how do you propose paying the employees, the server host, the printing company, the photographer, the description writers, the shipping/packaging personnel, the consignment director, and the social media specialist? I guess they’ll all work for free as well. Got it.