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

[nolemmings]

Originally Posted by Snowman

I think one could make an argument that it's not actually a deceptive tactic if they indeed charged 20% of the hammer price for sold items. But that's not actually the case. Nobody charges 20%. It's usually between 10 to 15% and the consignor gets some portion of the BP back. It's pretty difficult to argue that it is not intended to deceive with that being the case.

Not true. I have never received any BP kickback when I consigned and I believe many here could say the same. Unless your total consignment is for very large $$ or you have headliner material that will make the AH's front page you are not getting any of the 20% tossed back, much less up to half.

Again, I remain puzzled by any grousing over the BP as being deceptive. It's there in the rules for all to see, and if you get fooled once, don't go back. In fact, since so many here are intent on calling out what they see as shady or deceptive practices and avow they will not participate with such sellers, do so now. I would love nothing more than to see dozens or more competitors drop off the bidding list in nearly all major and minor auctions in solidarity against these "scammers".

[Fballguy]

Originally Posted by nolemmings

Not true. I have never received any BP kickback when I consigned and I believe many here could say the same. Unless your total consignment is for very large $$ or you have headliner material that will make the AH's front page you are not getting any of the 20% tossed back.

Again, I remain puzzled by any grousing over the BP as being deceptive. It's there in the rules for all to see, and if you get fooled once, don't go back. In fact, since so many here are intent on calling out what they see as shady or deceptive practices and avow they will not participate with such sellers, do so now. I would love nothing more than to see dozens or more competitors drop off the bidding list in nearly all major and minor auctions in solidarity against these "scammers".

For some reason this conversation always goes down an unintended rabbit hole. The OP never mentioned it being deceptive.

I'd love to see the conversation stay on point for once and explain why Hunt can survive on 17.5,% while Heritage needs 20% (I guess they haven't figured out how to capitalize on economies of scale?) and Huggins 23%? Maybe if it didn't feel so arbitrary, people wouldn't bring this up so much.

[Fballguy]

And it would be refreshing for once (and a real differentiator for that AH), if an auction house made an effort to cut down on shipping costs. There's absolutely no incentive to because they just pass on 100% of the cost to the buyer so what do they care (and who knows...likely more than 100% of the cost).

I don't think I've ever won an auction that I couldn't have shipped for about 50% of what AHs charge me.

[BobbyStrawberry]

Originally Posted by Fballguy

I don't think I've ever won an auction that I couldn't have shipped for about 50% of what AHs charge me.

For sure! AHs could easily show you an estimate of your total cost at the time of placing a bid. But why do that when you can hide the BP and inflated shipping costs?

[sb1]

Originally Posted by Fballguy

And it would be refreshing for once (and a real differentiator for that AH), if an auction house made an effort to cut down on shipping costs. There's absolutely no incentive to because they just pass on 100% of the cost to the buyer so what do they care (and who knows...likely more than 100% of the cost).

I don't think I've ever won an auction that I couldn't have shipped for about 50% of what AHs charge me.

My AH charges reasonable shipping. I try to charge as close as possible to actual cost, that includes box or bubble mailer and a small percentage for private insurance. Often I figure too low for some bulkier winnings, or ones that just miss first class and have to go priority. Perhaps you are not bidding in the right auctions.

[x2drich2000]

Originally Posted by Fballguy

For some reason this conversation always goes down an unintended rabbit hole. The OP never mentioned it being deceptive.

I'd love to see the conversation stay on point for once and explain why Hunt can survive on 17.5,% while Heritage needs 20% (I guess they haven't figured out how to capitalize on economies of scale?) and Huggins 23%? Maybe if it didn't feel so arbitrary, people wouldn't bring this up so much.

Same reason Audi is a different price than Toyota or Milwaukee is a different price than Dewalt, or Hershey's is a different price than Ghirardelli. Different products, different costs, different management, different businesses. Seems quite simple to me.

[Fballguy]

Originally Posted by x2drich2000

Same reason Audi is a different price than Toyota or Milwaukee is a different price than Dewalt, or Hershey's is a different price than Ghirardelli. Different products, different costs, different management, different businesses. Seems quite simple to me.

This is not a strong argument. Auction houses produce no product. They're simply a venue.

[x2drich2000]

Originally Posted by Fballguy

This is not a strong argument. Auction houses produce no product. They're simply a venue.

Auction houses absolutely produce a product. The auction house's product is the service they provide. If the auction house is simply a venue, then you would be doing all the work. Even if they are just a venue, like ebay, than the product they provide is the place for you to sell.

[Fballguy]

Originally Posted by x2drich2000

Auction houses absolutely produce a product. The auction house's product is the service they provide. If the auction house is simply a venue, then you would be doing all the work. Even if they are just a venue, like ebay, than the product they provide is the place for you to sell.

Service is not a product. And what's the difference in service from Hunt to Heritage to Huggins to REA to LOTG to Lelands to etc to etc to etc?

[Casey2296]

Originally Posted by Fballguy

Service is not a product. And what's the difference in service from Hunt to Heritage to Huggins to REA to LOTG to Lelands to etc to etc to etc?

Service might not be a product like McDonalds French fries but it is tangible and valuable. The difference between auction houses is the same difference between the service you get at a greasy spoon vs fine dining. And I love greasy spoons but there is a marked difference.

[BobC]

Originally Posted by Fballguy

Service is not a product. And what's the difference in service from Hunt to Heritage to Huggins to REA to LOTG to Lelands to etc to etc to etc?

Are you really serious???

Have you ever in your life owned or operated an actual business to really see and understand how ALL businesses, whether they produce an actual product, or just provide services, have any number of differing and varying costs involved? AHs can have different numbers of employees, in different numbers of locations and offices, in different states with different levels of taxes, and owners with different needs/wants as far as how much they need to make. They can provide different levels of advertising with significantly different costs, and even the size and volume of lots, and how frequently they hold auctions, can dramatically effect how much they need to charge as commissions and fees to stay in business.

Every single business, including AHs, have what are known as fixed costs, that they know they have to pay whether they hold one single auction, or sell one single item, or not. And those fixed costs are going to vary from business to business, and AH to AH. And then there are the variable costs that are incurred, based on what they have to spend to actually run an auction and sell items. And those obviously are going to vary from one AH to another. So, thinking and ever suggesting that all AHs should somehow be charging the exact same commissions and fees as every other one is absurd and ludicrous.

And go back to what I posted in post #88 of this thread and read my scenarios of what can happen if one AH splits their fees of say 15% and 25% between a seller's commission and a buyer's premium, while another AH that say only charges a seller's commission of 29%, sells the exact same item for the same gross amount. Even though both AHs are charging different commission/fee percentages, in my scenarios both AHs end up with basically the exact same profit. So just because the commission/fee percentages between AHs aren't exactly the same doesn't necessarily mean one AH is making more or less money than another anyway.

This thread should have never gotten into a double digit numbers of posts. The OPs question was pretty quickly answered. The way various people are misinterpreting and going in weird directions with this is ridiculous. Here are the cosmic truths surrounding this entire issue.

AHs have to charge someone, sellers and/or buyers, commissions/fees so they can make money they need to stay in business.

AHs have all different and varying costs and needs as to how much they have to make, which can affect the commission and fee percentages they end up having to charge, to stay in business.

AHs need consignments so they have items to auction and sell to make money to stay in business.

AHs will often charge bidders Buyer's Premiums, so they can lower prospective Seller's Commissions so more people will consign items to them as opposed to other AHs, so they can stay in business.

AHs do not charge Buyer's Premiums to be deceptive to bidders. They generally do however not add the BP onto the bids during an auction so people bidding can see exactly what they'll end up paying, until after the auction ends. Because some bidders may/do forget and end up bidding more than they may have otherwise had they seen the BP added onto their bids during an auction. And virtually all the AHs do this as a marketing technique, trick, whatever you want to call it, so they can hopefully make more money for their consignor/customers, and also make a little more money for themselves, to then still stay in business.

AHs have to stay competitive and pretty much do what all the other AHs are also doing, to stay in business.

[doug.goodman]

Originally Posted by Fballguy

This is not a strong argument. Auction houses produce no product. They're simply a venue.

I don't see yours as a strong argument either, since the rent for Madison Square Garden is different than the rent for the Prudential Center across the river, although they're simply venues.

Doug "I've rented each of them" Goodman

[x2drich2000]

Duplicate post

[RCMcKenzie]

Baseball cards are luxury items. After 2 people bid up a painting 10 times the high estimate, the auctioneer said, "Nice things cost money."

[Orioles1954]

Originally Posted by Fballguy

I'd love to see the conversation stay on point for once and explain why Hunt can survive on 17.5,% while Heritage needs 20% (I guess they haven't figured out how to capitalize on economies of scale?) and Huggins 23%?.

Just an FYI that for 90+% of our bidders that H&S charges a 20% BP. The extra 3% are for those very few bidders who insist on using Credit Cards.

[Pat R]

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.

Originally Posted by Fballguy

For some reason this conversation always goes down an unintended rabbit hole. The OP never mentioned it being deceptive.

I'd love to see the conversation stay on point for once and explain why Hunt can survive on 17.5,% while Heritage needs 20% (I guess they haven't figured out how to capitalize on economies of scale?) and Huggins 23%? Maybe if it didn't feel so arbitrary, people wouldn't bring this up so much.

Maybe it's just me but it seems like that's what he was insinuating in his post.

[nolemmings]

Originally Posted by Pat R

Maybe it's just me but it seems like that's what he was insinuating in his post.

It's not just you. I also didn't see the OP raise any question as to why one AH charged a higher BP than another, so it seems it is that question which strays from the original point. As for that question, I am not certain why an AH would have to explain why it charges a particular BP, and I do not see where they are limited to a % that they need to "survive".

[Fballguy]

Originally Posted by nolemmings

It's not just you. I also didn't see the OP raise any question as to why one AH charged a higher BP than another, so it seems it is that question which strays from the original point. As for that question, I am not certain why an AH would have to explain why it charges a particular BP, and I do not see where they are limited to a % that they need to "survive".

Which AH do you own? And please don't say none because that would be embarrassing.

[RCMcKenzie]

It's called a service industry. Yes, you could pick up food and cook it, or you could go to dinner which is more expensive, or pay even more money to have it delivered.

Hotel advertises $149.99 per night. No one expects the bill not to be $237.54 or whatever.

Gone are the days of me hawking my own junk on eBay and doing all the legwork, and still getting $84 for a $100 sale, and grousing around about shipping and on and on.

[nolemmings]

Originally Posted by Fballguy

Which AH do you own? And please don't say none because that would be embarrassing.

Non-sequitur. Then again, not surprising.

[sb1]

Originally Posted by Fballguy

Which AH do you own? And please don't say none because that would be embarrassing.

www.brockelmanauctions.com

appreciate the free advertising

[BRoberts]

Something I think is telling when people post about their talks with AHs regarding consignments is how they describe those consignments. Almost always on 54, that reference is in dollars.

"I had a $75,000 consignment ... "

I think intelligent consignors realize it's not just about estimated value but also the specifics of the item. A single $75K card is not that same as a 660-card partially graded set or a collection of 100 vintage photos valued at $75K.

I think many people disregard the time, money and effort that go in to selling sets and lots of memorabilia as "the cost of doing business" and that the AH should just absorb those extra costs. It's probably a reason many of those people have never successfully run a business.

Much easier and satisfying to describe the AHs as greedy pigs.

[raulus]

Originally Posted by Pat R

Maybe it's just me but it seems like that's what he was insinuating in his post.

Call me crazy, but it kind of seems like we're quibbling over semantics, and maybe intent. Not that semantics and intent aren't important!

But the bottom line is that the juice is there, it's a quirk of history and somewhat unique to the auction business, and if you want to go there, you can assert with some confidence that there's arguably some beneficial psychological and marketplace aspects to the practice that conveys a nonzero benefit to the auction house, and helps to further perpetuate the practice.

And I suppose some want to ascribe insalubrious, even malicious intent behind those assertions. But to my mind, those assertions are really not intended to be anything more than a benign recognition that the auction houses are savvy operators, who are operating within standard business practices for their industry. And bully for them!

I believe the old saying is, "If you can't beat 'em, join 'em!" I'm sure if any of us were to open our own AH to get a piece of this sweet, sweet action, we would probably choose to use the same format...

[ValKehl]

Originally Posted by Fballguy

I'd love to see the conversation stay on point for once and explain why Hunt can survive on 17.5,% while Heritage needs 20% (I guess they haven't figured out how to capitalize on economies of scale?) and Huggins 23%? Maybe if it didn't feel so arbitrary, people wouldn't bring this up so much.

I assume the reasons Hunt Auctions can survive on a 17.5% BP are (1) because Hunt hasn't invested in state-of-the-are auction software, and (2) because Hunt seldon shows sufficient pics of its auction lots, often showing only a pic of the front of a card. You couldn't pay me to consign to Hunt Auctions!

[BobC]

Originally Posted by ValKehl

I assume the reasons Hunt Auctions can survive on a 17.5% BP are (1) because Hunt hasn't invested in state-of-the-are auction software, and (2) because Hunt seldon shows sufficient pics of its auction lots, often showing only a pic of the front of a card. You couldn't pay me to consign to Hunt Auctions!

Possibly very true and more good points Val.

Also, how much do all these different AHs charge for Seller's Commissions, and how much or how often might they then cut a break to consignors on those Seller's Commissions? Hunt may be charging a bit higher Seller's Commission as well to make up for the lower BP, or could be less likely to cut the Seller's Commission and do deals with consignors, thus allowing them to possibly get by on that lower BP as well.