Shrinking Buyers Premium ?

[BobC]

Originally Posted by Snapolit1

Nothing about my original question had anything to with how this would affect or not affect my potential buying activities. I just asked why AH's don't do it to for their own economic reasons. I then got 15 responses saying who the hell cares and why would it matter to me as a buyer. And then a 5 minutes internet search reveals that Sotherbys does exactly what I suggested. And more why would I care responses.

But, hey guys, I get it. You personally don't care about the buyer's commission. We've all sort of heard that. Many times. Sort of a bit of a broken record at this point. Believe it or not, there was a different question on the table. For some reason Sotherbys believes it is in their interest to have a declining commission rate. Of course Christies does the same thing. Curious why they have a business model different than in our little world.

Don't worry Steve, I get your question, and can understand where you're coming from.

To me, the idea of a fixed buyer fee/commission kind of goes along with the overcharging that TPGs do when grading cards or authenticating autographs. The TPGs charge a sort of progressive fee based on the supposed underlying value of the card/autograph, which allows them to grossly overcharge for basically putting in and doing the exact some amount of work and effort to grade a '52 Topps Mantle, or authenticate a Mantle autograph, as they do for grading an '88 Topps common card or an autograph from a common player in the same '88 Topps set. Yet people gladly and willingly seem to just go ahead and pay it. In the case of an auction house it is kind of the same with a fixed commission/fee. Technically and theoretically, the auction house puts in pretty much the exact same amount of work and effort to sell a '52 Topps Mantle card as they would for selling an '88 Topps common card. But because the '52 Mantle card is intrinsically more valuable and ends up selling for more money, the auction house makes more money for basically doing the same amount of work they did to sell a much lesser valued card. I'm certainly not against a legitimate business making a profit, but the fixed commission/fee auction house model definitely pushes AHs to go after the higher valued items, and ignore lower priced items and such that they may not make as much money on otherwise.

The idea you brought up in your question, and is demonstrated by what actually occurs with an auction house like Sotheby's, really makes perfect sense from a business standpoint for an AH. When Sotheby's sells an item at auction, they likely have a pretty good idea, based on the number of items in their auction, of what their fixed and variable costs are to sell each item in that auction. So if they have someone consign a very valuable item that will clearly generate commissions/fees well in excess of their fixed/variable costs, wouldn't it maybe behoove them to scale those commission/fees back a little by using a declining commission/fee charge, which they do as shown by your earlier post. That way, other potential consignors with very valuable items to sell would likely choose Sotheby's over different AHs that don't offer such a reducing commission/fee charge. Using such a declining commission/fee schedule should ultimately put more money into the consignor's pocket, and as a result, more consignors choosing to use Sotheby's for such sales. And this really isn't that different of an approach than what many AHs more focused on sports cards and memorabilia already take and use when they offer to reduce, or even eliminate, a seller's commission/fee that they would otherwise charge to consignors. Or in the case of some extremely valuable cards and items, even share a portion of the buyer's commission/fee with an item's consignor. It is an incentive or technique they offer to get consignors to consign with them, and not their competitors.

As you mentioned, the use of such a declining buyer's commission/fee technique really wouldn't/shouldn't have any effect on an auction buyer. It has been discussed before that in some cases you can have some auction bidders get caught up in the heat of an auction moment, and who then may momentarily forget about the buyer's commission/fee they end up paying. But I believe, as many others have already said, that that is likely happening only a very, very small percentage of the time, if at all. And that is especially the case when you're talking about more valuable items. A bidder is much more likely to not think about a 20% buyer's commission/fee on a $100 item, than they would on a $1M item. Wouldn't you agree?

I think your question itself just accurately highlights another way for some AHs to offer discounts/savings to consignors, to attract more of them to their AH as opposed to competitors. And the fact that big time art AHs like Christies and Sotheby's do things their way, using a declining commission/fee schedule to benefit and attract consignors, while sports card/memorabilia AHs tend to use an upfront discounted seller's commission/fee to benefit and attract their consignors, just shows how competitors in different businesses/industries tend to end up copying/sharing the same techniques and operating ways of their direct competitors. Great question IMO.