REA increasing their BP and making other changes

[jayshum]

From the REA newsletter email I received:

Later this summer, we will roll out changes to the closing times and procedures for auctions in an effort to end auctions earlier, a practice we pioneered in 2016. More specifics will be forthcoming, but we are confident this will result in the same spirited bidding on a quicker basis while still allowing lots to remain open for as long as needed in the presence of competitive bidding. Additionally, effective September 1, 2025, the Buyer’s Premium for auction items will be 23%. There will continue to be no Buyer’s Premium on Marketplace purchases, and our introductory commission of 5% on any successful sale will continue through the end of the year.

[theshowandme]

[oldjudge]

Really sorry to hear that. I thought they were one of the good guys. Just because you can doesn't mean you should.

[Yoda]

Originally Posted by oldjudge

Really sorry to hear that. I thought they were one of the good guys. Just because you can doesn't mean you should.

Why? They are a profitable company. Rob Lifson once cut the BP from 20% to 19%.

[bandrus1]

Can somebody explain to me the reasoning behind adding a BP vs taking a total amount of a final hammer price?

Is there a known psychology that people will bid higher with BP's vs total price

[jayshum]

Originally Posted by Yoda

Why? They are a profitable company. Rob Lifson once cut the BP from 20% to 19%.

Curious how you know their current financial state. Care to provide a source for your claim?

[Musashi]

Originally Posted by bandrus1

Can somebody explain to me the reasoning behind adding a BP vs taking a total amount of a final hammer price?

Is there a known psychology that people will bid higher with BP's vs total price

It actually has nothing to do with the bids or bidders, and is about consignors. Consignors expect to pay little or no commission on high end items, and at the top of the market, expect a piece of the buyer premium as well. Buyer premium is how auctions maintain their profit margin while competing aggressively for high end consignments.

[jayshum]

Originally Posted by oldjudge

Really sorry to hear that. I thought they were one of the good guys. Just because you can doesn't mean you should.

They're a business that's trying to make money, and usually that means as much as possible. I don't consider them to be bad guys for that.

[Aquarian Sports Cards]

Originally Posted by bandrus1

Can somebody explain to me the reasoning behind adding a BP vs taking a total amount of a final hammer price?

Is there a known psychology that people will bid higher with BP's vs total price

It started with Christie's and Sotheby's in the art auction world (I forget which one but this is what we were taught in auction school) using BP as a tool to be able to say to consignors "Hey we're only charging you X% the other guy is charging Y%. Of course when you add X% and the newfangled BP it equaled, or even surpassed Y%, but when you're the first to do something it works. Of course you also get copied, and the other company followed suit pretty quickly because they got tired of hearing "The other company only charges X%"

It's pretty hard to get away from once a the market starts to do it. This may well actually be to get them competitive again with Goldin and Heritage on the CONSIGNMENT end of things, because, as we all know, BP SHOULDN'T make a difference in the money an auction makes as people SHOULD account for it in their bidding.

[bnorth]

Originally Posted by Aquarian Sports Cards

It started with Christie's and Sotheby's in the art auction world (I forget which one but this is what we were taught in auction school) using BP as a tool to be able to say to consignors "Hey we're only charging you X% the other guy is charging Y%. Of course when you add X% and the newfangled BP it equaled, or even surpassed Y%, but when you're the first to do something it works. Of course you also get copied, and the other company followed suit pretty quickly because they got tired of hearing "The other company only charges X%"

It's pretty hard to get away from once a the market starts to do it. This may well actually be to get them competitive again with Goldin and Heritage on the CONSIGNMENT end of things, because, as we all know, BP SHOULDN'T make a difference in the money an auction makes as people SHOULD account for it in their bidding.

How would a higher buyers premium help get consignments? The way I understand buyers premium is the higher it is the less cash the consignor gets with everything else being even.

[Republicaninmass]

When they dropped free shipping, I significantly reduced my bidding. Then monthly auctions. Meh OK I'll have a look. At some point, its just another auction house, no longer anything special

[Aquarian Sports Cards]

Originally Posted by bnorth

How would a higher buyers premium help get consignments? The way I understand buyers premium is the higher it is the less cash the consignor gets with everything else being even.

Well it's in the first part of my response that you quoted but let me give an example from the original scenario, AND an example from today that is 100% hypothetical.

_______________________________

In the year 1975 BBP (Before Buyer's Premium), Sotheby's and Christies were battling for supremacy in the art world. To do that you need to get better consignments than your rival, and the best way to do that is to charge your consignor less commission, everything else being fairly equal.

Well you can only do that so far and then you're not profitable, so now we're at a stalemate. Let's say that happened around 15% commission.

Then some genius at Christie's comes up with the genius idea of a Buyer's premium. "Hey boss, let's hit the BUYERS up for 10%, and then even if we go down to 5% seller's commission we're still making our 15% nut, and we get to tell the sellers were charging them LESS than those bastards over at Sotheby's!"

Being the first adopter, this worked like a charm and Sotheby's eventually figured out why they were getting spanked on the consignment end, and in the year 1 ABP (After Buyer's Premium) Sotheby's followed suit and things equaled out again.

Of course over the years periodically one of them would raise their BP rate so they could charge their sellers even less, and the other one would quickly follow suit.

Forget that thinking people realize it doesn't matter who it's coming from they're, in essence, paying the same rate they always did. It works on the consignment end. Trust me I've tried to explain it numerous times to potential consignors and they stop listening once they find out you're "charging them more."

This was even MORE pronounced when BP was a new concept altogether.

__________________________________________________ ___

Now for the modern hypothetical.

Fast forward to the year 49ABP and Goldin announces a new higher BP of 22.5%. Everyone scoffs and says "We'll never buy from them again!" and Goldin promptly goes out of business.

Oh, what's that you say? That didn't happen? Right because now Goldin is telling consignors of the BEST stuff that he can give them 115% instead of 110% that is customary.

Suddenly they're getting more of the absolute top end stuff. Our friends at REA realize that they're seeing less of the top tier items because they're still at 110% to the top consignors. So, similarly to the original example, they are almost forced to follow suit to remain competitive.

__________________________________________________ ___

Please, ignore the fact that who pays what is basically nonsense if the total paid is ultimately the same. An entire industry doesn't do something just for grins and giggles, they do it because it works.

[Lorewalker]

We have had this discussions a lot. My POV on this is that I do not care as a bidder what the house charges me. I factor that into my bid. If others do not do this then I will likely not be winning as much and those bidders might find they are paying more.

One thing that is now a real factor is the sales tax we pay at almost all houses. Some buyers are sales tax exempt but most are not and that sales tax, while not kept by the house, is part of what we pay for the items we win. On graded cards, the sales tax is not included in the data that is collected by all of these apps and websites that give us sales info.

[Jay Wolt]

Originally Posted by Lorewalker

We have had this discussions a lot. My POV on this is that I do not care as a bidder what the house charges me. I factor that into my bid.

Exactly!
If you have a price you are willing to pay, factor in buyers premium, tax & shipping

[mrreality68]

I am not sure what the number is but at some point the % will be to high that either the bidder will not be willing to pay it and go elsewhere or do without that item or the consignor will find another format/platform to sell it as they are getting a smaller piece of the pie(except perhaps a small portion that can negotiate for top cards). Because if you are able to sell elsewhere and pocket more of the money (that you would have given up to the auction house then their services may not be worth it)

I prefer private sales and/or trades but auction houses for now still get the bulk of the business because they currently get the vast majority of cards most of us desire

[doug.goodman]

As a buyer, I bid as long as :
(Bid + BP + CA tax + shipping) <= (what the item is worth to me)

I don't really care what an auction house charges, it could be 1000% and it wouldn't bother me.

[oldjudge]

In theory, the levels of BP shouldn't matter to bidders. They can just adjust their bids accordingly. However, in practice I have found that it does because 1. my cut off point for bidding is not a hard and fast number, and 2. If the final bid is below my cutoff with a 23% premium then I have paid 3.4% more (add 10.25% tax bite) than I otherwise would have with a 20% buyers premium.
Will this stop me from bidding in REA (or Goldin or HA)? If I "have to have an item" --no. However, it will dissuade me from bidding on whims.

[BioCRN]

Originally Posted by doug.goodman

As a buyer, I bid as long as :
(Bid + BP + CA tax + shipping) <= (what the item is worth to me)

The shipping is what kills me in the past few years compared to years past (not REA for me, btw).

Some auction houses are good about steady or expected shipping rates and some I have no idea what shipping/insurance/packing/etc metrics they're using to come up with surprisingly huge numbers.

Then there's the sometimes surprising multiple-items = multiple-packages = multiple-shipping-fees...sometimes understandable, sometimes questionable.

[parkplace33]

I’m sure the others will follow suit. 25 percent can’t be far behind

[Johnny630]

Originally Posted by parkplace33

I’m sure the others will follow suit. 25 percent can’t be far behind

Geez when will enough be enough lol

[notfast]

Originally Posted by parkplace33

I’m sure the others will follow suit. 25 percent can’t be far behind

I noticed heritages non sport auction is 25%

[Jstottlemire1]

Originally Posted by mrreality68

I am not sure what the number is but at some point the % will be to high that either the bidder will not be willing to pay it and go elsewhere or do without that item or the consignor will find another format/platform to sell it as they are getting a smaller piece of the pie(except perhaps a small portion that can negotiate for top cards). Because if you are able to sell elsewhere and pocket more of the money (that you would have given up to the auction house then their services may not be worth it)

I prefer private sales and/or trades but auction houses for now still get the bulk of the business because they currently get the vast majority of cards most of us desire

Amen!

[JimC]

At some level the ability of the auction houses to deliver adequate prices will be compromised. I think the market softening/unpredictability of the last couple years has made it much more challenging to decide which items are best suited to auction with one of the larger houses as opposed to the alternatives.

[doug.goodman]

I have never sold thru an auction house (although I have been thinking about culling my herd, haha), but when I do the higher the BP the better chance I'm going to want some of it, and I would bet that super high end items are already getting a cut.

[oldjudge]

Hi Doug! The super high end items are in some cases getting 3/4 or more of the BP. Even four figure items are getting close to half the BP. Of course, this is all negotiable and the sheep will get fleeced.

[Snowman]

Originally Posted by jayshum

Curious how you know their current financial state. Care to provide a source for your claim?

Ya, his source is 'No Shit Sherlock'. What's yours?

[Aquarian Sports Cards]

Originally Posted by doug.goodman

I have never sold thru an auction house (although I have been thinking about culling my herd, haha), but when I do the higher the BP the better chance I'm going to want some of it, and I would bet that super high end items are already getting a cut.

Basically I get to tell people that at our 17.5% it's like they're already getting 5% of the BP because we don't charge it in the first place.

Like almost everything else I try to explain it gets a lot of blank stares. That's why the simplicity of telling the consignors you're charging them less, or giving them more of the BP, is so much more effective, as illustrated in my examples above.

[jayshum]

Originally Posted by Snowman

Ya, his source is 'No Shit Sherlock'. What's yours?

As a data scientist, I thought you might want actual data to support an argument, but I guess not. That's all I'm looking for someone to provide since I personally don't know how REA is doing as a business. I've seen local businesses that appear to be doing well close so just because a business appears to be successful, their actual financial situation may be different.