REA increasing their BP and making other changes

[OhioLawyerF5]

Originally Posted by Exhibitman

Scott, besides the fact that the antecedents for having a BP are totally irrelevant to today's business, I do not buy any explanation for the commission-BP structure other than it makes the auctioneer more money. If I 'win' a card at REA now, I pay REA the hammer price plus 23%. 123% of the hammer price is the true price of the card. On a $1,000 bid the auction house receives $1,230 from the winning bidder. How the proceeds are chopped up does not change that math. When a middleman (and auctioneers are middlemen between buyer and seller) has two choices of how to do things, a simple one and a more complex one, there is no reason to use the complicated one, other than in the belief that it makes more money for the middleman to do it that way. I've had many negotiations with auctioneers big and small, and they all use the bifurcated structure because they all 'sell' a low or zero commission knowing that the buyer's premium is still going to them.

I am not begrudging an auctioneer the right to make a living, I am expressing a preference for simply admitting that the commission and buyer's premium are one and the same, and dropping the pretense.

It was readily admitted that the purpose is to make the auction house more money and bring in more consignments. That's the goal of a for-profit business after all. Of course the auction house wants the more complex situation. They can spread the costs/fees out in various ways to keep various cutomers happy. They have to please buyers so they spend more. And they have to please consigners so they keep getting good items that draw buyers to their auctions. That's common sense and it isn't disputed by the auction house as the reasons for buyer's premiums. So I'm not sure who you are arguing with. I haven't seen anyone disagree with that. In fact, the one auctioneer posting said as much.

While you are correct that "how the proceeds are chopped up doesn't change the math" of a buyer's total cost being the hammer price, plus the BP. Your argument seems to ignore the fact that without the BP, the hammer price would be 123% of what it is when there is a 23% BP. In your scenario, the buyer wants to spend $1230 on the card. It makes no difference if there is zero BP and he bids $1230, or there is a 23% BP and he bids $1000. It's incorrect to suggest the bids would be the same with or without the BP. The buyer who doesn't factor the BP into his bids is a small minority.