Quote:
Originally Posted by Luke
In my opinion, it seems like you're looking at this in the wrong way. If you're the auctioneer, it's not really a 12.5% margin. If you had bought an item for $100 and then sold it for $112.50, then that would be a 12.5% margin.
As an AH, you're just selling other people's stuff that you have no money tied up in. If I give you a Green Cobb to sell and it goes for $5k plus the 12.5% BP, that's $625 you just made without any risk or investment (obviously advertising, salaries, etc, but every business has these things). As long as you can build the business enough to get good consignments and your overhead isn't massive, of course you can make a living with a 12.5% BP. Those are big IFs of course, but the business model itself is pretty easy to understand.
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Their margin is still only the money they bring in that doesn't go out to consignors, so 12.5% is indeed the gross margin. Then out of that comes catalogs, auction platforms (for the online guys) payroll, and all the other expenses. Risk or investment has nothing to do with gross margin.