REA increasing their BP and making other changes
 

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.

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%.

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

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

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.

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.

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.

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

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.

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.

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

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

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.

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.

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.

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

Geez when will enough be enough lol

I noticed heritages non sport auction is 25%

Amen!

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.

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.

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.

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

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.

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.

Maybe someone else asked this, but is Huggins and Scott (REA's sister) also increasing their BP?

If you really want the card(s), sometimes you just gotta say WTF and not worry about the BP, tax, shipping, etc,...

Nobody buys cards anymore...they're too expensive ;)

I find all the discussion about BP a lot like going to your cell phone provider’s store to get a new phone or change your plan…ridiculously confusing! They are literally in the business of running rings around you with the numbers. It’s what they are paid to do.
As mentioned by many previously, they can charge whatever they want for BP, it’s not going to change what I’m willing to pay in the end. I have a figure in mind, I make my bids and and mentally add the % to my bid, and when it’s over my bid, see ya next time.

Now here’s what I DON’T understand. Why are reputable companies who sell using ebay (Probstein, 4 Corners), not viewed as a better option for a consigner than large auction houses? The major ones using eBay offer 95% of the sale price on items selling over $1000. So do the math…

$5000 card through auction house
$4000 bid + 23%=$4920.Result to consigners is $4K IF…IF they have 0% consignment fee. That’s best case scenario.

$5000 card on eBay through Probstein, 4 Corners, etc
$4920 winning bid (to keep all things equal). Result to consigner after 5% fee=$4674.
This seems like a No-Brainer for a consigner. What am I missing? I realize when we get into 5 digit, 6 digit, and 7 digit cards, no one will throw them up on eBay and hope for the best. But for the $1000-$10000 cards, I don’t understand why it’s not considered as an option by more consigners.

Doesn’t eBay charge 13%?

If you consign through a high volume seller like Probstein, 4 Corners, Greg Morris, etc, they get completely different rates than the average guy. Check their rates on their websites. Generally anything over $1000 will net you 95%. And you get NONE of the hassle. I’ve had mostly good success through this route.
Full disclosure, I don’t work for any of them, just an impartial observation.

Ah, makes sense.

Would have zero problem selling with probstein in terms of the results he seems to get. My fear is I’ve heard you ship items to a place in Jersey, don’t really get communication from him about if they’re received and when they’re being put up. I tend to doubt this is true. Anyone who has actually used him?

Rick Probstein, in a YouTube interview a year or two ago, mentioned something that stuck with me. His business model involves a slimmer margin than traditional auction houses; however, he makes up for this through high volume.

We've all seen this in other sectors. Wal-Mart comes immediately to mind. It worked for Sam Walton. Apparently, it also works for Rick Probstein.

I use him , frequently.
Never an issue with payment, and almost always get good results.
Contacted him one time about a mislabeled T206 back, and he personally called me to discuss options.
I really like the % you net selling with him and do not have to deal with the eBay azzhats!

As we do not have the complete financial records to account every penny of the companies finances, it seems more reasonable to think REA runs a profit than that REA runs a loss at this point in their business, at or near the top of a very profitable sector with auction prices exploding the last few years. Does anybody genuinely, seriously believe that REA is actively losing money?

Those catalog are nizzzzzzze but, come on! They are a gold mine

It's certainly easy to say they must be making a lot of money because of what prices have done over the past few years. However, it also seems strange they would raise their BP just to make more when doing so is also likely to upset a (probably) large percentage of their customers. Maybe it's for the reason that Scott provided in an earlier post or maybe it's for something else. Without knowing their overall financial situation, it's hard to know why they would make this change.

I doubt they are losing money but maybe not making as much as during the big boom. So taking a bigger share to keep up the bigger profit margin. It really doesn't matter how they increase the rates with simple math it always means the consigner gets less money and the AH gets more. The whole breaking it up into sellers premiums and buyers premium is just a way to make many people not understand that in the end they will be receiving less money for their consignment. As a buyer it is really meaningless how they do it.

Since the commission and the buyer’s premium both are paid to the auctioneer from the proceeds of the sale, they are functionally the same, so why split them? If you’ve read my Substack for a while you know my answer: to manipulate people. It is a jazz hands misdirect. Labeling 1/3 of the AH take as a “commission” and the other 2/3 as a “buyer’s premium” tends to suggest that they are somehow different and that the consignor only pays the “commission” because the buyer pays the “buyer’s premium”. It's salesmanship: "I tell you what: I am going to make you a special deal and completely waive the commission on your consignment." Nevermind the 20%, er 23%, Biuyer's Premium. That’s a bullshit framing, but a significant percentage of the public (especially the novices or hon-collectors) falls for it when consigning. They don't have the knowledge or the stomach to ask for a piece of the BP.

Something I am going to cover in more detail in another column is the follow-on effect of the confusion that the split causes to some percentage of bidders.

I get that the idea is that the higher the BP, the more of it you can offer back to consignors. However, consignors also realize that getting back 5% or 10% of 23% is not the same as 20%. If one auction house offers you 10% of 20 and the other offers 10% of 23, you go with the first, all things being equal. So now you have to offer 12% or 13% to be competitive. How does this help in the end?

One last time. They are not raising their BP to make more money in the direct sense. As numerous people point out the BP shouldn't have any impact on the money generated by a lot, just shift things around.

They are raising the BP to better secure consignments. If it makes a few extra bucks because people aren't smart enough to incorporate the information into their bids, that's a only a side bonus.

I explained the origins and the reasons it still works in detail earlier in the thread.

deleted

Definitely true.

Another piece that I find interesting is the behind the scenes negation between the seller and AH about getting a piece of that BP. For example, if you were getting 50 percent of the 20 percent before, do you now ask for 50 percent of the 23 percent?

Absolutely. Or more.

I do think there might be an opportunity for ebay sellers to capitalize on this.