Buyers premium question

[Exhibitman]

Originally Posted by perezfan

Regardless of who owns the item, the auction house still has related selling expenses.

The auction software, photographer, description writer, catalogue publisher, and shipping/packaging personnel are all fixed costs that are paid either partially or in-full from the AH's Buying and Selling premiums.

No, that is not an accurate analysis for purposes of analyzing why AH's use the selling price + BP model rather than taking a straight commission off the selling price. Mathematically, it is all one sale price for one item and one set of marketing costs for the auction; whether it is paid from BP on the sell price or a commission is mathematically irrelevant. Since what you label it and how you slice it up does not change the overall costs on either side of the equation, it means that there is a non-financial motive to cut the price of the card into a price and a BP and complicate the administration of the auction. IMO it is to set up a structure where bidders get into a fight and 'forget' the BP when bidding and therefore bid more.

The opposite model is something we use every day. eBay takes a commission on every sale, with no BP.

[mechanicalman]

Originally Posted by Exhibitman

IMO it is to set up a structure where bidders get into a fight and 'forget' the BP when bidding and therefore bid more.

.

It's hard to imagine a business model that's predicated primarily on the forgetfulness or irrationality of presumably savvy buyers. Perhaps another explanation for the existence of the BP is that is divides the huge margin that many AHs work off so the burden is shared by both the buyers and the sellers. When looking recently to consign with a couple of the major AHs, I was quoted 15% seller's commission on top of 20% BP. Yes, the commission was negotiable based on total consignment value, and yes, I realize that not all AHs have a seller's commission, but the ones about whom we create threads to show off our winnings do. It's crazy; I don't think any person here would feel good paying any entity a 35% margin for giving us access to cards, but it's happening. I guess as long as we keep getting pretty catalogs, it will continue.

[1952boyntoncollector]

Originally Posted by mechanicalman

It's hard to imagine a business model that's predicated primarily on the forgetfulness or irrationality of presumably savvy buyers. Perhaps another explanation for the existence of the BP is that is divides the huge margin that many AHs work off so the burden is shared by both the buyers and the sellers. When looking recently to consign with a couple of the major AHs, I was quoted 15% seller's commission on top of 20% BP. Yes, the commission was negotiable based on total consignment value, and yes, I realize that not all AHs have a seller's commission, but the ones about whom we create threads to show off our winnings do. It's crazy; I don't think any person here would feel good paying any entity a 35% margin for giving us access to cards, but it's happening. I guess as long as we keep getting pretty catalogs, it will continue.

Also comes down to bottom line.. For a lot of people its harder to sell at 50k card by just listing it on ebay or direct versus consigning with a AH... yes some cards you can do just as well on your own (assuming you are the average joe) as consigning but taken as a whole, most nice cards obtain a higher offer than we can do on our own...you are paying for that of course as you dont get the entire bid but lets not just pretend you are just losing 20%+ more than you would get on the card. Plus ebay you are losing 10%+ on the card.

[Peter_Spaeth]

Originally Posted by mechanicalman

It's hard to imagine a business model that's predicated primarily on the forgetfulness or irrationality of presumably savvy buyers. Perhaps another explanation for the existence of the BP is that is divides the huge margin that many AHs work off so the burden is shared by both the buyers and the sellers. When looking recently to consign with a couple of the major AHs, I was quoted 15% seller's commission on top of 20% BP. Yes, the commission was negotiable based on total consignment value, and yes, I realize that not all AHs have a seller's commission, but the ones about whom we create threads to show off our winnings do. It's crazy; I don't think any person here would feel good paying any entity a 35% margin for giving us access to cards, but it's happening. I guess as long as we keep getting pretty catalogs, it will continue.

The burden is only on the consignor though, not the buyer. Assuming rational buyers and that buyers' premiums depress hammer price, it's irrelevant to the buyer who just factors it into his total price, and the effect is on the consignor who realizes a lower price.

[mechanicalman]

Originally Posted by Peter_Spaeth

The burden is only on the consignor though, not the buyer. Assuming rational buyers and that buyers' premiums depress hammer price, it's irrelevant to the buyer who just factors it into his total price, and the effect is on the consignor who realizes a lower price.

I think you missed my point, which implies that I didn't make it clearly enough. Please allow me to clarify. Of course, it's the seller who pays for both sides of the selling fees, but I believe an AH splits the margin into seller's commission and buyer's premium to create the PERCEPTION of a lower burden on the selling side. If you went to Memory Lane with a $5k card, and they told you it would be a flat 35% sellers fee, most people would balk at that. But for some reason, a 15% free + a 20% BP seems more palatable to most, for reasons I don't understand.

[Snapolit1]

In a perfect market buyers premium is completely irrelevant. Of course I agree. But when I took Economics 101 decades ago I didn't think anyone assumed perfect behavior. It's why car dealerships sell new Camrys for $23,000 with $1000 back, and only after you dig the financing statement out of the load of paper they gave you is it clear that you are paying over $40,000 for your new $23,000 car. And there were also 14 charges that you need to add in. We see the information we want to see sometimes. I made $800 day trading a stock yesterday. Well, no, you actually made less than $400 when taxes and brokers fee is counted. Again, while the info is all there to see, sometimes we focus on what we want to see.

[tschock]

Something else that is just 'interesting', to me anyway. The seller's premium is the only unknown amount at the time the agreement to sell is made. When the agreement to buy is made, all costs are calculable at the time of the agreement (winning bid), barring undisclosed shipping costs, that is. Whether one calculates that amount is another thing.

[Peter_Spaeth]

Originally Posted by mechanicalman

I think you missed my point, which implies that I didn't make it clearly enough. Please allow me to clarify. Of course, it's the seller who pays for both sides of the selling fees, but I believe an AH splits the margin into seller's commission and buyer's premium to create the PERCEPTION of a lower burden on the selling side. If you went to Memory Lane with a $5k card, and they told you it would be a flat 35% sellers fee, most people would balk at that. But for some reason, a 15% free + a 20% BP seems more palatable to most, for reasons I don't understand.

Which AHs in your experience actually charge a seller's fee?

[mechanicalman]

Originally Posted by Peter_Spaeth

Which AHs in your experience actually charge a seller's fee?

Feels like I'm being cross-examined. I had a conversation with Memory Lane, and they start at a 15% seller's commission. They offered to waive that with a total consignment over $25K. When I pushed back on the fee being on top of the BP, I was told that "all the major players pretty much operate the same way." I later had a conversation with REA and I was told they start with a seller's commission as well, but again, it's flexible based on consignment value. Let me know if you need more examples. Though I'm sure others have more experience than I do. I haven't pursued this channel much after my initial learning.

[Peter_Spaeth]

It's hard for me to believe as a practical matter that anyone ends up charging it, given how many alternatives there are for a consignor these days.

[Exhibitman]

Originally Posted by mechanicalman

It's hard to imagine a business model that's predicated primarily on the forgetfulness or irrationality of presumably savvy buyers.

We pay large sums of money for pictures of dead guys on cardboard and compete for an anonymous person's assessment of who has the best ones (the registry): "irrationality" is SOP.

[Exhibitman]

With regard to commissions, many of the AHs will waive it for a good consignment or consignor. If the item is really great, some will waive it and split the BP with the consignor. You just have to call around and negotiate. If a particular AH won't budge, your consignment is probably not a desirable one for that house.

As for the phony baloney sales techniques like giving a discount and then reclaiming it with BS fees and costs, that's my point exactly: the purpose of using a hammer price + BP rather than just a single price with a commission is to confuse confusable people. Remember, 50% of the people in the bidding pool are dumber than the average of the pool and at least one of them is the dumbest one there. Just like the car sales example, the more the AH confuses them with [gasp] math, the more likely it is that someone will overbid by failing to consider the BP. FWIW I think that is also why AHs don't always use round bid increments and easily calculated BP percentages. If you gotta bid 10% compounded and then figure a 23% BP (20% if paid by check), you are doing some algebra or you are just winging it. The more difficult it is to calculate the total cost of a bid on the fly the more likely it is that some of the mathematically-challenged out there will screw up and bid that next increment over budget. If you as an AH then charge 1% of the total price for insurance even though you have a flat rate general insurance policy and tack on mega charges for 'handling' and shipping which you reduce only for the people who whine (bet they'd have demanded that '33 Lajoie too), you are making money hand over fist. And if you are really ambitious, you can even offer to finance your dealers at say a point a month collateralized by their next consignment. But I digress...

[mechanicalman]

Originally Posted by Exhibitman

With regard to commissions, many of the AHs will waive it for a good consignment or consignor. If the item is really great, some will waive it and split the BP with the consignor. You just have to call around and negotiate. If a particular AH won't budge, your consignment is probably not a desirable one for that house.

As for the phony baloney sales techniques like giving a discount and then reclaiming it with BS fees and costs, that's my point exactly: the purpose of using a hammer price + BP rather than just a single price with a commission is to confuse confusable people. Remember, 50% of the people in the bidding pool are dumber than the average of the pool and at least one of them is the dumbest one there. Just like the car sales example, the more the AH confuses them with [gasp] math, the more likely it is that someone will overbid by failing to consider the BP. FWIW I think that is also why AHs don't always use round bid increments and easily calculated BP percentages. If you gotta bid 10% compounded and then figure a 23% BP (20% if paid by check), you are doing some algebra or you are just winging it. The more difficult it is to calculate the total cost of a bid on the fly the more likely it is that some of the mathematically-challenged out there will screw up and bid that next increment over budget. If you as an AH then charge 1% of the total price for insurance even though you have a flat rate general insurance policy and tack on mega charges for 'handling' and shipping which you reduce only for the people who whine (bet they'd have demanded that '33 Lajoie too), you are making money hand over fist. And if you are really ambitious, you can even offer to finance your dealers at say a point a month collateralized by their next consignment. But I digress...

I simply can't buy your assertion that people who have the disposable income to spend hundreds and thousands on baseball cards are too stupid to do the mental math on a 20% tip.

[Peter_Spaeth]

Originally Posted by mechanicalman

I simply can't buy your assertion that people who have the disposable income to spend hundreds and thousands on baseball cards are too stupid to do the mental math on a 20% tip.

I am too stupid, but I have a calculator. There is even one on my computer, funny that. I just multiply my bid by 1.2 or 1.13 or whatever.

[Exhibitman]

Originally Posted by mechanicalman

I simply can't buy your assertion that people who have the disposable income to spend hundreds and thousands on baseball cards are too stupid to do the mental math on a 20% tip.

Sit a table at the National and speak with the general public for a while. "Stupid" doesn't even begin to do justice to it. But dum [sic] isn't the only thing that goes into it. Forgetting the BP in a bidding frenzy can do it too.

[mechanicalman]

Originally Posted by Exhibitman

With regard to commissions, many of the AHs will waive it for a good consignment or consignor. If the item is really great, some will waive it and split the BP with the consignor. You just have to call around and negotiate. If a particular AH won't budge, your consignment is probably not a desirable one for that house.

...

For the record, these were the cards that Memory Lane quoted a reduced 7.5% sellers commission. Perhaps these are not desirable cards though.

[Peter_Spaeth]

Sam -- try elsewhere, I think you will get a different reception.

[mechanicalman]

Originally Posted by Peter_Spaeth

Sam -- try elsewhere, I think you will get a different reception.

Fair enough. Point taken. I've exhausted my energy on this topic. I'm just surprised, with all the whining on this board, there isn't more discussion about the hefty margin separating collectors from new cards. But not a fight I'm going to win. Off to see what's new in the commission-free BST.