The seller pays the "buyer's premium." The buyer decides how much money he/she/they is willing to pay, and the auction house splits that with the seller as they have agreed in the listing agreement.
If an auction house can consistently get a premium over what the seller could get on his/her/their own, the premium charged to the seller is "worth it."
Some people will view any for-profit business as "greedy" (excepting themselves, of course) just because they seek to make a fair profit. Those same people will happily cherry pick a coin and make 500%, but don't think that represents "greed". But if Heritage or anyone else makes a 10% net margin, they are "greedy".
"Heritage handles over 40 varieties of collectibles and every department works a little differently. In XXXXXX we have a 15% consignor’s fee. It amounts to 15% of whatever the hammer price is...Our profit is made off of the buyer’s fee, which in XXXXXX is 20% added to the hammer price. "
10% net margin?
Net is not gross. On some lots where they are paying 105% of hammer even their gross margin is only 15%, sometimes even less.
I know dealers who get 110%, as long as they keep their quota
"quota?"
Some auction houses offer preferred terms to dealers, such as giving them 110% of hammer, if they will agree to provide a certain dollar value of items consigned each month. As long as you hit that quota, you get the preferred terms.
@BryceM said: @jmlanzaf, you keep talking about gross and net margin as if the auction houses buy the products they are auctioning. They don’t incur any cost to own the coin. They don’t own the coins. The consignor does until the buyer pays and assumes ownership. Am I missing something here?
No. I'm just referring to the margin on sales. It is, of course, different than a strictly retail operation. However, it is hard to talk about inventory costs. They own many of the coins they sell, so those are straight inventory costs. For the consignments, it's harder to determine the actual "inventory" costs because on their books they will spend the money but they are effectively buying the inventory (as you suggest) after selling it. However, they also have to guarantee the transaction even after, sometimes, the consignor has been paid. Not knowing what percentage of sales represent house coins nor what percentage of sales represent set asides for impairment, the best I've got is gross/net margin of "sales".
@Connecticoin said:
Greed and lack of competition, essentially an oligopoly.
Nonsense. Your local coin store may have a higher gross margin. It's just not disclosed.
In the numismatic auction house space, it quacks like an oligopoly to me. When Heritage raised the BP to 17.5%, the others followed suit. When Heritage raised the BP to 20%, the others followed suit. How did they survive on the meager 15% or (gasp) 10% BPs in the past?
@Connecticoin said:
Greed and lack of competition, essentially an oligopoly.
Nonsense. Your local coin store may have a higher gross margin. It's just not disclosed.
In the numismatic auction house space, it quacks like an oligopoly to me. When Heritage raised the BP to 17.5%, the others followed suit. When Heritage raised the BP to 20%, the others followed suit. How did they survive on the meager 15% or (gasp) 10% BPs in the past?
its suspect because if one auction house raises the cost then another should keep its fee lower to take business away . unless there is collusion between them.
Out-compete your opponent in the market place and destroy them
I would say Auction houses owning inventory is criminal behavior. They would be incentivized to promote thier item at the expense of a similar item .
Are they also buying inventory in these auctions? Then they would be limiting bids on the items they dont own to buy them for resale. Where upon when re auctioned the bid (big surprise) would be much higher
@Connecticoin said:
Greed and lack of competition, essentially an oligopoly.
Nonsense. Your local coin store may have a higher gross margin. It's just not disclosed.
In the numismatic auction house space, it quacks like an oligopoly to me. When Heritage raised the BP to 17.5%, the others followed suit. When Heritage raised the BP to 20%, the others followed suit. How did they survive on the meager 15% or (gasp) 10% BPs in the past?
its suspect because if one auction house raises the cost then another should keep its fee lower to take business away . unless there is collusion between them.
Out-compete your opponent in the market place and destroy them
I would say Auction houses owning inventory is criminal behavior. They would be incentivized to promote thier item at the expense of a similar item .
Are they also buying inventory in these auctions? Then they would be limiting bids on the items they dont own to buy them for resale. Where upon when re auctioned the bid (big surprise) would be much higher
This will be my only comment in this thread.
I believe that your above post, and in conjunction with it, the one you posted after it (“Oops too bad but a few last second bids didn't go through on your item, but we would be happy to take it off your hands”) are both libelous.
Mark Feld* of Heritage Auctions*Unless otherwise noted, my posts here represent my personal opinions.
@Connecticoin said:
Greed and lack of competition, essentially an oligopoly.
Nonsense. Your local coin store may have a higher gross margin. It's just not disclosed.
In the numismatic auction house space, it quacks like an oligopoly to me. When Heritage raised the BP to 17.5%, the others followed suit. When Heritage raised the BP to 20%, the others followed suit. How did they survive on the meager 15% or (gasp) 10% BPs in the past?
its suspect because if one auction house raises the cost then another should keep its fee lower to take business away . unless there is collusion between them.
Out-compete your opponent in the market place and destroy them
I would say Auction houses owning inventory is criminal behavior. They would be incentivized to promote thier item at the expense of a similar item .
Are they also buying inventory in these auctions? Then they would be limiting bids on the items they dont own to buy them for resale. Where upon when re auctioned the bid (big surprise) would be much higher
Lower BP means less money to use to incentives major consignors. Like it or not, the people who pay 20% allow the major consignors to get 110% of hammer. That's how they compete.
20% BP also allows them to expand advertising and provide more consignor services. That's how they compete.
Comments
Without reading the previous 100 responses....
The seller pays the "buyer's premium." The buyer decides how much money he/she/they is willing to pay, and the auction house splits that with the seller as they have agreed in the listing agreement.
If an auction house can consistently get a premium over what the seller could get on his/her/their own, the premium charged to the seller is "worth it."
Inflation
Some auction houses offer preferred terms to dealers, such as giving them 110% of hammer, if they will agree to provide a certain dollar value of items consigned each month. As long as you hit that quota, you get the preferred terms.
No. I'm just referring to the margin on sales. It is, of course, different than a strictly retail operation. However, it is hard to talk about inventory costs. They own many of the coins they sell, so those are straight inventory costs. For the consignments, it's harder to determine the actual "inventory" costs because on their books they will spend the money but they are effectively buying the inventory (as you suggest) after selling it. However, they also have to guarantee the transaction even after, sometimes, the consignor has been paid. Not knowing what percentage of sales represent house coins nor what percentage of sales represent set asides for impairment, the best I've got is gross/net margin of "sales".
In the numismatic auction house space, it quacks like an oligopoly to me. When Heritage raised the BP to 17.5%, the others followed suit. When Heritage raised the BP to 20%, the others followed suit. How did they survive on the meager 15% or (gasp) 10% BPs in the past?
its suspect because if one auction house raises the cost then another should keep its fee lower to take business away . unless there is collusion between them.
Out-compete your opponent in the market place and destroy them
I would say Auction houses owning inventory is criminal behavior. They would be incentivized to promote thier item at the expense of a similar item .
Are they also buying inventory in these auctions? Then they would be limiting bids on the items they dont own to buy them for resale. Where upon when re auctioned the bid (big surprise) would be much higher
Oops too bad but a few last second bids didn't go through on your item , but we would be happy to take it off your hands
This will be my only comment in this thread.
I believe that your above post, and in conjunction with it, the one you posted after it (“Oops too bad but a few last second bids didn't go through on your item, but we would be happy to take it off your hands”) are both libelous.
Mark Feld* of Heritage Auctions*Unless otherwise noted, my posts here represent my personal opinions.
Lower BP means less money to use to incentives major consignors. Like it or not, the people who pay 20% allow the major consignors to get 110% of hammer. That's how they compete.
20% BP also allows them to expand advertising and provide more consignor services. That's how they compete.
Most people can't see past the headline number.