Auction Firms....profit margins

SethChandler

With so many large auctions that gross $3mm to $10mm seemingly commonplace, what do you think is the(typical)net margins the auction houses are netting? Do they normally charge 15% to the buyer and seller? So in a $10mm auction there would be $3mm in fees to collect less expenses....does anyone care to speculate what the bottom line would be like in an auction?

boiler78

They charge the buyer 15% but often they waive the sellers fees and in many cases they pay the consignor 3-5 % of the hammer price.

Nice icon!

SethChandler

So can auction firm look at their sales as a...gulp...loss leader. It seems every major house also has a thriving retail/wholesale business where I'm sure the margins are decent, more consistent, predictable?

Joshua

I think everyone would be surprised how little the auction company makes. If the auction sells 10MM
and they average 12% in fees their income would be $ 1,200,000. Now off the top figure how much the catalogs cost - and remember Heritage's FUN auction had three separate ones for US coins - say $ 10.00.
for the large catalog. How may catalogs - 25,000 - that's $ 250,000. $ 3.00 apiece for the small catalogs (2) is $ 150,000. Mailings, advertising, photography the cost of the viewing rooms, personnel, the auction itself, insurance, storage, security and I do believe they have to pay a fee to the coin show just to have the auction.
I'm sure I am off on the actual costs but as you can see they don't make as much as you think.
And they are in business to make a profit.
When everyone complains about the 15%, they should take a second and try to figure out the cost of running the auction and then the 15% doesn't seem so bad.

Joshua

Barry

On a related note, I wonder if Ebay has cut into their business. Yeah, I know, you're all thinking Ebay is primarily a dumping ground for crap. However, guys like Adrian and Ira Stein sell PQ stuff on Ebay and that's their primary (only?) venue.
Whaddya think?

DesertLizard

Profit margins? Razor thin!

Look at a firm like Heritage. Ever see their army of people at each auction?

Running their massive website is no small task. Think of all the bodies to maintain the database. It seems all glamorous but it is a business and there are real expenses.