Should Heritage accelerate the inevitable, cut its fees to 8%, and thin the auction firm herd to the

Longacre · October 26, 2006 10:07PM

Everyone knows that Heritage is the single most important numismatic firm in the universe. It has size, financial power, and the ability to gather up huge, quality consignments. It is also a fairly well known fact that at least one of the other major auction firms has one foot in the grave, and the other on a bananna peel. No one is doing the collecting community any favors by having a lot of second tier auction firms hanging around who feel obligated to put on several auction a year with coins that have no business being sold at auction. Also, from a dealer's point of view, having fewer auctions would be a good thing because it is tough to travel around the country looking at all of these schlocky auctions.

Because Heritage is the 10,000 pound gorilla, in 2007 (and for as long at it takes, but only probably through 2007), should it cut its auction fees to 8% across the board? Of course, the other, less financially sound firms would need to cut their fees to compete, and would either go out of business doing so, or if they don't, their consignments would dry up and they would disappear anyway. By cutting to 8%, it is highly likely that Heritage could put some of the online auction firms out of business, too.

Before everyone gets up in arms about less competition and how it would be terrible for collectors, think about the coins that are currently in auction and the fact that well over half of those coins have no business being in auctions. This fee cut by Heritage can thin the auction firm herd, and also ultimately help to drive the junk out of auctions and get back to having quality coins in auctions. What do you think?

WaterSport · October 26, 2006 10:11PM

I would like to see them cut. Maybe even a cut per number of coins you buy would give them am edge while still drawing new/more customers.

WS

MrEureka · October 26, 2006 10:14PM

By sharing the buyer's premium with consignors (to whatever extent is necessary) , effective commission rates can already get to 8% and lower. Therefore, there's no need for a change in the buyer's premium to squeeze the competition.

ColonialCoinUnion · October 26, 2006 10:14PM

<< Before everyone gets up in arms about less competition and how it would be terrible for collectors, think about the coins that are currently in auction and the fact that well over half of those coins have no business being in auctions. This fee cut by Heritage can thin the auction firm herd, and also ultimately help to drive the junk out of auctions and get back to having quality coins in auctions. What do you think? >>

In your utopian auction environment, I'm guessing Heritage doesn't crank the fees up to 20% after they've finished 'thinning the herd', right?

ABC123 · October 26, 2006 10:15PM

No, Competition is Good---McDonalds

Longacre · October 26, 2006 10:20PM

<< 

<< Before everyone gets up in arms about less competition and how it would be terrible for collectors, think about the coins that are currently in auction and the fact that well over half of those coins have no business being in auctions. This fee cut by Heritage can thin the auction firm herd, and also ultimately help to drive the junk out of auctions and get back to having quality coins in auctions. What do you think? >>

In your utopian auction environment, I'm guessing Heritage doesn't crank the fees up to 20% after they've finished 'thinning the herd', right? >>

There will be enough strong competition left over that will prevent that from happening.

Longacre · October 26, 2006 10:22PM

<< By sharing the buyer's premium with consignors (to whatever extent is necessary) , effective commission rates can already get to 8% and lower. Therefore, there's no need for a change in the buyer's premium to squeeze the competition. >>

You might be right, but no one knows about this. A major announcement of an across the board cut in auction fees by Heritage would have a more significant impact, even if this is being done currently, albeit quietly.

Michigan · October 26, 2006 10:26PM

It is also a fairly well known fact that at least one of the other major auction firms has one foot in the grave, and the other on a bananna peel.

I assume you are not talking about Stack's/ANR but I'm sure their recent merger was due to Heritage.

Veep · October 26, 2006 10:26PM

To the contrary, Heritage could charge even more. They give customers the best chance of maximizing the proceeds from the sale of their coins. They can justify charging more. If they cut their commissions to 8%, they would have to do tremendous volume to just break even and then there's no guarantee how the marketplace would react. Heritage is doing just fine with their current strategy.

VamGuy · October 26, 2006 10:36PM

<< think about the coins that are currently in auction and the fact that well over half of those coins have no business being in auctions... and also ultimately help to drive the junk out of auctions and get back to having quality coins in auctions. >>

Don't you think this is a bit condescending? One mans junk is another mans treasure.

orie · October 26, 2006 10:46PM

I'll step out on a limb. The strong consigners don't pay full commissions at any of the auction houses.

ziggy29 · October 26, 2006 10:58PM

<< I'll step out on a limb. The strong consigners don't pay full commissions at any of the auction houses. >>

Of course, now that almost all firms have moved to a "buyer's premium," the marketing claims the sellers *don't* pay any commission. Of course, they do pay a hidden commission in the buyer's premium, as this is that much less the bidders can offer.

PhillyJoe · October 26, 2006 11:00PM

More likely a competitor would drop its fees fees to try and draw some business away from Heritage. Half way through the Signature gold auctions the other day the BP's had already exceeded $1,000,000. Doubt they'll change that cash cow.

Joe

MadMarty · October 26, 2006 11:06PM

Laura is going to bury them all!!!

DrPete · October 26, 2006 11:40PM

I like it the way it is. A free market and competition. If some companies can't compete, they go under. If companies can fix their problems and compete, they have accomplished something. There is room for more than one auction company and mostly competition pushes the envelope for innovation and pricing.

Heritage does an amazing job with its auctions considering the overall logistics. Are there areas they could improve. Certainly. Most of us would like to see an overall higher quality of images, but we know that high-volume tends to preclude top-end imaging at this point in time.

Coxe · October 26, 2006 11:49PM

20% per lot (buyer plus seller, and actually 19.35%) commission is too much. Was 15% not long ago. As one of many consignment fencesitters, I know that margin is what keeps potential quality consignments away from auctions. It does cost a lot to hold and promote auctions. Wonder if 10% straight buyers' fees and no sellers' fees would drive them out of business. There probably would be more volume and higher quality material, both fresh and recycled.

dbldie55 · October 26, 2006 11:51PM

<< I'll step out on a limb. The strong consigners don't pay full commissions at any of the auction houses. >>

I would think this is common knowledge, but I guess it is not the case given this thread.

numisma · October 27, 2006 12:05AM

I think they should serve better coffee at the auctions. This may be instrumental in destroying the competition.

CoinRaritiesOnline · October 27, 2006 12:41AM

<< I like it the way it is. A free market and competition. If some companies can't compete, they go under. If companies can fix their problems and compete, they have accomplished something. There is room for more than one auction company and mostly competition pushes the envelope for innovation and pricing. >>

That is Adam Smith's "Invisible Hand" at work.

lava · October 27, 2006 12:50AM

I agree with everything you said.

There are way too many auctions to follows. Aside from the major auctions, which seem to run closer and closer together, on the other extreme is ebay, with auctions going 24/7. With David Lawrence and Legend and Heritage running more frequent auctions, seemingly on a weekly basis, it is just too much to track.

CalGold · October 27, 2006 12:59AM

You can't just assume that the biggest firm can weather a big cut in commissions unless you know their operating margins. It may be the biggest house and it may generate the largest revenues and gross profits but it also may have the largest overhead. The landlord will still want the same rent for their fancy schmancy offices and unless they layoff employees they still will need to meet their payroll and have enough left over to allow the principals to maintain the lifestsyles to which they have become accustomed.

CG

lloydmincy · October 27, 2006 1:21AM

Longacre:

Were you born YESTERDAY??? The fees are already at that level in most cases, so what needs to change???

Heritage sold over $500 MILLION worth in the past year. Why in the world would they cut their "written" fees? If there is heavy demand in ANY industry, do you lower your prices???

<<It is just too much to track>>

That one is just as funny. Another reason to RAISE fees. Too much material is a GOOD thing!!! That means there is a steady supply, whether the coin shows up again and again, and that there is a strong demand to justify having so many auctions.

BTW, eBay has auctions for coins??? People actually buy from there???
One more note: Many on this board criticized Heritage's pictures. maybe they would have had $700 Million in prices realized with better pics???

jayboxx · October 27, 2006 1:27AM

It would be silly for them to cut their fees. All you need to do is look at Toyota vs. GM or Ford for an example that cutting prices isn't typically the answer.

Shamika · October 27, 2006 1:29AM

Actually, many of the coins being consigned these days are virtually out of my price range. What you may consider "junk", may be exactly what I'm wanting more of.

TwoSides2aCoin · October 27, 2006 1:35AM

Yes, and groceries should be free

RYK · October 27, 2006 1:35AM

<< Longacre:

Were you born YESTERDAY???

Heritage sold over $500 MILLION worth in the past year. Why in the world would they cut their "written" fees? If there is heavy demand in ANY industry, do you lower your prices??? Furthermore, the fees are already at that level in most cases, so what needs to change, and WHY???

<<It is just too much to track>>

That one is just as funny. Another reason to RAISE fees. Too much material is a GOOD thing!!! That means there is a steady supply, whether the coin shows up again and again, and that there is a strong demand to justify having so many auctions.

BTW, eBay has auctions for coins??? People actually buy from there???
One more note: Many on this board criticized Heritage's pictures. maybe they would have had $700 Million in prices realized with better pics???

>>

Lloyd is just cranky because the Tigers are getting whooped in St. Louis.

In balance, I do not think that Heritage would make that much more with better photographs, but certain individual coins certainly would get more action and more money for the consignor. I guess Heritage might be too big to worry about the individual, and if that is the case, my collection will go somewhere else.

As for Professor Longacre's original question, when I see that type of discounting, I will know that the coin market bears are running in the open field.

lloydmincy · October 27, 2006 1:46AM

<<Lloyd is just cranky because the Tigers are getting whooped in St. Louis.>>

Ummm, maybe just a little true!!!

I didn't mean to change the thread regarding Heritage's Pics. My point about it was sarcastic. $500 Million in sales is, to me, INCREDIBLE. Is Heritage too big to worry about the individual? They must be doing something right with those kind of numbers. The Negative is you might get lost in the pile at Heritage as a smaller collector, but the Positive - you WILL get maximized exposure for your coins in their auctions.

Longacre · October 27, 2006 1:50AM

<< As for Professor Longacre's original question, when I see that type of discounting, I will know that the coin market bears are running in the open field. >>

I would qualify to be called Doctor Longacre, thank you.

Aegis3 · October 27, 2006 4:54AM

<< It is also a fairly well known fact that at least one of the other major auction firms has one foot in the grave, and the other on a bananna peel.

I assume you are not talking about Stack's/ANR but I'm sure their recent merger was due to Heritage. >>

I would think he meant Superior and "Bowers and Merena," but I'm not sure which is which.

oreville · October 27, 2006 1:38PM

When holding coins on consignment, I am not sure which is worse; having one foot in the grave or on a banana peel!

lloydmincy · October 27, 2006 2:10PM

Superior and B & M are doing just fine.

ColonialCoinUnion · October 27, 2006 2:12PM

<< Superior and B & M are doing just fine. >>

I did not know that.

Robgetty · October 27, 2006 10:38PM

I don't have the budget for the ultra rare / ultra pricey coins. Having more stuff come up on auction in the $1,000 and less price range is great for me. I'd hate to see a plan where we eliminated the ability to see those coins.

majorbigtime · October 28, 2006 12:09AM

I've always been treated failry by the Goldbergs, my 1st choice!

Torrero · October 28, 2006 3:04AM

<< There will be enough strong competition left over that will prevent that from happening. >>

No, there wouldn't. I learned that the only competitive advantage the other companies can offer is discounted commissions. Remove that aspect and I'll bet they all become distant memories.

<< Superior and B & M are doing just fine. >>

Yeah? Then so are your Tigers in the World Series! I like the ANR people and I know they're willing to discount fees heavily in order to compete but now they are controlled by Stacks which I think isa joke here inthe 21st century. Who knows what will happen there now?

lloydmincy · October 28, 2006 5:11AM

Trust me. The larger your consignment, the better your deal. BTW, just fine in coin terms is below average, is it not???

And the Tigers were a Top Pop coin this year, so THERE!!!

Torrero: I have NO idea what you mean by the Stack/ANR merger being a joke.

majorbigtime · October 28, 2006 5:21AM

<< 

<< I'll step out on a limb. The strong consigners don't pay full commissions at any of the auction houses. >>

>>

Exactly! You also can negotiate other important terms, like buy-backs for example.

roadrunner · October 28, 2006 9:12AM

By sharing the buyer's premium with consignors (to whatever extent is necessary) , effective commission rates can already get to 8% and lower. Therefore, there's no need for a change in the buyer's premium to squeeze the competition.

Consignor's already own the entire buyer's premium. It's really theirs along with the consignor's other normal fees. Bottom line is that the consignor can get anything from a 30% total fee to a 5% or less consignment fee depending on what he has and the other Terms and Conditions. If you are consigning a single 1804 silver dollar to a sale, I'm sure you can work a 5% or less deal.

roadrunner

michael · October 28, 2006 3:06PM

they cant cut fees they would lose money

WTCG · October 28, 2006 5:10PM

There is no reason why Heritage, or any other auction company should or will cut their buyers' fees. The 15 percent premium is the standard and universal rate in the numismatic auction business. A reduction in buyers' fees would not be beneficial to any auction company.

Have you considered that not all auction lots are consignments? Plenty, if not the majority of auction lots today are "house inventory". Auctions are a good way to get rid of unsold inventory.

Heritage is gigantic, but they are not the ultimate "10,000 pound gorilla" in the business. There are other companies that have larger bullion, wholesale and retail operations than Heritage. By the way, there are other numismatic auction companies that are doing just fine.

Should Heritage accelerate the inevitable, cut its fees to 8%, and thin the auction firm herd to the

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