Have auction houses become too greedy with high buyers and sellers commissions?

[wlaidlaw]

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With recent discussions over a well known Leica auction house, I just checked on their commission structure and noted that the sellers commission is 18% and the buyers 24%. Now these are not excessive percentages compared with other auction houses and less than some I have dealt with recently. However if you take an item with a hammer price of €1000, the seller gets €820 but the buyer pays €1240 or a total differential of €420. That equates to a 51.2% mark up on the seller receipt price. I just wonder if this is too greedy? What do others feel? 

Wilson

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[PG Black nickel]

Hi Wilson,

Yes, that's a big difference...but you can always negotiate the fees (at least on the Lexus I'm sure the sellers have negotiated!)

Some of the Leica items I have put up for sale have sold well, but once you take out the fees from the auction house the profit is small!

Philippe

[Charles Morgan]

When I dabbled in antique dealing with a now late and certainly crooked business partner, the fees for selling were negotiable if you tried.

The only reason to use them was to rid yourself of otherwise sale proof stock. I wouldn't touch them, or anything most sell, with a bargepole.

[tranquilo67]

Hi,

As commented on the other thread, prices (and in this case commission) depends on demand. Personally in the business area I work we use to say the service margins over 40% are a steal (in other words, the end customer can perceive that the additional money he's paying for that service is not justified).

Coming back to this case, in my opinion the business case is clear: if the item will sell for more than twice what you could sell by your own, it worth to get their auction service. I'm not sure if that's the case for all the items but it seems clear that certain items have a very limited market and that market usually requires some warranties (like authentication or trust on the seller).

Best wishes,

Augusto

[pgk]

I have to say that many auction houses who operate through online platforms provide miserably poor descriptions considering the percentage they charge for selling expensive items. I will buy from such places but only when I am confident that I know what I am buying and have a set limit on how much I am prepared to pay (including commission) given what I understand about the item. If descriptions (and often photographs) were better I suspect prices would shift (for better, or worse in some cases) but at least the bidders would know more precise details about items they are interested in. My own opinion is that the fees charged are far too high given the low quality information often supplied online, for costly items at least. I'm not the greatest fan of eBay, but usually descriptions are far better (or some are and you can decide whether to bid on poor ones) and there are safeguards in place. Auction houses should strive to be far better than the average eBayer IMO.

[zeitz]

If you bid on LiveAuctioneers, add another 5% for the buyer.  I always send a bid sheet to the auction house, but I do watch the auction on LiveAuctioneers.  

What is confusing to us in the United States is VAT.  Is it in the hammer price, is it in the buyer's fee, or is it added on top of the hammer plus buyer's fee?  How do buyer's outside the EU avoid paying VAT?

[pgk]

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35 minutes ago, zeitz said:

If you bid on LiveAuctioneers, add another 5% for the buyer.  I always send a bid sheet to the auction house, but I do watch the auction on LiveAuctioneers.  

What is confusing to us in the United States is VAT.  Is it in the hammer price, is it in the buyer's fee, or is it added on top of the hammer plus buyer's fee?  How do buyer's outside the EU avoid paying VAT?

I think (though I'm not absolutely certain) that it is part of the 'vat margin scheme' on secondhand goods, which charges vat on both buyer's and seller's fees (and is included in the gross figure). So it equates to vat on the 'profit' by the auctioneer (seller) on the secondhand item. This vat is not reclaimable even outside the UK/EU as far as I am aware.

[pedaes]

1 minute ago, pgk said:

I think (though I'm not absolutely certain) that it is part of the 'vat margin scheme' on secondhand goods, which charges vat on both buyer's and seller's fees (and is included in the gross figure). So it equates to vat on the 'profit' by the auctioneer (seller) on the secondhand item. This vat is not reclaimable even outside the UK/EU as far as I am aware.

I think this is correct. For UK auction houses there is also the complication if an item has been 'temporarily imported' for the auction, when customs duty and vat on the hammer price is payable, but this should be clear in auction catalogue. Not seen this mentioned by EU houses.

[Pyrogallol]

Time was when the buyer’s premium had not been invented. When bidding now at an auction you have to remember to add the buyer’s % when bidding so it may well hold down the bid price. The auctions I have been to, before Covid, charge about 17.5% which comes to about 22% with the VAT for the buyer.

No wonder people buy and sell on e bay. No buyer’s premium and seller’s commission of about 15% all in.

[wlaidlaw]

I have been buying cameras (mostly Leicas) at auctions for over 40 years. Back then in the UK, it was only the big four up in London (Sothebys, Christies, Bonhams and Philips) who charged buyers' commissions (normally around 10%) and sellers commissions were generally around 12.5%. To be fair to the big houses, they usually produced beautifully photographed full colour glossy catalogues and they knew their clientele very well. They would do extensive letter and phone marketing to potential buyers, thereby in all likelihood, increasing the hammer price. One could therefore say that they could afford to reduce their seller commissions to attract business by putting a buyer commission in place, while still putting a lot of work into adding value for the client. I think lesser auction houses decided to copy their commission structure, without adding the value or putting in the effort that the big houses do. 

The small auction houses of 40 years ago and today are often in the same family ownership that they have been for sometimes over 100 years. They must therefore have been doing alright financially before they jacked up their commissions. There are few businesses that have as long ownership histories as local auction houses, other than breweries, another high margin business. When you look at the palatial offices of the larger modern auction house, you just know it has to be an exceedingly profitable business. 

Wilson

[tranquilo67]

2 minutes ago, Pyrogallol said:

Time was when the buyer’s premium had not been invented. When bidding now at an auction you have to remember to add the buyer’s % when bidding so it may well hold down the bid price. The auctions I have been to, before Covid, charge about 17.5% which comes to about 22% with the VAT for the buyer.

No wonder people buy and sell on e bay. No buyer’s premium and seller’s commission of about 15% all in.

I agree with you that having in mind the commission, at least in my case, I bid more conservatively than if I'm bidding for the total, specially if the action goes fast and I have to calculate the commission and VAT on top.

May be it would be a clever move to have a bid mechanism where you could see, besides the highest bid, the total for you including commissions, and to enable bidding through that total ...

Best wishes,

Augusto

[willeica]

7 hours ago, pgk said:

I have to say that many auction houses who operate through online platforms provide miserably poor descriptions considering the percentage they charge for selling expensive items. I will buy from such places but only when I am confident that I know what I am buying and have a set limit on how much I am prepared to pay (including commission) given what I understand about the item. If descriptions (and often photographs) were better I suspect prices would shift (for better, or worse in some cases) but at least the bidders would know more precise details about items they are interested in. My own opinion is that the fees charged are far too high given the low quality information often supplied online, for costly items at least. I'm not the greatest fan of eBay, but usually descriptions are far better (or some are and you can decide whether to bid on poor ones) and there are safeguards in place. Auction houses should strive to be far better than the average eBayer IMO.

This is a valid point with some auction houses being particularly bad as regards item description and grading. Others are very good and there is one auction house where I play a game of predicting the grading based on condition and I find that their grading almost always matches mine. Working condition is much more difficult to predict and describe, of course. Mis-description of items is also common and can be due to lack of knowledge or laziness. I have rarely seen evidence of a deliberate intent to mislead, but it does happen from time to time. Reputation is everything in this market and any auctioneer would be extremely foolish to try this as the long term loss could be much more than the short term gain..

Going on to Wilson's point, there have been signs of 'commission price creep' which has gone hand in hand with not only the huge increase in demand for bread and butter film cameras, but also the growth of pure collecting for collecting's sake in this market. The Commissions are a form of 'rent' (space to sell and space to buy) with no controls as regards what is an appropriate commission. There are two yardsticks to look out for (a) are commissions transparent and applied in accordance auction rules and (b) is there any evidence of price collusion, or signalling or even conscious parallelism in the market?  In a rising market such as we have at the moment auctioneers are always tempted to squeeze out a bit more, but in a falling market the opposite may be the case. Do auction houses actually compete with each other?  I would say that possibly only at the consignment level where they are competing to attract sellers with really nice 'headline items'.

There is a lot more that I could say but this. It is a business where a lot of work is required to make a success and, despite appearances, it is all too easy to get things wrong and to be left with a lot of unsold stock. One way of determining the success or failure of an auction is to look at what percentage of catalogue items have been sold. 'House buy backs' are also worth looking out for. 

William 

[ClarenceW]

I agree with you, I have thought about using auction houses to purchase a certain camera/lens. But factoring in the, almost 25% buyer fees + government import tax fees during covid as I cannot be there to pick it up myself. I most certainly will only use auction houses as a guarantee to buy camera/lenses that are very easily faked. Such as, black paint stuff. Since instead of buying a late/Kanto repaint camera/lens, I rather pay the extra money for a authentic piece than buying a worthless repaint.