The Auctioneer - Friend Or Foe?
inNovember 22, 2011 - 5:47pm
Antiques and collectibles shops have traditionally relied on the auction house as their principle source of supply. But have the suppliers become competitors? And if they have, what can the shop owner do about it?
Once upon a time, there was a time (there really was!) when it was rare to find yourself bidding against your own potential customers - and when a customer could not look up recent auction prices for an item you were selling, even the actual price you paid for it, with a just couple of clicks on a computer! This was a time of milk and honey, when lambs gamboled merrily in the fields, birds twittered sweetly (when that meant sung, not communicated their experiences and opinions via the Internet!) - a time when there was a clear supply chain: from the auction house (the wholesaler) to you, the retailer and then to your customer, the collector.
Unfortunately, in our business, that supply chain has been irretrievably broken. Retailers in our market must be unique in having to suffer their wholesalers selling to their customers and even publishing wholesale prices for customers to see while omitting to mention the hefty 'Buyer's Premium' that has to be paid on top. That the dealer is being squeezed out is becoming increasingly obvious.
However, it's not really the fault of the auction houses, because the seeds were sown probably as long ago as 1965, when Going for a Song, the forerunner to The Antiques Roadshow, was first broadcast by the BBC in Britain. Since then, auctions have become increasingly popular as a leisure interest worldwide, with a seemingly endless succession of television shows providing free marketing and turning some specialist auctioneers into national celebrities.
Then the Internet auction site came along, which the 'bricks & mortar' auction houses justifiably saw as competition. They responded by promoting their own auctions on-line and have increasingly been setting up live on-line bidding facilities where anyone can see and hear the auction as it takes place and place bids from the comfort of home or their office desk.
From the shop owners point of view, this is not going to change for the better and is certain to get worse. Internet and computer processing speeds will inevitably increase and introduce new possibilities for streaming live auctions - probably even 3D virtual auctions where you can feel as though you are actually in the room.
So what can you do?
You could concentrate on selling low ticket items that would be uneconomic for auctioneers to sell individually online - estate clearance bric-a-brac, for example. But you would then have the same problem as the auction houses. How long is a $20 item going to take to list and administrate? Even if it only took you half an hour to buy an item for $10 and list it for $20, and another half hour and $2.50 to administrate the sale, do you really want and, more to the point, can you afford to work for $7.50 an hour - and not every hour at that?
Or you could sell at the quality end of a specialist area, about which you know enough to stand a good chance of spotting fake, reproduction and even restored items, even if this means you have to carry a smaller inventory (which will anyway be less expensive to administrate). You can then take advantage of the weaknesses of the auction houses, which:
It is the last of these which is the key to overcoming the problem of buying at a price on which you can make a profit, because you can use it to take advantage of the way that auction houses promote themselves on-line. Many now publish their catalogs on auction database sites, so you can search them collectively and easily find multiple auctions with the items you sell all across the country and even abroad. When you have found them, you can keep track by copying the auction details and item information, then pasting it into whatever calendar software you use.
Make sure you contact the auction house in plenty of time to obtain any additional information you will need before bidding, such as condition information, additional photographs, in-house or local packing and shipping options and costs. You can set up standard email stationery to use for doing this, so sending out requests need not take more than a few minutes. Telephone or ignore the auction houses who do not reply.
The nature of auctions is that items sometimes sell for what they are worth, sometimes for less and sometimes for more. This all depends on who is bidding and how much competition there is in those few moments when they are up for sale. You need to pick up on the times when there are no collectors bidding and little competition. So you place absentee bids at low prices at all the auctions selling your items and work out your maximum bids as follows:
The price you think you could sell the item for.
The result of this calculation is your maximum bid.
If this figure is not more than ten percent below the low estimate or starting bid quoted for the item, it's worth placing. It's probably worth placing anyway, because there may still be no reserve set. Don't worry about auctioneers starting at your maximum bid if it is higher than the low estimate or published opening bid. They are generally honorable and you will soon become aware of any who are not and learn to avoid them. Remember, even if this happens you should still be getting the item at a price on which you can make a profit.
You may get only one successful bid out of as many as 20-30 placed, but at least it will be at a price on which you can make a profit and you won't have been suckered into competing with a collector and paying far too much as a result (and which of us hasn't done that!). On the downside, as you will not have examined the items personally you will occasionally buy something which was not correctly described. Sometimes, if you get back to them quickly enough, auctioneers will give you a refund, but others you just have to allow for as business expenses, weighing them against the costs in time and travel expenses you would otherwise have incurred if you bought your inventory in person. It is also a learning experience, because it will help you differentiate between the auction houses you can trust and those you cannot.
Another issue you need to watch out for is that you may occasionally be more successful than you expect, which can have an unexpected impact on your cash reserves. However, if you monitor your success rate by checking auction results as soon as they become available, you can adjust your bidding or even cancel some (and why not - you think you owe the auction houses any favors?). It is also a good idea to put aside a reserve to deal with such situations should they arise.
This should enable you to offer your items for sale at the equivalent of a high-end auction estimate (or what it would be inclusive of premium) with a little room left to give your regular customers or other dealers a discount. Then you market your items in a way that auction houses do not:
Why would a collector who specializes in your area of expertise not want to visit your shop and buy from you if you do all this? Also, as you are specializing in their particular area of interest, your shop is likely to register higher in their Internet search results.
In difficult times, which these most certainly are, it is easy to fall prey to the temptation to 'pile it high and sell it cheap'. That can work for essentials, such as food, but it doesn't work for luxuries. You need to follow the money. Who still has it? - the already wealthy, successful business people, doctors, Academics and lawyers, that's who. Usually very busy people, without the time or the inclination to trawl all the auctions and place multiple bids; people who are prepared to pay a little bit extra for excellent service and convenience.
Those idyllic times of the past, well, they didn't really exist, did they? There have always been difficulties of one sort or another to overcome. Markets are dynamic, organic, they wax and wane and change. Dealers either change with them and prosper from the new opportunities which arise, or they don't and sink while moaning about how hard times are. You are in the right place at the right time. There is no-one better placed to take advantage of recent market changes as a Ruby Lane shop owner, who already has the expertise and the quality shop to sell through.
So yes, auction houses have become competitors, but in doing so have opened up great opportunities for the right kind of dealer – the Ruby Lane kind of dealer.
Simon Little is a Ruby Lane staff member. He has worked in the antiques trade in the UK since 1997, and in Fine Art since 2007. He has been selling exclusively online since 2003. His shop is LeFays Fine Arts