Our first installment in the series below analyzed the pros and cons of reserves. This post looks at the issue of hidden reserves from the bidders’ perspective, which some houses overlook trying to please consignors so that they can offer their coins in an online auction. Our next post looks at a Proxibid auction house’s reserve policy, and our final post speculates whether reserve policies should be included in terms of service.
As many of our regular viewers know, Proxiblog patronizes many Proxibid coin auctions. In fact, our ratings are based on our experience as well as on terms of service, photography and lot descriptions. Sometimes we spend an hour or so making bids, a process that entails numismatic knowledge, checking of recent auction prices for a coin, figuring the buyer’s premium and shipping costs, and sometimes variety designations and other details.
Then, if our desired lots are attractive enough, we’ll join a live or timed session during the auction and bid higher or see how our maximum bids fared.
Imagine spending the time and effort beforehand and dedicating more time by attending a live session, only to see lots bid above wholesale or at times even retain won … and then passed by the auctioneer.
In one recent auction that happened to us four times on lots that could have brought the auctioneer a nice commission, had he not allowed the consignor to set the level of reserves.
Hidden reserves do not have an opening bid set at a predetermined level, but seem to start at zero, under the auctioneering theory that it is easier to go from zero to $300 rather than open at $300. True enough. But if those reserves are hidden, not only from Proxibid but also in the terms of service, then auctioneers fail to assess other less obvious ramifications of their policies.
Auctions are about risks. When we consign coins to a Proxibid auction, we do not set reserves, because we know that some lots will bring profit and others, loss. That is what this business is about.
We see an increasing trend in some houses of consignors setting the rules rather than the auctioneers, merely because the desire to offer coins is so great, especially high-quality lots that attract big bidders, compelling auctioneers to go against their better judgment and experience.
We understand that. But we also understand that reserves should come with penalties. Otherwise the only person penalized is the auctioneer.
Think for a minute: If you disappoint winning bidders, especially with hidden reserves, you are not taking into account the prospect of losing a return customer. You are not calculating that the disappointed customer had bid up other lots that did happen to meet their reserve, although purchased by other buyers. That can spark a vicious cycle in which fewer bidders register for your auctions because of their disappointing experience.
And then guess what? When you return coins to the consignor, because they could not meet their reserves, he is angry at you for failing to deliver buyers.
All of this affects the reputation of your company.
We encourage you to look at your consignment forms to see if there are penalties for lots that do not meet reserves. If you don’t have such a form, create one. Here is one of the best consignment forms in the business, by John Leonard of Leonard Auction.
If you’re going to allow reserves, especially hidden ones, you might ask consignors to designate only a percentage of their lots with reserves or set buyback fees for your legwork, which includes cataloging, advertising, posting, and book-keeping.
You might not get as many coins as you like for your auction if you create reserve policies, but you also won’t be turning away the lifeblood of your business, and that is, your buyer.
Proxiblog is an independent entity with no connection to the auction portal Proxibid. Our intent is to uphold basic numismatic standards as established by the American Numismatic Association and the National Auctioneer Association and to ensure a pleasurable bidding experience not only on Proxibid but also on similar portals such as iCollector and AuctionZip.