Charge Consignors for Reserves

consignor-agreement_counterfeit

One of our top-ranked auctioneers recently held a session on Proxibid, offering coins slabbed by ICG–a good, but not the best–holdering company. Reserves were set at PCGS levels. We knew the result. Those coins were not going to sell and auctioneer Darren Meares was going to have to foot the bill.


In this case, we’ll let email correspondence speak for itself:

PROXIBLOG: APRIL 23, 2:35 p.m.

Just a note for your consignor with high reserves on ICG coins. Typically, ICG coins grade down two notches, sometimes one, rarely crossover, with PCGS. The result of the reserves is I stopped bidding. Cases in point: On your mercury dimes graded ms67FB, I bid $35 and did not meet the reserve. Bidders do take chances on ICG coins. But here’s the reality: an MS66 or MS66FB ranges from $25-35. So bidders like me look at the coins and decide the chances of crossover. This, for example, is a horrendous ICG coin. The reverse looks stained:

icg


MEARES: APRIL 23, 2:35 p.m.

I am in agreement… that is one reason I put the disclaimer on the lot prior to all of the graded coins. He is one of our larger consignors and I have done my best to tell him about buying from these non-traditional grading companies. I will be dropping the reserves on these lots – I do hate reserves, but sometimes you get stuck with them to keep consignors.


PROXIBLOG: MAY 1, 8:45 a.m. I admire the note you put on your auction yesterday about top holdering companies. I also see that your consignor had 37 passed and about 10 sold. I know how hard auctioneers like you work on behalf of your consignors. Your consignor in this case is a fortunate man.



MEARES, MAY 1, 8:57 a.m.
: I am rewriting my terms for consignors in the next few weeks. One of the main points is no reserves on coins from ‘other than major graders’. They will all be sold to the highest bidder. … I’m thinking of also adding a no-sale fee for the ones that do have reserves attached.


We concur. Consignors who insist on high reserves should be held via contract to pay fees for items that do not sell. As Darron puts it, “It takes the same amount of time and effort to sell a coin as it does to try and meet a reserve price.”

We think an 8% of value fee is fair for lots with reserves that do not sell.

What do you think?

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.

Should Proxibid Require Reserve Policies in Terms of Service?

Our first installment in the series below analyzed the pros and cons of reserves. A second post looked at the issue of hidden reserves from the bidders’ perspective, and our third profiled the reserve policy of a top coin auction house. This last post asks Proxibid and our viewers to weigh in on whether reserve policies should be included in terms of service.

Why not? We routinely get news releases from auction houses soliciting us for coins and sharing their reserve policies with us, either informally via email or formally with a contract. Sometimes, as with RJ’s Auction Service, we learn about reserve policies in a news release.

Some reserves are set with opening bids. Those are transparent. In such case, the auction company had better have a consignment policy that charges sellers fees for unsold lots. Otherwise, the auction company stands to lose revenue.

Some reserves are hidden, with minimum bids set as low as $1, even though a reserve may actually be $300. The goal here is to inspire bidding so that bidder competition hits the reserve. In that case, the auction company also should have a consignment form that sets buyback fees or an agreement with sellers that the auction company has a right to sell lots at any price at its discretion.

And a few reserves are ghost-bid by auction companies that allow maximum-bid viewing. Proxibid allows those to engage in the practice, which we discourage, because of transparency notices–showcased in the terms of service, by the way (and for good ethical reason).

Some online auctions set high opening reserves on all except on 5-10% of select lots, luring viewers with bids and then, shortly before the live auction, setting equally high opening reserves, a practice that Proxibid should disallow pursuant to the Unified User Agreement. (See this post.)

A few timed auctions allow maximum-bid viewing–a combination we find suspect, by the way–because Proxibid’s technology should be running the show. Again, this is a practice that Proxibid should ban, even if the auction company believes it is harmless, because it sends a chilling message. Why view bids if your auction is timed? Just wait until it is concluded, and you’ll see how lots sold!

Finally, we understand that the auctioneer’s primary concern is pleasing the consignor. That can be done in a variety of ways, other than ceding your rights to reserve. You can advertise. You can invest in superior photography. You can learn how to write accurate numismatic descriptions. You can advertise in your local newspaper for coins, purchase them, and then offer them in Proxibid auctions, completely bypassing the consignor.

That said, we wonder how our viewers–both auctioneers and bidders–feel about reserve policies being listed in terms of service. Should Proxibid require this? Is it the bidders’ right to know?

We think it is. Proxibid’s brand functions on one word, and one word only: TRUST. Trust requires transparency.

What’s your opinion?

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.

RJ’s Auction Posts Reserve Policy

Our first installment in the series on reserves analyzed the pros and cons of reserves. A second post looked at the issue of hidden reserves from the bidders’ perspective. This 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.

One of our top-ranked coin auction houses, RJ’s, recently sent us a news release explaining reserve policies, one of Proxiblog’s main concerns during the past year. Some reserves are set with opening bids. Some are hidden. And some are ghost-bid by auction companies that allow maximum-bid viewing.

Reserves come with risks to the auction company. That is what this series of posts is about.

As we always recommend, RJ’s makes clear that sellers must pay for reserves. Nothing can be more discouraging to bidders than winning a lot only to learn that the auctioneer has passed on the coin.

Some auction companies, like RJ’s, have set policies on reserves. Here is RJ’s as shared by Richard H. Garvin, Manager and Senior Auctioneer:

    Reserves will be allowed on any item under the following condition. The number of lots with reserves will be restricted to twenty percent of the total number of lots in your consignment (no exceptions). Please note that if you place a reserve on a lot there will be a seven-dollar ($7.00) “Marketing Fee” per lot that does not sell or sells at your reserve.

We like the policy on limiting the number of reserves to 20% of the consignment because it assures that the majority of lots have the potential to spark bidder competition and inspire return customers. We think the $7 fee is lenient and recommend that reserve-buybacks be the same percentage as Internet buyers’ fees, or 15% in RJ’s case.

We understand that policies like the one we suggest above might discourage consignments. But in those cases, auctioneers can compensate by lowering consignment fees to less than 10% in a tiered system based on the total of sales in any auctions. We know many top-ranked Proxibid auctions that feature tiered systems of 5-8% and a few that even waive seller fees for premium coins.

RJ’s tiered system is as follows: Commission rates for selling coins and related items (non-gold, non-platinum) are $1 up to and including $400, 10%; $400.01-$600, 9%; $600.01 and up, 8%. Gold, platinum and bullion coins have a 4% commission fee.

The policies seem to be working.

RJ’s Auction remains one of the top houses as evidenced by these statistics:

    We recently completed our July Coin and Currency Auction. … We had 27 registered bidders that came to our auction facility and another 116 bidders that registered with Proxibid – our on-line Internet hosting partner since October 2008. Of the 301 lots consigned 299 of them sold during the auction. The remaining 2 lots were sold later that night to an on-site buyer. [S]ince January of this year 43.99 % of the lots sold have sold online and 37.1% of the total dollar volume sold has sold online.

Stats like this only underscore RJ’s Auction’s commitment to the online as well as onsite audience. Its next Proxibid auction is slated for Friday, August 17, 2012.

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.

Hidden Reserves: Bidders’ Perspective

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.