RINKER ON COLLECTIBLES — Column #1386
Copyright © Harry Rinker, LLC 2013
The $300 Auction Lot Minimum and Its Impact
Thanks to an invitation from Rich Reed, I attended the Friday afternoon, July 19 session of the 2013 R. S. Prussia Convention held in Grand Rapids. Jason Woody of Woody Auction (PO Box 68, Douglass, KS 67039; www.woodyauction.com) hosted an informative seminar in which he outlined the operating methodology of Woody Auction.
During his seminar, Jason noted that the Woody Auction minimum object/lot goal was three hundred dollars ($300.00). This means that if Woody Auction does not see the possibility of a $300.00 hammer price for a single object, it will be placed in a lot with one or more additional objects until the projected hammer price exceeds $300.00.
This is not the first time I encountered this policy. When I spoke with Dan Morphy of Morphy Auctions (2000 N. Reading Road, Denver, PA 17517; www.morphyauctions.com) about the sale of The Puzzle Pit, my collection of over 5,000 jigsaw puzzles and jigsaw puzzle ephemera, Dan informed me that his interest was restricted to puzzles or puzzle lots worth $300.00 or more. In addition, the burden rested with me to identify the puzzles and puzzle lots and prepare the description. When Richard Penn of Rich Penn Auctions (PO Box 1355, Waterloo, IA 50704; www.richpennauctions.com) visited The School (the former Vera Cruz [PA] Elementary School) to view the material I wanted to auction, his request was similar to that of Dan Morphy.
Until the 2008-2009 Great Recession, minimum object/lot bid requirements were limited to major New York City auction houses such as Bonham’s, Christie’s, and Sotheby’s. As the 21st century dawned, minimum object thresholds ranged from $2,000.00 to $3,000.00. Today, the amount exceeds $5,000.00. The move to the minimum object price coincided with the 2001 closing of Christies East, its division that sold low-priced art and objects. Sotheby’s Arcade, its counterpart to Christies East, ended its operations around the same time.
Today, every catalog auction house/gallery and some non-catalog auctions have a minimum object/lot requirement. Most do not publicize what that amount is. For major regional houses, the number appears to be $500.00. The minimum for some of the larger houses exceeds $1,000.00.
It is common to see object and lot estimates of $200.00-$400.00 or $300.00-$500.00 in some regional house catalogs. First, these estimates are designed to encourage bidding. The auction house is hoping the final hammer price will exceed $500.00. Second, these lots often represent the bottom end of a large collection or estate, the auction house having to agree to take everything in order to obtain the contract of sale.
My collection management consulting experience is that most national and regional auction houses have relationships with smaller regional and local auction houses to sell a client’s material that does not fit their minimum requirements. My clients have difficulty accepting this at first. I explain that lesser objects in a large house will be front-line objects in a smaller house. In the current auction sales environment, obtaining maximum dispersal value for a collection requires utilizing as many as three or four auction houses.
The implications of the $300.00 object lot minimum are many. First, a large percentage, often exceeding 60 or 70 percent, of the objects in many collectibles category collections are worth under $300.00. The same applies to a large number of antiques category collections.
I had the privilege of speaking on August 1 and 2 at the 2013 International Nippon Collectors’ Society’s annual convention held in Dublin, Ohio. In the evening, I visited the sale displays in the rooms of attendees. One member offered a selection of Nippon wall plaques at a price of $50.00 each and Nippon bowls at $75.00 each. Each grouping contained more than a dozen examples. In the past, these plaques and bowls would have been priced individually with a price differential of over $25.00 for objects within each group.
Another way to understand this is to assess the average per unit price of the common, above average, and hard to find items in any collecting category. How many collecting categories can you identify where the average unit price for common objects is above $300.00? Ask the same question about the above average, and hard to find objects in your collection(s).
Second, it is critical to understand what a minimum $300.00 object/lot hammer price requires and means. It is a mistake for sellers to assume that the $300.00 hammer price is equivalent to book value. This applies only if the final buyer is a collector willing to pay full price at auction, a rarity (and readers know how much I despise that word) at any auction.
Assume the buyer is a dealer buying merchandise for resale. The dealer needs to buy at 25 to 40 percent of book value in order to allow a sufficient profit margin. Hence, if a dealer purchases a lot for $300.00, it needs to contain between $750.00 and $1,000.00 worth of book value objects. I advise my collection management clients to assume a minimum $750.00 book value per object or lot when considering consigning objects to auction.
It is never safe to assume that an auction buyer is a private collector paying maximum value for an object or lot. More often than not, the final buyer is a dealer who is paying only what he/she has to pay. At a specialized sale loaded with upper echelon and masterpiece units, the percentage of dealer purchased lots will decrease. In such auctions, some high-end collectors will let dealers bid on their behalf to keep the collector’s presence a secret and the price down and/or to establish a dealer’s provenance to the piece to add potential future perceived value.
Potential bidders, whether collectors or dealers, will factor the buyer’s penalty required by the auction house into the amount they are willing to bid. Sellers must take this into account when preparing objects/lots for auction. Further, the auctioneer’s commission will range from 10 to 25 percent. As a result, a $300.00 minimum bid results in $225.00 to $270.00 to the seller.
Normally, a catalog auction lot consists of three to five objects. I have seen lots with as high as 10 objects, but they are atypical. Assuming a lot contains five objects, each has to average $60.00 in value to achieve the $300.00 minimum. If the average unit price for commonly found objects in a collecting category is under $50.00, this presents problems to the seller and auctioneer. The seller wants to sell everything, not just his/her middle and high-end material. The auctioneer wants the middle and high-end material but is in no position to accept everything the seller wants to sell to secure the better pieces
I am a collector of collections. The objects remaining at The School comprise hundreds of collections. The average unit price for most of these collections is well under $50.00. While I can easily prepare between 250 and 300 objects and lots that would achieve the minimum $300.00 auction hammer price, these objects and lots represent less than 25 percent of the material I wish/need to sell.
How long will the minimum remain at $300.00? Given the rapid nature of change in the antiques and collectibles field, collectors contemplating the sale of their collections in the future need to prepare themselves for the advent of the $500.00 object/lot minimum.
It is critical not to blame the auction community for the arrival of the object/lot minimum. The costs of doing business in the digital age continue to rise. If the catalog auctioneer wishes to remain in business, steps such as this are necessary.
The challenge ahead is to develop viable sales venues for the antiques and collectibles that cannot meet these object/lot minimums. The stuff is too valuable and important to send to the landfill. Reuse is not always an option. The internet auction route no longer appears able to absorb and adequately market this material. The door is wide open for an entrepreneur with imagination, persistence, and a willingness to see profit in volume sales.I remain optimistic that solutions will be found. I have to. Successfully selling my stuff at The School depends on it.
Rinker Enterprises and Harry L. Rinker are on the Internet. Check out www.harryrinker.com.
You can listen and participate in WHATCHA GOT?, Harry’s antiques and collectibles radio call-in show, on Sunday mornings between 8:00 AM and 10:00 AM Eastern Time. If you cannot find it on a station in your area, WHATCHA GOT? streams live and is archived on the Internet at www.gcnlive.com.
SELL, KEEP OR TOSS? HOW TO DOWNSIZE A HOME, SETTLE AN ESTATE, AND APPRAISE PERSONAL PROPERTY (House of Collectibles, an imprint of the Random House Information Group, $17.99), Harry’s latest book, is available at your favorite bookstore and via www.harryrinker.com.