P U B L I S H E R ' S N O T E S
Premiums on the Rise
Not long after the final hammer hit the block at Guyette & Schmidt’s blockbuster $4.3 million decoy auction in St. Charles, Illinois this past April, a subscriber approached me to discuss the over-the-top success of the sale and with some disgust said, “Can you believe they’re going to make us pay more,” referring to the announced increase in the buyer’s premium, from 10% to 15%, that will take effect at their upcoming auction in July.
Wondering how that would effect the other two major decoy auction houses, Ted Harmon’s Decoys Unlimited and Frank & Frank Sporting Collectibles, we checked to see if they were following suit. Jon Frank told me that he was “definitely” upping his buyer’s premium, already having reached a decision to initiate it at his October auction. Ted Harmon agreed that he was going to “make the change,” and that he would “probably do it this summer,” although he’s not yet cast that in stone.
So, at this time of already escalating prices and in the middle of a booming market are the auction houses getting greedy? Or are they simply getting in lockstep with other realities of the auction business. And will the change really “make us pay more.”
So we approached Gary Guyette to find out what brought about the change. As would be expected this decision more directly concerned the relationship between the auction house and the consignor. Gary told me there is “heavy competition” among auction houses for the best collections, and by changing the formula it would allow them to compete on a level field. Other auction houses that already charge 15% or more to the buyer have an advantage; they can charge the consignors less.
Jon Frank told us that the spiraling costs associated with running an auction house also led to their decision. But then again, he doesn’t hold $4 million auctions.
But will these changes really affect the bottom line? Will buyers pay a greater share, giving consignors a bigger piece of the pie? Not everybody thinks so.
“It’s a smokescreen,” Harmon insisted, and “buyers can do the math.” And according to Gary Guyette, “Jim Julia swears it makes no difference.” But according to Gary, “I think it must” make a difference. While acknowledging that some dealers and collectors are going to “count it to the dollar,” he said, “a lot of people don’t pay attention.”
Well count me as one of those collectors who “count it to the dollar,” not because of thriftiness, but I like to know what I’m spending. And I “can do the math.” Once you decide your bottom line, you simply adjust your bid accordingly.
I’d like to suggest that this change in buyer’s premium is basically a break even, but in all honesty it’s actually going to cost the consignors a bigger share of the pot. And by providing a psychological edge in negotiations with the consignor, it’ll give the auction houses a larger percentage of the gross than before. It’s the same “smokescreen” that Sotheby’s and Christie’s utilized years ago to such success.
You do the math. If the buyer and seller each contribute 10%, or the formula changes to 15% and 5%, that’s still 20% of the gross for the auction house. Those big consignors who they seduced with lower rates still get 80% of the gross, no change in net gain. But the little consignors, those who the auction house need not compete for, will realize a 5% reduction in their take, which drops to the bottom line of the auctioneer.
So yeah, we’re paying more for decoys. And you don’t need to be a mathmetician to figure that out, just check the prices realized in the three sales this spring. But it’s not an increased buyer’s premium that’s driving the prices, there’s simply more and more pressure and competition for the best examples. And if you want to blame higher premiums for the increase, go right ahead.