I have consigned one item for auction in all my years as a collector. This was in a recent MEARS Auction. MEARS has not taken many outside consignments, but I can say that all consigners have been paid promptly once secure funds have been provided. I talked with a long time hobbyist recently about the problems that American Memorabilia is having and how they hope to turn things around with respect to paying out consigners from previous auctions. Based on my writings about markets, he asked me what I thought about the plan AMI has on the table to get back in the black. While I am not too optimistic, I do wish them well, largely as a function of hoping that the consigners get paid out.

While creative in approach, I am not sure it will work as it requires that collectors who are already owed money, are willing to maintain a sense of trust and confidence that has already been severely stressed. The concept involves the collector retaining the item until it has been paid for and this does not sound too bad. However, if it is an item requiring authentication, then the collector has to arrange and coordinate this. The collector also appears responsible for providing the images and descriptions, things typically associated with the work or service provided by the auction house. I may not have their formula quite figured out, but what they appear to be looking to do is pay down the debt on monies owed out of current yields in consignment fees/buyer’s premiums and credit collectors with the amounts.

This seems a bid odd in that AMI is leveraging a current consignment fee to pay a past debt, when now more of the burden for getting the item consignment ready falls on the collector; A collector who is both owed money and now doing the bulk of the work. In essence, collectors are being charged for the time they are now spending to sell their own item. Since the money they were rightfully entitled to is now being seen by AMI as credit against their account, why would a collector do more work that only results in eliminating a debt that is not his to begin?

In my opinion, collectors are not getting much value in return for their efforts and continued support, but there is some potential financial upside. For example and an item that gets a high bid of $1,000:

High Bid: $1000

High Bid 15%:

Consignment Fee (normally paid to AMI) = $150

High Bid – 15%:

Your Normal consignment payment: $850

High Bid * 20%

Buyer’s Premium (normally paid to AMI): $200

High Bid + Buyer Premium + Consignment Fee: $1200 paid to consigner.

Buyer Premium +Consignment Fee: $350 paid to collector today to service past debt.

AMI is realizing $1200 on this item and passing it all on to the consigner. The upside is that in this instance, the collector would have made an additional $350.00 than in years past and allowed AMI to reduce their debt by this same amount. Per AMI’s guidance, it all boils down to “The additional money paid to you will be deducted from the money owed to you.” You, your time, and your items are the source of you having this debt settled.

In this example, an item selling at $1000, reduces the debt by $350. But what if the collector is owed $25,000 by AMI? AMI is willing to work for free (giving up both current consignment fee and Buyers Premium in order to reduce debt at a rate of 35% on the transaction. A few questions come to mind:

1. How long can AMI keep this up with zero cash flow on consigned items from these collectors?

2. What is the impact on the collector who is owed $25k? In this case, if this the only way they will get paid out, this collector will have to consign items that bring final bids of $70,000. ($25K x 3.5 – 20%) These final bids at $70,000 will result in a net payout of $87,500 required to meet both current obligations and service the previous debt.

What is not factored in to all of this is how much this costs the collector in having his money tied up at a zero % return over the time he is helping finance the AMI debt. While it is true he is making more on each sale than in years past, the end result is he is only getting the monies he is actually owed over a much longer period of time.

The collector is now getting more for the $1000 item than he did in past auctions, but he still remains integral in helping to resolve a debt he is owed. What happens if the collector chooses not to participate in this program? With cash flow on consignments being zero unless AMI can attract a solid number of first time consigners, how is the debt serviced for this collector? In the case of the collector who is owed $25k and does not wish to consign anything further, how successful does AMI need to be with new customers or those they don’t already owe money to. Remember AMI has to have some positive cash flow in order just to keep the lights on and you also have to consider that debts may not be limited to only consigners.

Assume they are only going to keep the consignment fee from new or non-debt owed consigners at 15% and they still are going to charge a 20% Buyers Premium. In order to service this debit of $25k, AMI needs to generate a sale with a legitimate final price of around $105,000.00.

Final Bid Price: $ 105,000.00

Buyers Premium at 20% = 126,000

Consignment Fee: $15,750.00

Consigner Payout: $89,250.00

I use the phrase legitimate final price as per the rules listed on the AMI website under:

9. Reserve Auctions:

“Unless explicitly stated otherwise by AMI, each Lot is being sold with reserve as a reserve auction. These terms are applicable to all reserve auctions. AMI and seller reserve the right to withdraw any property before and during the sale of such property. The seller also reserves the right to reject any and all bids for any reason. The reserve price may not be disclosed. All bids are raised in ten percent (10%) increments and AMI, at its sole and complete discretion, may reject a nominal bid advance. AMI reserves the right to place a bid on any Lot on behalf of the seller up to the amount of the reserve, if any. AMI will not specifically identify bids placed on behalf of the seller.”

I would ask you to consider both the previous pricing example of:

Final Bid Price: $ 105,000.00

Buyers Premium at 20% = 126,000

Consignment Fee: $15,750.00

Consigner Payout: $89,250.00

and the above bidding rules. In this case, with an auction house that is not functioning to service old debt, this same sale of $105,000 would have netted AMI $41,750. But what if this was the case of an item that did not meet a hidden reserve and never sold? Yet, in the past, you as collector looked at this type of sale as one of the factors that swayed you to consign your item to AMI to begin with and now you are left being owed money? As I see it, your only hope is that AMI can attract new consigners or retain those they have and don’t owe money to in sufficient numbers to get you paid out.

These are not questions that I am faced with as I have never consigned or bought anything from AMI, and I don’t see that changing. As I said, I wish AMI the best of luck, but I am skeptical that the current market conditions will advance the environment and draw the product they need to make this plan viable. For those who are owed money, I hope I am wrong.

As always, collect what you enjoy and enjoy what you collect.


For questions or comments on this article, please feel free to drop me a line at DaveGrob1@aol.com