Back in November 2006 I wrote a piece titled “Rising Auction House Fees. What’s Behind This? This Answer May Surprise You.” I had not planned to do a follow up on this, but based on reader feedback and an evolving dynamic and the economics of this industry, I decided it might be worthwhile. I will ask for your patience as I set the stage for the points I am trying to make.
Over the years I have read various posts and blogs talking about “all the authenticators” and a variety of topics associated with them. While I have always felt that individuals making these comments should qualify them with respect to who they are talking about, (and yes I mean by name) some comments that I have found particularly interesting are the ones that “authenticators either cater to auction houses” or “they never reject stuff from auction houses because that is how they make their money.” I can’t speak for other individuals or organizations, but these have never been forcing functions for MEARS.
When MEARS was established, building on much of the work done as SCDA, we did auction work on a regular basis for 8-10 houses. After the first year as MEARS, we saw this drop to almost half. These decisions where made by both MEARS and the auction houses themselves. A large factor for a number of the houses that dropped MEARS on a contractual basis was centered on our pricing. I discussed this at some length back in November so I won’t rehash that here. The point being is that if MEARS was as wedded to auction houses as many would have led you to believe, we would have given in to the requests to go back to either the old day rate or deeply discounted pricing structure to maintain their business. MEARS did neither.
The second year for MEARS showed:
1. A Decrease in the volume of auction house work.
2. An Increase in retail submissions, many being individual high-end pieces from auction houses.
3. A steady state for subscriptions to MEARS On Line.
What this showed us that collectors saw the value in what we where doing, even if a not recognized fully by a segment of the industry (an auction house). Another aspect of the way MEARS has operated (and still is alone in this respect as a company/individual) is that we disclosed what pieces where consigned by our employees. While it may seem like an obvious statement to make at this time, it means that MEARS employees where providing product to auction houses, and in this we are not alone in the world of those offering opinions. What came with this product where a couple of things:
1. The MEARS Buyers Protection Program.
2. We could not charge the auction house for the opinion as I have always felt it a conflict of interest to provide a product and then force someone to pay for that which you did on a voluntary basis.
Now consider all of this within the context of MEARS in 2007 and the new sales section on MEARS On Line. MEARS Auction House work is at an all time low with respect to contract holders. To off-set these losses in revenues for Dave and Troy, sales where added to generate income. I am very happy to say that this is working out rather well. This brings me to the point of interest for the story with respect to our relationship with the auction house segment of the industry. A comment was recently made to MEARS that “we (auction house individual) are not too thrilled that you guys are buying and selling.” While I don’t see this dynamic changing for MEARS, I can understand the level of frustration.
– Three years ago this segment (and a large segment) of the industry was getting what they felt was a valuable service for a great price. Items were still being consigned.
– Two Years ago, this service was both improved and the cost went up based on a percentage of volume. Items were still being consigned.
– One year ago, service continued to improve, no discounts where given for volume. Items were still being consigned.
– Today, costs have increased above the retail rate for non-contract holders and consignments have practically ended.
A driving force for Dave and Troy choosing to re-enter “buying and selling” in a big way was provided by the auction house segment of the industry. In choosing to create this change within the economics for MEARS by foregoing our services based on the impact on their bottom line, Dave and Troy also made a business decision. While I am not questioning the decisions made by some in the auction house segment, I do have to question the validity of their complaints. In retrospect, had MEARS not met such resistance to what I felt and advocated were reasonable fees for the totality of what the service entails, the sales venture may never have been launched.
Now that Dave and Troy are once again actively buying/selling and have an established and successful means to market and sell their own items, what is the economic benefit of consigning items for auction? Consider that they auction house dynamic as it largely exists, charges both a fee to the consigner and the buyer. There is nothing wrong with this since they have to cover the expense associated with marketing and selling the item. Larger organizations have payroll and publication considerations that have to be factored in. Additionally, they need to establish a fee schedule that makes the whole venture profitable. Again, nothing wrong with this expect when the justification is authentication fees as I addressed in November.
For the dynamic that has been created in the sales segment of MEARS On Line, Troy and Dave can now operate without paying any sort of consignment costs. In addition, buyers are not charged any sort of “hammer fee” when they make the purchase, and this saves them money. In addition, with these purchases they are also getting a MEARS evaluation and coverage under the MEARS Buyers Protection Program. These are two things that where once benefits only enjoyed by the auction houses.
After the end of the 1965 Major League Baseball season, my beloved Cincinnati Reds dealt Frank Robinson to the Baltimore Orioles for pitcher Milt Pappas. The Reds made a business decision as Robinson was an “old thirty” and they did not see the value of his services. Frank went to Baltimore and won both the AL MVP and the Triple Crown. In 1970 when the Reds faced the Orioles in the World Series, Robinson hit .275, scoring 5 runs, 6 RBI’s and hit two home runs, one homer in the final game that helped to clinch the title. Frank Robinson reacted in a very positive manner to a set of economic circumstances that a person he used to work for had placed him in. Some forty years later, Dave and Troy have found themselves in a somewhat similar set of circumstances. In this respect baseball and the economics of business share something in common…You can’t be expected to take it easy on the old team.
MEARS Auth, LLC
LTC MEARS Auth, LLC can be reached for questions or comments about this article at:
LTC MEARS Auth, LLC
14218 Roland Court
Woodbridge, VA 22193