REA increasing their BP and making other changes
 

From the REA newsletter email I received:

Later this summer, we will roll out changes to the closing times and procedures for auctions in an effort to end auctions earlier, a practice we pioneered in 2016. More specifics will be forthcoming, but we are confident this will result in the same spirited bidding on a quicker basis while still allowing lots to remain open for as long as needed in the presence of competitive bidding. Additionally, effective September 1, 2025, the Buyer’s Premium for auction items will be 23%. There will continue to be no Buyer’s Premium on Marketplace purchases, and our introductory commission of 5% on any successful sale will continue through the end of the year.

Really sorry to hear that. I thought they were one of the good guys. Just because you can doesn't mean you should.

Why? They are a profitable company. Rob Lifson once cut the BP from 20% to 19%.

Can somebody explain to me the reasoning behind adding a BP vs taking a total amount of a final hammer price?

Is there a known psychology that people will bid higher with BP's vs total price

Curious how you know their current financial state. Care to provide a source for your claim?

It actually has nothing to do with the bids or bidders, and is about consignors. Consignors expect to pay little or no commission on high end items, and at the top of the market, expect a piece of the buyer premium as well. Buyer premium is how auctions maintain their profit margin while competing aggressively for high end consignments.

They're a business that's trying to make money, and usually that means as much as possible. I don't consider them to be bad guys for that.

It started with Christie's and Sotheby's in the art auction world (I forget which one but this is what we were taught in auction school) using BP as a tool to be able to say to consignors "Hey we're only charging you X% the other guy is charging Y%. Of course when you add X% and the newfangled BP it equaled, or even surpassed Y%, but when you're the first to do something it works. Of course you also get copied, and the other company followed suit pretty quickly because they got tired of hearing "The other company only charges X%"

It's pretty hard to get away from once a the market starts to do it. This may well actually be to get them competitive again with Goldin and Heritage on the CONSIGNMENT end of things, because, as we all know, BP SHOULDN'T make a difference in the money an auction makes as people SHOULD account for it in their bidding.

How would a higher buyers premium help get consignments? The way I understand buyers premium is the higher it is the less cash the consignor gets with everything else being even.

When they dropped free shipping, I significantly reduced my bidding. Then monthly auctions. Meh OK I'll have a look. At some point, its just another auction house, no longer anything special

Well it's in the first part of my response that you quoted but let me give an example from the original scenario, AND an example from today that is 100% hypothetical.

_______________________________

In the year 1975 BBP (Before Buyer's Premium), Sotheby's and Christies were battling for supremacy in the art world. To do that you need to get better consignments than your rival, and the best way to do that is to charge your consignor less commission, everything else being fairly equal.

Well you can only do that so far and then you're not profitable, so now we're at a stalemate. Let's say that happened around 15% commission.

Then some genius at Christie's comes up with the genius idea of a Buyer's premium. "Hey boss, let's hit the BUYERS up for 10%, and then even if we go down to 5% seller's commission we're still making our 15% nut, and we get to tell the sellers were charging them LESS than those bastards over at Sotheby's!"

Being the first adopter, this worked like a charm and Sotheby's eventually figured out why they were getting spanked on the consignment end, and in the year 1 ABP (After Buyer's Premium) Sotheby's followed suit and things equaled out again.

Of course over the years periodically one of them would raise their BP rate so they could charge their sellers even less, and the other one would quickly follow suit.

Forget that thinking people realize it doesn't matter who it's coming from they're, in essence, paying the same rate they always did. It works on the consignment end. Trust me I've tried to explain it numerous times to potential consignors and they stop listening once they find out you're "charging them more."

This was even MORE pronounced when BP was a new concept altogether.

__________________________________________________ ___

Now for the modern hypothetical.

Fast forward to the year 49ABP and Goldin announces a new higher BP of 22.5%. Everyone scoffs and says "We'll never buy from them again!" and Goldin promptly goes out of business.

Oh, what's that you say? That didn't happen? Right because now Goldin is telling consignors of the BEST stuff that he can give them 115% instead of 110% that is customary.

Suddenly they're getting more of the absolute top end stuff. Our friends at REA realize that they're seeing less of the top tier items because they're still at 110% to the top consignors. So, similarly to the original example, they are almost forced to follow suit to remain competitive.

__________________________________________________ ___

Please, ignore the fact that who pays what is basically nonsense if the total paid is ultimately the same. An entire industry doesn't do something just for grins and giggles, they do it because it works.

We have had this discussions a lot. My POV on this is that I do not care as a bidder what the house charges me. I factor that into my bid. If others do not do this then I will likely not be winning as much and those bidders might find they are paying more.

One thing that is now a real factor is the sales tax we pay at almost all houses. Some buyers are sales tax exempt but most are not and that sales tax, while not kept by the house, is part of what we pay for the items we win. On graded cards, the sales tax is not included in the data that is collected by all of these apps and websites that give us sales info.

Exactly!
If you have a price you are willing to pay, factor in buyers premium, tax & shipping

I am not sure what the number is but at some point the % will be to high that either the bidder will not be willing to pay it and go elsewhere or do without that item or the consignor will find another format/platform to sell it as they are getting a smaller piece of the pie(except perhaps a small portion that can negotiate for top cards). Because if you are able to sell elsewhere and pocket more of the money (that you would have given up to the auction house then their services may not be worth it)

I prefer private sales and/or trades but auction houses for now still get the bulk of the business because they currently get the vast majority of cards most of us desire

As a buyer, I bid as long as :
(Bid + BP + CA tax + shipping) <= (what the item is worth to me)

I don't really care what an auction house charges, it could be 1000% and it wouldn't bother me.

In theory, the levels of BP shouldn't matter to bidders. They can just adjust their bids accordingly. However, in practice I have found that it does because 1. my cut off point for bidding is not a hard and fast number, and 2. If the final bid is below my cutoff with a 23% premium then I have paid 3.4% more (add 10.25% tax bite) than I otherwise would have with a 20% buyers premium.
Will this stop me from bidding in REA (or Goldin or HA)? If I "have to have an item" --no. However, it will dissuade me from bidding on whims.

The shipping is what kills me in the past few years compared to years past (not REA for me, btw).

Some auction houses are good about steady or expected shipping rates and some I have no idea what shipping/insurance/packing/etc metrics they're using to come up with surprisingly huge numbers.

Then there's the sometimes surprising multiple-items = multiple-packages = multiple-shipping-fees...sometimes understandable, sometimes questionable.

I’m sure the others will follow suit. 25 percent can’t be far behind :D

Geez when will enough be enough lol

I noticed heritages non sport auction is 25%

Amen!

At some level the ability of the auction houses to deliver adequate prices will be compromised. I think the market softening/unpredictability of the last couple years has made it much more challenging to decide which items are best suited to auction with one of the larger houses as opposed to the alternatives.

I have never sold thru an auction house (although I have been thinking about culling my herd, haha), but when I do the higher the BP the better chance I'm going to want some of it, and I would bet that super high end items are already getting a cut.

Hi Doug! The super high end items are in some cases getting 3/4 or more of the BP. Even four figure items are getting close to half the BP. Of course, this is all negotiable and the sheep will get fleeced.

Ya, his source is 'No Shit Sherlock'. What's yours?

Basically I get to tell people that at our 17.5% it's like they're already getting 5% of the BP because we don't charge it in the first place.

Like almost everything else I try to explain it gets a lot of blank stares. That's why the simplicity of telling the consignors you're charging them less, or giving them more of the BP, is so much more effective, as illustrated in my examples above.

As a data scientist, I thought you might want actual data to support an argument, but I guess not. That's all I'm looking for someone to provide since I personally don't know how REA is doing as a business. I've seen local businesses that appear to be doing well close so just because a business appears to be successful, their actual financial situation may be different.

Maybe someone else asked this, but is Huggins and Scott (REA's sister) also increasing their BP?

If you really want the card(s), sometimes you just gotta say WTF and not worry about the BP, tax, shipping, etc,...

Nobody buys cards anymore...they're too expensive ;)

I find all the discussion about BP a lot like going to your cell phone provider’s store to get a new phone or change your plan…ridiculously confusing! They are literally in the business of running rings around you with the numbers. It’s what they are paid to do.
As mentioned by many previously, they can charge whatever they want for BP, it’s not going to change what I’m willing to pay in the end. I have a figure in mind, I make my bids and and mentally add the % to my bid, and when it’s over my bid, see ya next time.

Now here’s what I DON’T understand. Why are reputable companies who sell using ebay (Probstein, 4 Corners), not viewed as a better option for a consigner than large auction houses? The major ones using eBay offer 95% of the sale price on items selling over $1000. So do the math…

$5000 card through auction house
$4000 bid + 23%=$4920.Result to consigners is $4K IF…IF they have 0% consignment fee. That’s best case scenario.

$5000 card on eBay through Probstein, 4 Corners, etc
$4920 winning bid (to keep all things equal). Result to consigner after 5% fee=$4674.
This seems like a No-Brainer for a consigner. What am I missing? I realize when we get into 5 digit, 6 digit, and 7 digit cards, no one will throw them up on eBay and hope for the best. But for the $1000-$10000 cards, I don’t understand why it’s not considered as an option by more consigners.

Doesn’t eBay charge 13%?

If you consign through a high volume seller like Probstein, 4 Corners, Greg Morris, etc, they get completely different rates than the average guy. Check their rates on their websites. Generally anything over $1000 will net you 95%. And you get NONE of the hassle. I’ve had mostly good success through this route.
Full disclosure, I don’t work for any of them, just an impartial observation.

Ah, makes sense.

Would have zero problem selling with probstein in terms of the results he seems to get. My fear is I’ve heard you ship items to a place in Jersey, don’t really get communication from him about if they’re received and when they’re being put up. I tend to doubt this is true. Anyone who has actually used him?

Rick Probstein, in a YouTube interview a year or two ago, mentioned something that stuck with me. His business model involves a slimmer margin than traditional auction houses; however, he makes up for this through high volume.

We've all seen this in other sectors. Wal-Mart comes immediately to mind. It worked for Sam Walton. Apparently, it also works for Rick Probstein.

I use him , frequently.
Never an issue with payment, and almost always get good results.
Contacted him one time about a mislabeled T206 back, and he personally called me to discuss options.
I really like the % you net selling with him and do not have to deal with the eBay azzhats!

As we do not have the complete financial records to account every penny of the companies finances, it seems more reasonable to think REA runs a profit than that REA runs a loss at this point in their business, at or near the top of a very profitable sector with auction prices exploding the last few years. Does anybody genuinely, seriously believe that REA is actively losing money?

Those catalog are nizzzzzzze but, come on! They are a gold mine

It's certainly easy to say they must be making a lot of money because of what prices have done over the past few years. However, it also seems strange they would raise their BP just to make more when doing so is also likely to upset a (probably) large percentage of their customers. Maybe it's for the reason that Scott provided in an earlier post or maybe it's for something else. Without knowing their overall financial situation, it's hard to know why they would make this change.

I doubt they are losing money but maybe not making as much as during the big boom. So taking a bigger share to keep up the bigger profit margin. It really doesn't matter how they increase the rates with simple math it always means the consigner gets less money and the AH gets more. The whole breaking it up into sellers premiums and buyers premium is just a way to make many people not understand that in the end they will be receiving less money for their consignment. As a buyer it is really meaningless how they do it.

Since the commission and the buyer’s premium both are paid to the auctioneer from the proceeds of the sale, they are functionally the same, so why split them? If you’ve read my Substack for a while you know my answer: to manipulate people. It is a jazz hands misdirect. Labeling 1/3 of the AH take as a “commission” and the other 2/3 as a “buyer’s premium” tends to suggest that they are somehow different and that the consignor only pays the “commission” because the buyer pays the “buyer’s premium”. It's salesmanship: "I tell you what: I am going to make you a special deal and completely waive the commission on your consignment." Nevermind the 20%, er 23%, Biuyer's Premium. That’s a bullshit framing, but a significant percentage of the public (especially the novices or hon-collectors) falls for it when consigning. They don't have the knowledge or the stomach to ask for a piece of the BP.

Something I am going to cover in more detail in another column is the follow-on effect of the confusion that the split causes to some percentage of bidders.

I get that the idea is that the higher the BP, the more of it you can offer back to consignors. However, consignors also realize that getting back 5% or 10% of 23% is not the same as 20%. If one auction house offers you 10% of 20 and the other offers 10% of 23, you go with the first, all things being equal. So now you have to offer 12% or 13% to be competitive. How does this help in the end?

One last time. They are not raising their BP to make more money in the direct sense. As numerous people point out the BP shouldn't have any impact on the money generated by a lot, just shift things around.

They are raising the BP to better secure consignments. If it makes a few extra bucks because people aren't smart enough to incorporate the information into their bids, that's a only a side bonus.

I explained the origins and the reasons it still works in detail earlier in the thread.

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Definitely true.

Another piece that I find interesting is the behind the scenes negation between the seller and AH about getting a piece of that BP. For example, if you were getting 50 percent of the 20 percent before, do you now ask for 50 percent of the 23 percent?

Absolutely. Or more.

I do think there might be an opportunity for ebay sellers to capitalize on this.

Or lager percentage in cash advance....idk I bet all kind of negations happen if the consigner has the material a auction house really wants to showcase. Who knows people always want it both ways...sometimes it's the diamond sometimes the stone...idk

If you were getting 10% before to be equivalent you should be getting 13% now. I wonder if REA is passing this along to consignors. My guess is no. This is why consignors should negotiate not what amounted of the BP they get back but rather what amount of the BP that the auction house keeps.

With all due respect, unless I'm missing something, your comparison doesn't make sense.

With an auction house, the buyer's premium has to be factored in after the hammer price.
A card that sells for $5,000.00 will net the consignor $5,000.00 if there is no consignment fee as you stated. The buyer pays the $5,000.00 plus 23% for a total cost of $6,150.00 to the buyer.

If the card sells for $4,000.00 before the buyer's fee, like in your auction house example, it's not a $5,000.00 card - it's a $4,000.00 card, in which the consignor with no fee gets $4,000.00.

The problem is that you compared a $4,000.00 winning bid (auction house) to a $4,920 winning bid (on eBay through Probstein, 4 Corners, etc).

I'm watching inflation going on all around me with virtually everything I buy. I just constantly keep adjusting what I'm willing to pay, realizing the numbers across the board trend upwards. This is just another example.

The assumption in the example you are questioning is that the bidder is taking the BP into consideration when placing a bid so that the selling price with the BP equals the selling price on eBay. Of course, not all bidders do this, but many on this board claim they do (or at least try to).

Which is amusing as every time ebay does something that pisses off the rank and file we get consignments from people who are sick of Ebay.

Obviously you're talking about the power guys like Probstein, but Ebay is constantly abusing their smaller sellers, much to our benefit.

I believe you are confused because the real winning bid through the AH isn't $4000. It is the total of the actual price the winner pays including the BP.

I see it this way if the consignor isn't also hit with a sellers fee from AH.
Card sells for $5K on eBay so after fees(5%) seller gets $4750. 5% of $5K is $250.
Card sells for $5K at AH. Seller gets $4065 after the AH takes the BP(23%) from the real sale price($5K) the buyer paid. The $4065 is the "winning"(LOL) bid before the 23% buyers premium is added to the real selling price the buyer paid.

If I am wrong someone please post the math. To be clear I do not care how the AH tries to add confusing fees to get more cash from the consignor or trick buyers into bidding more than they thought. As long as I know the numbers up front I am good.

The buyer's premium isn't SUBTRACTED from the winning bid, it's ADDED.
So, if the bid total is $5,000.00 at auction end, the buyer's premium of 23% is ADDED to this total, not SUBTRACTED as in your example. So the buyer would pay a total of $6,150.00 as I previously mentioned.

The consignor - if paying no fees as was the original example given - receives $5000.00, which was the total of bidding at auction end.

Think about it logically, if the winning bid at the end of the auction is $5,000.00, and the consignor pays 0% commission, how could he possible end up with $4,000.00, as in the example of the original poster. 0 is 0 no?? not 20% ??

So again, the buyer's premium is ADDED to the final hammer price, it is not taken from it.

Fair enough. But what I questioned was the argument that the seller would get less with an auction house than Ebay as the original poster stated - which is wrong. 0% commission means the consignor gets 100% of the winning bid total. He tried to state that with a $5,000.00 winning bid, the consignor would only get $4,000.00 despite a 0% commission.

The 0% commission referred to is saying that the seller is not paying any commission to the auction house so they keep whatever the high bid is. However, the argument that was made is that when an auction house has a 23% BP, if the high bid is $4000 then the final selling price is really $4920, but the seller only gets $4000 and the auction house keeps $920.

On eBay, if a consignment company charges 5% of the high bid, if the high bid is $4920 (same as the selling price with the auction house including the BP), then the seller gets $4674 (95% of $4920) and the consignment company gets $246 (5% of $4920).

In the 2 cases above, the card is selling for $4920. One is a high bid plus BP (auction house) while the other is just a high bid (consignment house on eBay). When comparing the above outcomes, the seller is getting $4674 from the consignment company selling the card on eBay versus $4000 from the auction house.

I get how it works. Take my example and actually do the math. My example shows the buyer paying the exact $5k total for their purchase in both examples. OK my math is actually a few pennies off because in my example the buyer at the AH really only paid $4999.95 for the card the consignor will receive $4065 for.

Seriously please show me the math when the real total selling price the buyer pays is $5K.

Ebay is unlikely to bring as much as top AHs on most items. There is no OT bidding on Ebay so an under bidder who is willing to pay more has no opportunity unless they put in a ceiling bid in advance of the close. The option of jumping back in after the initial bidding is closed often is the big difference in AHs. I see plenty of completed auctions on EBay that fall well under market even with the big guys previously mentioned. It is more of a crap shoot IMO.

These are not equal comparisons. Both you and Ben are comparing a closing bid of $4,000.00 with the auction house, to a closing bid of $4,920 on Ebay. Honestly, can you not see the difference??

IF the closing bid for both the auction house and eBay is $4,920.00, which is all that matters in making a fair comparison, the seller with the auction house and a 0% commission fee gets $4,920. The eBay seller pays 5% commission which is $246.00, for a net total of $4,674.00 to the seller.

You're comparing two DIFFERENT high bid totals. You don't add the buyer's premium INTO the high bid, it's added ON TOP of the high bid. Of course the buyer will get more for a card that sells for a HIGH BID of $4,920 on eBay, compared to a card that sells for a HIGH BID of $4,000.00 at an auction house. I don't know how to better spell it out.

Yes, your example shows the BUYERS paying the same price. So what?? What the seller gets is in relation to the FINAL HIGH BID, not what the buyer's FINAL price is. Again, the buyer's commission price is ADDED to the HIGH BID with an auction house.

Seriously Ben, you're combining the winning bid with the buyer's fee as opposed to basing what the consignor gets which is based on the winning bid amount. The winning bid amount determines what the consignor gets, the buyer's fees are ADDITIONAL to that.

The assumption being made is that the selling price is the same because the buyer is including the BP being added on when determining what their high bid will be. If that's the case, then the example is correct. Yes, the high bids are different, but what the buyer pays isn't.

If the selling prices are different (which is what happens if the actual high bids are the same), then yes, the consigner will do better with the auction house, but since many people say they include the BP when deciding what their high bid will be, it's more likely that the high bid will be lower if there's a BP added on top of it.

Thanks for the clarification on your part. I don't disagree with this at all. The original argument made was why would a consignor sell with an auction house as opposed to eBay, with the fees mentioned included 0% for the auction house, and 5% with eBay, yet he claimed the consignor would net more with eBay - which is wrong. That was my whole point. It is irrelevant what the seller pays in the end. IF the high bids are the same in both scenarios, the consignor would net more with the auction house. That's all I was stating.

Oh I am sure it quite the discussion between consignor and AH :D

A prominent guy on a FB group posted that he will not buy from REA anymore with this news. I am sure he won't.... until a huge card appears at the next REA auction. Then all bets are off :rolleyes:

The complaining will end soon enough and they will be back to buying from REA. The real winner is REA they will still get tons of bidders and consigners.

Scott, besides the fact that the antecedents for having a BP are totally irrelevant to today's business, I do not buy any explanation for the commission-BP structure other than it makes the auctioneer more money. If I 'win' a card at REA now, I pay REA the hammer price plus 23%. 123% of the hammer price is the true price of the card. On a $1,000 bid the auction house receives $1,230 from the winning bidder. How the proceeds are chopped up does not change that math. When a middleman (and auctioneers are middlemen between buyer and seller) has two choices of how to do things, a simple one and a more complex one, there is no reason to use the complicated one, other than in the belief that it makes more money for the middleman to do it that way. I've had many negotiations with auctioneers big and small, and they all use the bifurcated structure because they all 'sell' a low or zero commission knowing that the buyer's premium is still going to them.

I am not begrudging an auctioneer the right to make a living, I am expressing a preference for simply admitting that the commission and buyer's premium are one and the same, and dropping the pretense.

Everything is negotiable!
 

Everything is negotiable! I have done auctions for years going back to my Teletrade days when I had numerous employees, and currently with
www.AllSportsAuctions.com
where I am the only employee and have NO overhead!
When you run the company, you can do anything you want!
In my auctions consignors get the best of both worlds---I get very retail prices and I limit the consignor fees to something that makes sense for all parties.
Call me and see what I can do!
Thanks, Andy Sandler (914) 388-2940

Lol.

It was readily admitted that the purpose is to make the auction house more money and bring in more consignments. That's the goal of a for-profit business after all. Of course the auction house wants the more complex situation. They can spread the costs/fees out in various ways to keep various cutomers happy. They have to please buyers so they spend more. And they have to please consigners so they keep getting good items that draw buyers to their auctions. That's common sense and it isn't disputed by the auction house as the reasons for buyer's premiums. So I'm not sure who you are arguing with. I haven't seen anyone disagree with that. In fact, the one auctioneer posting said as much.

While you are correct that "how the proceeds are chopped up doesn't change the math" of a buyer's total cost being the hammer price, plus the BP. Your argument seems to ignore the fact that without the BP, the hammer price would be 123% of what it is when there is a 23% BP. In your scenario, the buyer wants to spend $1230 on the card. It makes no difference if there is zero BP and he bids $1230, or there is a 23% BP and he bids $1000. It's incorrect to suggest the bids would be the same with or without the BP. The buyer who doesn't factor the BP into his bids is a small minority.

For the sake of conversation, let's assume extremes to help understand what happens in normal ranges.

If the buyers premium was zero, I believe the buyer would spend the same bottom line. And the consignor would get more because the hammer would be higher.

If the buyers premium were 50%, I believe the buyer would still spend the same bottom line. And the consignor would get less because the hammer would be lower.

So, as the buyers premium increases, there is probably going to be no affect on what the buyer spends. However, the consignor would get less as BP increases.

In a roundabout way, the BP is actually a consignors fee.

I absolutely agree with this logic

But I don't think that's realistic. If the buyer's premium goes down, commissions have to go up to compensate the auctioneer. So I don't think the consignor will get more with a lower BP. The auction house will get theirs one way or another. This is just about shifting those things around in the best way to get the most buyers and sellers to use them. It all balances out in the end for the consignor.

Agree 100%

Don't know about the others, but Greg Morris is nowhere close to this.

Last I looked, it was $5 k minimum submission for consignment. And they take 25% of raw vintage consigned sales.

Greg Morris is similar on graded stuff, though.

25 percent of raw sales! Goodness.

Is that really much different from an AH? If there's a 20% BP and some seller commission (which is probably at least 5% if not more on lower priced items), then selling through an AH is costing at least 25% if not more.