Buyer’s Premiums and Hidden Charges: The auctioneers’ dirty little secrets.
I was recently called by a potential customer who asked why he should sell his wine at auction with Bid for Wine rather than one of the multi-national players with expensive London premises or some of the smaller ‘cheaper’ regional auctioneers (for clarity I should say that the descriptions are mine, not his).
I made several points:
-We’re wine specialists. People buy from us because we get quality stock, we ensure it’s in good condition and where necessary we offer photos as standard.
-We arrange delivery to buyers (or they can collect from our warehousing account in East London)! In many cases when you buy elsewhere you find you’ve won a few bottles and then are asked to pay £25-30 to get them repacked and sent down to you. In some cases this service isn’t even offered.
-We always have wines for sale – so if you need to sell next week we can probably sort it. No waiting several months for the next sale…
-Finally I pointed out that we don’t charge a buyer’s premium.
‘But that doesn’t affect me’ he said.
I told him I’d send him an email to explain why it did. In doing my research I came across a plethora of extra charges you might incur and I wanted to share the ‘auctioneers’ dirty little secrets’ with you via this post.
Many auctioneers entice buyers by offering really attractive discounts on their commission charges. If you’re told their commission is 15%, you can probably knock them down to 5% or sometimes even 0%. So how do they make any money?
Let’s make one basic assumption – for any given case of wine, people will have a fixed view of what it’s worth and won’t go above this. Unless it’s something really rare/unusual, this will usually be the price you can buy it from a wine merchant less a bit – reflecting the fact that wines are sold as seen whilst most merchants accept returns. We’ll call this the Buyer’s target price.
Let’s start with selling via Bid for Wine.
| Buyer’s target price | £300.00 | £1,200.00 |
| Hammer Price | £300.00 | £1200.00 |
| Commission (14% + VAT) | £50.40 | £201.60 |
| Listing Fee | £1.75 | £1.75 |
| Proceeds of Sale | £247.85 | £996.65 |
Here the bidder offers what they want to pay. We charge the seller our basic rate of commission of 14% + VAT (less if you sell your wine via a ‘direct listing’) and a listing fee of £1.75. That’s it.
Next let’s look at a generous competitor who doesn’t charge sellers any commission!
| Buyer’s target price | £300 | £1200 |
| Bid Price (target price less Buyer’s premium of 20%+VAT) | £228 | £984 |
| Proceeds of Sale | £228 | £984 |
In this case, anyone bidding has to discount target price by the value of the Buyer’s premium they’ll have to pay on top of the hammer price (the price at which the wine sells). Once this is taken into account, you’re still worse off than when selling via Bid for Wine!
Finally let’s look at a more typical scenario:
| Buyer’s target price | £300 | £1200 |
| Bid Price (target price less Buyer’s premium of 15%+VAT) | £246 | £984 |
| Commission – 15%+VAT (Min. £60 + VAT) | £174 | £806.88 |
| Storage/Insurance (1.5% + VAT) | £4.43 | £17.71 |
| Proceeds of Sale | £169.58 | £789.17 |
Here sellers are not only charged commission but this is set at a minimum cash sum. In addition, there’s a charge for storing and insuring your wine whilst it’s with them! I’ve not even touched on the amount you’ll be charged if a photo of your wine is included in the catalogue.
So in summary if you’re offered a discounted rate of commission always question why. Most likely you’ll still pay in one way or another – it’s just a question of how much…
| Buyer’s target price of £300 | Difference vs BfW | Buyer’s target price of £1200 | Difference vs BfW | |
| Proceeds from Bid for Wine | £247.85 | - | £996.65 | - |
| Proceeds where there’s only a buyer’s premium | £228 | -£19.85 | £984 | -£12.65 |
| Proceeds for a typical auction house | £169.57 | -£58.42 | £789.16 | -£194.83 |
