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Ad Rates / Articles / Classified Ads / Editorial / Home / Links / Showtime   Auction premiums get mixed reviews   List John Norris Next   Auction premiums way of doing business since 1975   By John Norris In tough economic times, the last thing auction goers want to hear is "buyer's premium," but they are hearing it more often than ever across North America.   Implementing a buyer's premium, which is tacked onto each bill of sale, has been an auction business decision since 1975 and today imposed premiums range from a few percentage points to 20-plus.   For example, Toronto's five corporate auction firms charge the following: Waddington's, 20%; Joyner Canadian Fine Art, 18%; Heffel Fine Art, 17%; Bonhams, 20% on the first $500,000, and 12% on the excess of $500,000; Sotheby's, 20% up to and including $50,000, and 15% of any amount in excess of $50,000.   Kilshaw's Auctioneers in Victoria, B.C., charges a 15% premium, which added $12,000 to the $80,000 selling price of an unframed oil portrait on canvas of Tsar Alexander III of Russia, and added $30,000 to the final $200,000 selling price for a gilt framed oil on canvas by A. (Albert) Bierstadt.   Smaller Ontario firms, in some cases, charge considerably less: John Simpson of Simpson Sporting Auctions in Creemore, currently charges 10%, as does Tim Potter of Odessa, whereas Rob Rusland of Rusland's in Peterborough charges only 5% - but 10% on "special" auctions.   Auctioneers cite the increasing costs of doing business, including credit card company fees, staff wages, advertising, developing and maintaining Internet websites, office supplies, fuel costs etc. John Simpson was among the earliest of the country auctions in Ontario to begin using a premium on a regular basis for only consignment-type auctions.   In the mid '90s, he was charging 5% for his specialty auctions, such as his biannual Canadiana or firearms auctions, which took a lot more work on sale preparation, and required higher advertising and staffing costs.   However, in 2000, he started charging a premium for all consignment auctions and in 2004 raised his premium to 10% because of "the increasing high costs of doing business."   "First, we had previously absorbed the credit card charges and usage costs of about 3.5%," Simpson tells the Wayback Times. "But the increased use of credit cards by purchasers, which sometimes accounted for as much as 90% of an auction's receipts, could no longer be ignored.   "Second, the increased use of the Internet for advertising, including the building and maintenance of a website to remain competitive in the industry, in turn raised expenses."   For a busy auctioneer, this could mean adding another full-time employee to pay. In addition, increases in the cost of normal advertising, such as newspapers, magazines, mailing, yellow pages, etc. cut substantially into any profits in the business.   "Third," says Simpson, "general increases in many of the costs of doing business, such as insurance, employee wages, health care, hydro, vehicles, etc. meant extra revenue had to be generated somewhere for the business to survive.   "Fourth, consignors were already squawking at the 20% or 25% seller's commissions. Due to increased competition, rate cutting, and Internet auctions sites such as eBay, commissions could not be raised enough to compensate for the increased business costs.   "Fifth, purchasers were often demanding more and better service in the form of payment conveniences, such as credit card, guarantees of authenticity and condition (a carryover from eBay), delivery and storage, provenance, shipping, etc., all resulting in higher costs to the auctioneer."   Initial reaction from buyers to Simpson's premium was not met with "outrage," as had first greeted Christie's in New York when it introduced a premium 30 years ago, but with "some complaints, particularly among the re-sellers.   "Some of them felt the premium detracted from the hammer price of their consigned items, because, in their minds, the bidders would stop 10% short of the ultimate bid. However, auction association studies have shown that generally any amount up to 10% premium has little, if any, effect on the final bid outcome."   Gradually, Simpson's bidders began to understand that costs had to be covered and could no longer be carried by the auctioneer. Perhaps, they deduced sympathetically, 5% was not unreasonable, given the 10%-25% charged in some city firms.   Ironically, over time, an increase even to 10% became "easier to swallow" and was deemed "more in line with the increased cost of doing business in today's economic climate."   Simpson says he expects more auctioneers will be using the premium in the future and anticipates the premium and consignor's commissions will increase somewhat due to rising costs and a decrease in auction prices, particularly for antiques and collectibles.   In Peterborough, Rob Rusland said he supports Simpson's charging the premium.   "We started it four years ago to offset the costs of running an auction. If you look at retail stores operating today, when their costs go up to pay for heating, labor, ads, etc., they raise the price of their products to offset this. However, in the auction business, we can't raise our product price, so a premium is an alternative solution.   "It really hasn't discouraged bidders, as they know they have the option of bidding a bit less, if they wish. But with items selling less today than they used to, the bidders don't even worry about it."   Rusland says comments have included: "Why would bidders not bid just because of a premium, when there is an opportunity to buy something they're looking for, and can still name the total price they want to pay?"   "I don't plan on raising our premium in the near future, but would speculate you won't find many auctions without them over the next few years."   Last October, auctioneers Andrea Zeifman and Andrew Wilkens of A. H. Wilkens Auctions in Toronto, reacted to high costs by raising their premium from 15% to 17%.   "We felt it necessary," says Zeifman. "The first reason being the high cost of running a business in downtown Toronto. The second reason was to try to keep our sellers' costs in line.   "We have tried to keep extra expenses for them to a minimum. At this point in time, we are doing our best to keep the premium at 17%. Most of our bidders understand this is the cost of doing business at auction. We rarely get negative feedback."   "We're moving slowly," says Wilkens, suggesting another move upwards is possible, if not inevitable.   On the other hand, Don Corneil, an auctioneer in Little Britain since 1975, is not a fan of buyer's premiums on ethical grounds.   "I think 13% HST, plus a 10% premium, add up to an almost one-quarter more than the final price for an article," says Don. "It's unfair to the buyer. I hope I will never have to use it in the future."   While he and his son, Greg, did introduce a 3% premium in January, it is only on credit card use to defer the cost of rising credit card fees charged by the banks.   Auction buyers who pay their bills with a cheque, debit or cash do not pay any premium.   The voices of anti-premium buyers have been heard across North America. Anna Marie Hicks, a member of AuctionZip.com, equates the premium to a bar's cover charge.   "Why should I have to pay for the opportunity to spend my money?" she asks. "Whatever happened to the seller bearing the cost of selling? Would you shop at a store that charged you to park, and then charged you to get in the front door?"   Stuart MacLaren, editor of Britain's Government Auction News, notes premiums are kept by the auction houses.   "You are paying an additional fee to the auction house for the privilege of having bought from them. It's "purely a tax on your spending, and auction houses charge it because they can, and because it makes them a lot of money."   Meanwhile, a number of American auctioneers are offering alternatives to premiums set in stone.   Lyn Liechty of Adrian, Michigan, doesn't charge a premium.   "What I do charge is on absentee bids . . . a service fee. I hire a person to represent and bid for the absentee bidder. I collect this service fee and then pay it directly to the staff member."   Granny's Antique Auction in Clearwater, Florida, charges 13%, but gives a 3% discount to bidders paying by cash or cheque, a way of avoiding credit card fees. Similarly, Toni Wilkinson of Dora, Florida, forced to raise her premium from 10% to 13%, now offers the same 3% discount.   Hake's in York, Pa., charges 15%, but gives a 2% discount for cheques or money orders.   And then there is Al Cardamone of Mooney Auction Service in East Durham, N.Y.   Cardamone offers a 0% premium to active buyers who open a "prepay" account with a minimum $1,000 deposit to help Mooney's cash flow, writes David Hewett in a Maine Antique Digest article. Depositors also get a $7 credit at the snack bar.   However auctions do business, it is up to bidders to research auction websites before attending sales to determine if there are premiums being added to the sale price. Websites that do not clearly state premiums or no premiums should be suspect. It is the equivalent to inspecting a dealer's booth full of merchandise with no price tags.   A final recourse, of course, is to not attend auctions where a premium is charged. It has proven very popular with the most vociferous of dissenters. Return to top of page   This Is Livin' Publishing © 2011 581 8th Line West, RR1 Hastings, ON, K0L 1Y0 Phone/Fax: 705-696-1833   webmaster