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The auction business, and the auctioneer business, is in an era of transition. Most point to this time in the auctioneering field as the most transformative in the history of the profession, dating back to at least 500 B.C.

What is changing in the auction business? Most suggest the Internet, and our ability as auctioneers to advertise to a worldwide market, and sell to a worldwide market. Yet, I would submit this change is minor when compared to a change many predict regarding reserve auctions.

A reserve auction allows sellers to withdraw property (personal or real) anytime before the auctioneer says, “Sold!” As well, sellers using this format can set minimum bids, and/or have final bids subject to their approval, and decline them if they are not acceptable.

In other words, in the reserve auction, the seller owns the property, and maintains all the rights of ownership unless he expressly accepts the final bid by the highest bidder; the seller can keep his item that was marketed to a worldwide marketplace — for any reason whatsoever.

Many are predicting that this type of auction will be hard to find in the coming years, and thus the title of this post. Will we see the death of the reserve auction? I think so.

Why?

One only has to look at eBay to see auctions through the eyes of millions of people around the world. Sure, many people attend live auctions and others bid by phone, absentee or the Internet. Yet, 100’s of millions of people all over the world buy and sell on eBay every day.

So, what do those 100’s of millions of people see happen on eBay every day? Here’s a typical example:

    Item #1: 4-Drawer Blodgett Pizza Deck Oven, Nice Condition, Works Well, Selling NR! Final Bid Price $4,300.

    Item #2: 4-Drawer Blodgett Pizza Deck Oven, Nice Condition, Works Well, Selling with reserve of $3,500. Final Bid Price -0- (No Sale).

Why would the same pizza oven sell for $4,300 in one auction, but not sell at all — for a lesser price — in another auction? The answer is not elusive. It is simply: Buyer participation and interest.

Price is driven by interested buyers. The mathematics is not complex as with zero buyers, things don’t sell. With one interested buyer, things might sell, but for a discount. However, with many buyers, competition is enhanced, adrenalin flows, and prices are enhanced.

Or, if you prefer, we can think of it in terms of supply and demand. With one item for sale (supply), as the number of interested buyers (bidders) increases (demand), price goes up.

So, why do many see the death of reserve auctions? Because sellers are beginning to see that by selling without reserve (a.k.a. absolute) larger crowds form, more interest is attracted, and higher prices are attained.

Auctioneers hardly can operate any business model without a seller. Yet, once the seller is in place as the auctioneer’s client, most all efforts from that point forward are directed to attracting buyers. What would attract a buyer to an auction? We have said before in our post about absolute auctions: (https://mikebrandlyauctioneer.wordpress.com/2009/12/11/auctions-and-an-iowa-corn-field/) there must be the prospect of a deal for buyers to participate.

As many auction sellers (and as millions of eBay sellers) have realized, without reserve auctions attract more attention, more participation, and higher prices.

And, so we see the death of the reserve auction, as more sellers find they are more fruitful, and buyers continue to prefer, and seek out that prospect of a deal.

Mike Brandly, Auctioneer, CAI, AARE has been an auctioneer and certified appraiser for over 30 years. His company’s auctions are located at: Mike Brandly, Auctioneer, Keller Williams Auctions and Goodwill Columbus Car Auction. His Facebook page is: www.face book.com/mbauctioneer. He is Executive Director of The Ohio Auction School.