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Much discussion these days revolves around how an online-only auction compares to a live auction. Some say that online-only auctions realize more money for sellers, while others say that the live auction realizes more money for the seller.

First, it is probably important to note that the recent Michigan State University Auction Industry 2010 study showed that only 6% of all auctioneers conduct their business as an “online-only” auction enterprise, while 78% of auctioneers conduct their business as a live auction enterprise (13 live auction auctioneers for every 1 online-only auction auctioneer.)

Our question here is: “Do online-only auctions realize more money for the seller?”

To answer this with certainty, we would have to sell the same item, at the same time, from the same location — both online-only and at a live auction, and see which demanded a higher price. And, even such an experiment would only answer this question for this one item, and not generally as we hope to answer it here.

Those who say that the online-only auction realizes more money generally say:

  • More bidders can participate due to the convenience of bidding online
  • Bidders prefer to bid first, then only travel to the auction if they win something, rather than travel regardless
  • Online-only auctions expose the property being sold to a larger audience

Those who say that the live auction realizes more money generally say:

  • Bidders are more vested in a live auction, and are more likely to bid if physically present
  • Live auctions inject a level of excitement, competition, urgency and focus which isn’t replicated in an online-only event
  • Because all bidders rely on their own inspections, they are more likely to “close the deal” as compared to online-only auctions

Although not in every case, most auctioneers report that holding an online-only auction requires much more work than a live auction. That is only important from one standpoint: If more work is indeed required, is it reasonable that more fees must be charged?

It’s not difficult to find online-only events charging more than live auctions; most of the time, the online bidder is charged a buyer’s premium, (or a higher buyer’s premium) to compensate for the additional costs: labor, time, online platform, storage, etc.

If online bidders are charged more, such as a buyer’s premium in excess of what live bidders are required to pay, do those bidders compensate for such, and bid lower?

Maybe a topic to explore more in a later article, but it does seem reasonable that at least some bidders … sometimes … adjust their bid lower to figure in the buyer’s premium (or an additional buyer’s premium.) And, if that is the case, even some of the time, then the seller probably receives less due to that “adjustment.”

Even if we ignore the additional time, labor and other expense for an online-only auction, and ignore any bidding adjustments due to buyer’s premiums, there is another distinct difference between these two ways auctions are held:

At a live auction, the bidders are physically present. Once a bidder is physically present, are they then more likely to participate? I would argue that nobody goes to the movies to buy $10 buckets of not-so-good popcorn, but once people get to the movie theater, they buy it. In fact, they buy two $9 not-so-good drinks, and a couple other not-so-good snacks — but only once they are there, and only because they are there.

It seems to me that if an auction is in a market where a sufficient live crowd is able to find it and attend physically to bid, that auction will realize more money for the seller than if it was conducted as an online-only auction. And, of course, in a market where a sufficient live crowd cannot be expected, online bidding may well be prudent — as a supplement to the live auction, or in place of the live auction.

A friend of mine recently attended a Cleveland Indians baseball game. He purchased an Indian’s ball cap, and an Indian’s shirt. I asked him if he had thought to buy an Indian’s hat or shirt online prior to the game — for about 1/2 the price? The thought never crossed his mind. Apparently, there’s something about being at the game that’s different from watching the game on TV, or online.

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.facebook.com/mbauctioneer. He is Executive Director of The Ohio Auction School.