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Aristotle, auction, auctioneer, auctioneers, auctions, bidders, john mcmillan, Kazumori, live auctions, McMillan, online auctions, phd stanford university
We previously wrote about Selling at auction: online versus live. Today, we write about selling at auction with both online and live bidding.
Again, we look at a research paper titled “Selling online versus live” which was released as a result of work by,
- Eiichiro Kazumori, PhD (California Institute of Technology)
- John McMillan, PhD (Stanford University)
dealing with the issue of utilizing ascending auction methods.
One particular paragraph from this study deals with today’s topic:
- “Online bidders in a live auction are in a no-win situation; the theory says they can expect to pay the item’s full expected value. They can overcome their informational disadvantage by either inspecting the item themselves at the presale exhibition or hiring an agent to do the inspection; but this means incurring the same transaction costs as the live bidders. Rather than providing the best of both worlds, mixing online and live bidding combines the disadvantages of both …”
While many auctioneers utilize live bidding augmented with online bidding, Kazumori and McMillan seem to suggest that:
- If the bidder wants maximum knowledge, they must incur the transaction costs of attending the auction. Therefore online bidding is not prudent.
- If the bidder wants to save transaction costs, they must bid without full knowledge. Therefore live bidding is not prudent.
Kasumori and McMillan’s conclusion is based upon the bidder’s prospective.
If bidders wish to eliminate their lack of knowledge and inspect the item, they may as well attend the auction and bid live. Otherwise, they are at an informational disadvantage by bidding online, but save transactional costs associated with attending.
However, what about the other side of the transaction — from the seller’s perspective?
- Do the online auction costs of additional cataloging, picture-taking, description and the online platform suggest then the additional costs of hosting the auction live may not be prudent?
- Do the live auction costs of tables, chairs, parking, utilities and staff suggest then the additional costs of hosting the auction online may not be prudent?
I wonder if the seller-perspective argument is not at least as strong as the buyer-perspective argument. Ultimately, is it fair to say, “Either have a live auction, or an online auction” but not both?
It is important to note here that not all auctions are alike. For instance:
- Could a live auction with 100 cars benefit from online bidding?
- Could an online auction with 100 cars benefit from live bidding?
For the live auction, it’s probably safe to assume the cars are all lined up with sufficient space between — so how hard would it be to take, say, 10 pictures of each, and upload that to an online auction?
For the online auction, it’s probably safe to assume the cars are all lined up with sufficient space between — so how hard would it be to, say, setup a registration area there at the location, and conduct a live auction?
Many auctioneers talking about (and/or arguing about) the merits of a live auction versus the merits of an online auction seem to tend towards agreement that maybe doing both is the best solution.
However, the research thus far seems to suggest the opposite — that either piece is better than the sum of the parts and/or the whole — far from Aristotle’s thought that the whole is greater than the sum of the parts, and therefore greater than either.
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 adjunct faculty at Columbus State Community College and is Executive Director of The Ohio Auction School.
Mike Brandly, Auctioneer Blog 
In my mind you have missed the very important point that in today’s world time is a very precious commodity. We conduct both online absentee bidding and live auctions. A preview is scheduled for the the week before the auction allowing buyers to view and then place their bids online without having to spend their time sitting through an auction. It has increased our buyers and is a win-win for all involved. For those that love to attend an auction they are still able to do so and for those whose schedule is just too busy they are also represented at the auction.
Carrie,
I think the point of the research and my comments were that if you’re offering online bidding, with a preview, then why not just do that — or if you are offering live bidding, why not just do that?
The expense of doing both (picture taking, descriptions, provider costs, holding, shipping, labor — and square footage, chairs, tables, utilities, parking, labor, etc.) seems to double cost while not doubling profit.
I would argue that the expense of picture taking and descriptions (cataloging) is a necessity either way for marketing and organizational purposes; in fact I would suggest that quality of these functions has a direct and quantifiable payoff. Thus, if this in fact true… then this cost is bore between both platforms. Leaving only the direct costs of each “hosting platform”.
Where, in my opinion, using the findings of this study at the individual (buyer) perspective fails to address the overall benefits to both buyers and sellers at the aggregate level. Opportunity.
For buyers, as Carrie pointed out, the benefit of being able to participate “on their own terms” as far as time is concerned is favorable- allowing a bidder who cannot attend on auction day the ability to participate regardless. For items that have specific value (such as items that are only used in a buyer’s particular industry) the ability to participate in auctions outside his own geographical locale may very well offset the cost of rigging & shipping.
For sellers, the first precept of supply and demand is to procure as many potential buyers as possible. If having an online component brings even a marginal additional audience/pool of potential buyers; then the argument could be made that not only should you consider the success of the online component (or vice-versa I suppose) based from the actual sales from that component but also must include the contribution to final hammer prices that the bidding from this source secured.
Additionally, I suspect that going forward it is just going to become more-and-more necessary to do both in conjunction. With online commerce becoming safer, easier, and just increasingly mainstream.. the potential benefits of reaching out to a larger market and to a market that increasingly will come to expect the convenience of online participation. On the other hand, there will always be more tactile buyers that need to not only see, hear, touch, and smell the merchandise… but also auction day itself.
Steve, I appreciate your comments, but I would tend to disagree with your premise. Most all auctioneers conducting a live-only auction take far fewer pictures, and write far less description than what is required and expected in the online-only environment.
The goal in the live auction format is to “tease them sufficiently” so they attend the auction. On the other hand, the online-only environment is anything but teasing — the auctioneer has to endeavor to compel them to participate, watch, bid …
Therefore, I would contend that a properly conducted online-only event requires far more pictures, much more description, much more time and effort than the equivalent live auction event with the same items.
Live auction marketing has a distinct different goal than online-only marketing up-front, with the same goal of maximizing the seller’s position at the end.
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