Online Auctions are Up Up UP

Online Auctions are Up Up UP
With most American consumers penned up at home, the online auction market has exploded to gargantuan proportions. It wasn't long ago that eBay and a few others made up the lion's share of at-home bidding opportunities. These days, anyone with a hankering to do it can lease auction software, rent a list of email addresses, and jump in. The good news is that the most esoteric items from around the world are now available with a few clicks of the keyboard. The not-so-hot news is that there is no rating service as yet for auction houses, and there definitely needs to be. Having invested way too much time in looking at this category over these past weeks, I can now tell you that not all auctions are created equally - or even remotely so. Here are some things to know.

First, even the big boys have jumped headfirst into online. While the major art auctioneers have always made spectacles of their live auctions, that is no longer possible. Live auction theater has morphed into live auction streaming. Fine art sellers such as Christie's and Phillips have consolidated live sales into single online extravaganzas in the hope of salvaging their traditionally strong spring seasons. If this tact proves successful, such firms will undoubtedly start reconsidering the need for expensive print catalogs and fancy real estate. Such potential reductions in costs might help these auctioneers survive the transition from live to online auctions, but we'll have to wait and see.

If there's a further bright side to this trend, it is the number of new bidders that are emerging online for premium art and antiques. Sotheby's recently announced that some 50% of online bidders in their sales since March 1st are first-timers, and an equally high percentage are coming from mobile devices. Evidently, even the old-schoolers are getting comfortable with techno-bidding. If there remains a major uncertainty, it is whether or not multi-million dollar paintings can still command top prices online. So far, relatively few trophy artworks have been put up for sale in public auction forums, and the results have been mixed.

As for online auctions aimed at more pedestrian buyers (like me), they are seemingly everywhere. Online portals such as Invaluable and BidSquare can sort through auctions around the world to find specific items or categories. In my case, I've instructed these search engines to notify me of auctions containing military or maritime items, and the lineup grows every week. My most recent list of such items received yesterday included 17 auctions over the next 10 days, spanning five countries and thousands of individual lots. It's lucky I have a lot of time on my hands at the moment.

Nonetheless, when you dig down into the individual auctions, the results get decidedly murky. It turns out some of these auctions have reserves whereby items will not be sold if bids do not exceed a certain level. That's OK so long as the auction house discloses this upfront, but not all of them do. Other auctions consist largely of reproductions or forgeries, but an auction house can duck responsibility by identifying such items as "unauthenticated." Likewise, do not believe coin collections marked as "unsearched" and mechanical devices like clocks and radios marked as "untested." Those representations are invariably untrue.

Shipping - a much larger component of online auctions than the more typical cash-and-carry live auctions - can also be a significant bone of contention. Some auctioneers pass the buck on shipping arrangements altogether, offering only a list of local shipping services and leaving it to their high bidders to compare quality and pricing. Others handle shipping of smaller items in-house but may charge a minimum shipping fee per lot won. That's reasonable enough for larger items but can result in outsized costs when shipping multiple lots of, say, coins or jewelry. I recently bid for and won a number of lots of small low-value stones and wound up paying far more in shipping than the value of all the lots put together. Lesson learned.

Finally, as consumers continue to manage their acquisitive urges through online purchasing, do not expect to find many bargains out there at auctions. The prices that even commodity items like silver coins are bringing at auction today are astounding. Caught up in the frenzy of click bidding, buyers may be forgetting about the hefty buyer's premium that is often as much as 25% of the winning bid. That, plus the cost of shipping and the increasing application of sales tax, can inflate your winning bid from bargain level to premium retail. If the thrill of the chase offers something extra in entertainment value, then that's OK too. Just don't forget about it.

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