This week we’re highlighting an issue that is common ground for dealers and auctioneers: how to charge for art market services and expertise in the modern era.
The topic of our latest round table was inspired by a story relayed to ATG last year by one auctioneer.
As the auctioneer walked the carpeted halls of a major London fair, he spotted a picture his auction house had sold months before. At auction, it had fetched a satisfying £36,000. Now reframed and cleaned, and prominently displayed on the buyer’s stand, it came with well-documented research.
Impressive too, was the dealer’s asking price of £270,000. It led the auctioneer, who could recall the controversy over Sotheby’s introduction of buyer’s premium to the UK back in 1975, to think “how modest” buyer’s premium charges seem in comparison.
Dealers, faced with rising buyer’s premiums and the decline of high street passing trade, might beg to differ.
We put the topic of charges to our debaters – a diverse group embracing large and smaller auction houses, together with dealers operating at varying levels of the market.
The picture that emerged was of auctioneers and dealers having to adapt to fit what the market dictates and to suit buyers’ changing needs. There seems to be no one blueprint for doing so, but there are similar considerations underpinning why dealers and auctioneers charge what they do – and what they offer in return.
The panel of debaters at ATG’s round table discussion included both dealers and auctioneers operating at varying levels of the market.
“We try and provide a personalised service based on reputation, trust and due diligence - Emma Ward
ATG: First things first, can you outline the expertise and services you provide to buyers?
Stephen Ongpin: I sell 16th through to 20th century drawings, water colours and oil sketches. In the time spent researching, I very often make discoveries at auction.
It’s not just my expertise, but also the personal service attached – presentation and restoration if necessary, framing, mounting, hanging. There’s also the fact that like most dealers, I stand by my attributions and there are no caveats.
Richard Winterton: We bring buyers and sellers together to get an item to auction that wouldn’t otherwise be available. As a general auctioneer, let me tell you, it takes a lot of work to get that item sold.
We do several house clearances a week. We go through a house, write a report and then send the wagons out. We clear the house, unload back at the saleroom where I have 12 experts to sort the lots into different sales.
Richard Winterton, managing director, Richard Winterton Auctioneers in Lichfield.
“For a recent sale, our team had to do 610 condition reports on 1300 lots - Richard Winterton
They are photographed, catalogued and advertised. For a recent three-day sale, our team had to do 610 condition reports on 1300 lots. And the other auctioneers here are doing exactly the same.
Angela Hardy: I deal in a narrow sphere of paintings and I offer clients my expertise in that area. I’m also selling my time in the trade and reputation. I provide other services like delivery, hanging, and allow clients to take an item on approval.
Finally, it comes down to whether people get on with you and want to do business with you. That’s different to auctioneers, in that they have a less personal contract between buyer and seller.
Angela Hardy, founder and principal of London dealer Burlington, specialising in 19th and 20th century British and European oil paintings.
Paul Roberts: We’re an upper mid-market auctioneer, hosting about 25 sales a year featuring in Scottish, British and European pictures, 20th century decorative arts, jewellery and design.
We’re headquartered in Edinburgh with offices in Glasgow and London, with an international presence largely through our connection with Freeman’s in Philadelphia. In terms of services, we’ve made a huge investment in our staff, premises and marketing the brand.
Emma Ward: As art dealers and advisers, we try to provide a personalised service based upon reputation, trust and due diligence. We work on a transparent basis with clients, which is important given some of the high-profile fraud stories that have shaken the art world.
Adam Partridge: We’re a fairly similar model to Richard, at the working end of doing house clearances, yet becoming increasingly specialised in studio pottery, militaria, musical instruments and Asian art. At the same time, we acknowledge the fact that most items in a traditional regional auction room are from private buyers as opposed to stock that is consigned by dealers.
ATG: Do you feel you’re operating in a buyer’s or seller’s market?
Paul: When I started all those years ago, 80% of my attention was on people consigning. That’s switched and finding buyers is as important now. Which is why auctioneers have to do retail-y type things to convince our customers to buy. We have become a marketing service.
Emma: I don’t disagree. Sotheby’s and Christie’s have become champion marketers. The biggest price ever achieved at auction, $450m for Leonardo da Vinci’s Salvator Mundi last year, and that was a triumph of marketing by Christie’s above all else. The marketing campaign was a stroke of genius.
Emma Ward managing director, Dickinson, London-based advisers and fine art dealers in works from Old Masters to contemporary art.
Adam: Going back to what Angela said, you need to be liked by your consignors. The buyer will buy from you whether they like you or not. We need to have a good relationship with our vendors because without them, we don’t have an auction at all.
Paul: The seller is king, as Adam points out. Without the seller, we don’t have a business.
ATG: How important are dealers as buyers at auctions?
Paul: Times have changed when dealers could go around a string of sales and then move the objects to London and make money.
That’s history now. A whole raft of auction buyers has evaporated for a string of reasons. It’s gone from being whatever we got consigned, someone would buy. The trade was always there to snap up unbidden trifles and that is no longer the case. Which is why we court private buyers too.
Angela: I challenge you to find a dealer who doesn’t buy at auction, because otherwise where can he or she get their stock?
Adam: Dealers will always be important and let’s not forget the need for the underbidder as well. They are almost as important as the buyer.
Angela: They’re equally important, or else you won’t get your price beyond the reserve. It’s comforting that auctioneers appreciate the underbidder!
Paul: That’s a good point. My rule is, if you bid £100,000, and it sells for more, you get a bottle of whisky or wine.
ATG: How do both sides manage consignor expectations on price?
Emma: Everybody is price sensitive now – private sellers and buyers, as well as dealers.
Talking about the high end of the market, a consignor might be seduced because Sotheby’s gave them a higher estimate than Bonhams or Christie’s, and if it doesn’t sell, they’ll come to me and say, will you sell it?
That’s if an auction house hasn’t put a guarantee on the table, which we know some are doing in volume now.
Stephen: I give a valuation and often tell the potential consignor to show their works to an auction house as well for their estimate and see if it tallies with mine. You can give someone the option of a net price or a percentage of the final sale.
Emma: It doesn’t matter if you’re a dealer or auction house, if you give someone an estimate of 10-20 – they remember 20. Valuations are a tricky thing. Consignors shouldn’t be seduced by higher estimates – sometimes it’s shrewder to go lower to get more bidders.
Angela: Antiques TV shows have encouraged people to walk into fairs, walk up to a picture and ask, ‘What’s your best price on that?’ I don’t answer this question directly anymore. Instead, I ask back: ‘Are you interested in it?’
Adam: It’s about managing expectations. Consignors with decent objects are going to several auction houses to be given varying competitive sellers’ commission rates – maybe 7% or even 3%. Then they come to us and say, well, what will you do for me?
Richard: Adam, we have similar models. Like you, we had a 90% sell-through rate last year. That is high. We don’t muck around – everything is in to sell. I certainly wouldn’t give 0% to consignors. For us to get that object to auction takes a lot of work.
Adam: We got the Hans Coper sale [2015] on full commission. But we do have to reduce seller’s commission to get good lots – consignors are increasingly aware of that.
I wonder how many auction houses advise their prospective sellers of the buyer’s premium that will be paid, when they’re offering attractive seller rates to encourage consignment?
Adam Partridge, founder of Adam Partridge Auctioneers & Valuers, based in Macclesfield, Liverpool and south Manchester.
“I heard about an American auctioneer who christened his yacht Buyer’s Premium - Adam Partridge
ATG: Are the lines blurring between wholesale and retail?
Paul: We were wholesalers. The world has changed and we have had to adapt to become retailers.
Angela: But that’s your choice. Auctioneers have made it their business to be retailers. In the past, you weren’t retailers. I don’t think the world has changed – auctioneers have adopted a different remit.
Adam: I don’t agree that auctioneers should see themselves as retailers. The reason our auction house and Richard’s sell nearly 90% of goods that come through is we have different models to those auction houses with aspirations to be galleries. Either you’re an auction house or a gallery and you need to make that distinction.
ATG: When buyer’s premium was introduced in 1975, caveat emptor was a principle that auctioneers operated by. Is that still the case?
Paul: Not in the saleroom I work in!
Adam: I agree, and there’s more recourse for the buyer to query their purchase, thanks to recent legislation such as Distance Selling Regulations.
Angela: Auctioneers have more risk on this issue, with a broader range and higher volume of throughput. I do my research on items I buy and it goes without saying that if there was any doubt about an object, I’d want to take the item back – though I’ve never had that situation.
ATG: Buyer’s premium was 10% back in 1975 – now it averages 20-25%. Can auctioneers keep a cap on it?
Adam: Ours (18% including VAT) is enough for us to operate at, without getting greedy. I met a chap who knew an American auctioneer who had a yacht which he had christened Buyer’s Premium.
Angela: That’s a brilliant story.
Emma: And it encapsulates the topic we’re discussing!
Paul: It’s hard. Not only do we have the expense of marketing that we’ve always had, whether it’s catalogues or adverts or whatever. Almost by osmosis, we’ve also suddenly got the expense of the digital world – website, social media and so on – that goes on top. And this costs hundreds of thousands of pounds. It puts pressure on the margins and drives you to follow the route that Sotheby’s and Christie’s have gone.
Paul Roberts, vice-chairman, Lyon & Turnbull auction house in Edinburgh and London, and president of Philadelphia-based saleroom Freeman’s.
Stephen: If auction houses act as an agent to the seller, surely charging the seller a premium makes more sense?
Paul: More than ever before, we are in a seller’s market and the competition is fierce for higher-value objects. The market dictates that we charge the seller less and less, but the money we need to run our businesses has to come from somewhere. It’s as simple as that.
Richard: In our firm the buyer is not paying more than the vendor. We’re 17% plus VAT and the vendors pay 15% and a lotting fee which takes it up to 19%. So, the seller pays more than the buyer.
Adam: It’s very unusual not to give a reduced rate of commission on anything.
Richard: Giving a special rate for a special consignment is rare for us – we’re not that kind of auctioneer.
ATG: Does Lyon & Turnbull have to follow the big houses when reviewing buyer’s premium?
Paul: Yes. Our buyer’s premium is on a sliding scale: 25% on the hammer price up to and including £100,000, and 20% on £101,000 thereafter. When I was president of Phillips in New York in the late 1990s, I outlined how auction prices are calculated when I was interviewed as an expert witness by the FBI during the Sotheby’s- Christie’s price-fixing investigation. I explained to them, if Sotheby’s or Christie’s took their premium up to 25%, and we are chasing the same consignments, we have to follow suit to enable us to compete.
“It’s a seller’s market that dictates we charge the seller less and less Paul Roberts
ATG: To what extent are auction buyers influenced by buyer’s premium rates?
Adam: One of our experts is under the impression we get greater hammer prices because of our lower buyer’s premium – I’m not so sure. I don’t know how many people look at buyer’s premium any more.
Angela: I look at buyer’s premium quite intently prior to bidding because it defines how I bid. And if there’s Artist’s Resale Right, I have to add that on too. I can get excited like anyone when I bid. But I am a professional buyer and have to protect my margin against my competitors.
ATG: Is ‘buyer’s premium’ a misnomer?
Adam: What do we actually do for the buyer? I don’t think we do anything for the buyer at all.
Richard: I fully believe we are entitled to charge buyer’s premium. If a buyer collects posters, for instance, we find that poster for you, we catalogue it and get the item to the marketplace that wouldn’t otherwise be available. In other words, we bring buyer and seller together.
Adam: We’re exclusively acting for the vendor, as every photo we take and every condition report we complete is in the interest of getting a good price for the vendor.
Stephen: Emma, do you charge the vendor for the expense of marketing, shipping, cataloguing and research?
Emma: About 90% of our work is on a consignment basis – not dissimilar to the auction houses who act as the go-between from seller to buyer, but we do so on a more discreet basis and without time constraints. Unlike most auctioneers, however, we do not charge double commission on a sale, that is, a vendor’s commission and a buyer’s premium.
ATG: Should dealers be transparent about their mark-up?
Paul: I don’t see why they should. Dealers take a capital risk. If dealers buy something in good faith and know more about it than most anyone else, but have to shell out, say, £22,000, there is no reason the trade can’t charge what they like in capitalising on their expertise.
Angela: Not quite, Paul, as we’re in a competitive market. Anything we buy has to be competitively priced against our rivals. In the retail space, we are all bound by a perceived value for something. It’s one of the reasons I don’t feel I can be transparent about my profit margin.
Paul: And you may have to hold stock for 10 years before selling.
Angela: It’s not just that. My profit margin can vary from a small percentage to a large amount. If I find something in an obscure place and it costs me very little, I will not pass it on for very little. I will charge the market value and my profit margin on that will be big. If the client finds out what I paid for it and questions me, I say, it’s nothing to do with what I paid, it’s what the object is worth.
Emma: Angela, you’ve got the right to use all your expertise and decades of knowledge to make a discovery like that. I have no shame in saying, we’ve made a discovery.
Stephen: I acquire works privately or on consignment. In those instances, I price them for what I think they’re worth.
Angela: Psychologically, however, it is a tough call if someone knows what you’ve paid for something if it was a small amount.
Richard: Buyers have to take into account the cost and hidden costs for dealers in acquiring an object. On my side of the fence, I wake up every day aware I have to pay 25 staff and maintain a huge building.
ATG: Is there room for more transparency on charges?
Emma: At auctions we attend, you have a screen with all of the different currencies that people are bidding in. It would be helpful to know how the buyer’s premium tickers up through the levels when we’re bidding.
When we’re recommending to clients to buy at auction we have to make it very, very clear what the end bill will be, which can come as a shock to even some of the world’s richest people.
Richard: At our auction house, everywhere you look, we tell people about buyer’s premium – in the catalogue, on the website, in the saleroom.
Stephen: The price I quote includes mounting, framing, shipping, VAT – what it doesn’t include, which is extra, is Artist’s Resale Right.
Emma: When we do art fairs, all our pictures have price labels on them. The perception is that dealers change their prices according to who they’re talking to. I want to slay that misunderstanding: regardless of whether it’s a museum buyer, another dealer, an art adviser or a private collector, the price is the price as in the contract with the vendor.
Art dealer Angela Hardy speaking at ATG’s round table discussion about how dealers and auctioneers charge for their services.
“My profit margin can vary from a small percentage to a large amount - Angela Hardy
ATG: Do price databases help?
Stephen: I research databases so I can tell the prospective seller what I think their consignment is worth.
We also rely a lot on our integrity as dealers – like Angela, sometimes my profit is 10%, sometimes it’s 150%. It can depend on how much work I put in.
If I buy something at auction I will very often have it for a minimum of a year before it’s offered for sale. And in that year I do the research, which is where dealers add a lot of value.
I spend one afternoon a week going through thesaleroom.com’s website to see what’s coming up and another afternoon on drouot.com. It’s a very useful thing to do.
Stephen Ongpin founder and principal of Stephen Ongpin Fine Art, London, dealers in 16th-20th century drawings.
Emma: Absolutely. Also, the internet is not going anywhere. It’s here to stay and we either embrace it, adapt or die.
We disclose our sources on fact sheets and, anyway, buyers these days do their homework. Buyers won’t baulk at a dealer charging three times the cost price, if they’re told it’s a discovery by the dealer. Being upfront with buyers helps them not to feel conned.
Stephen: I pretty much assume my clients know where I bought a picture from or that they can find out.
Angela: Perhaps. My experience is, people can’t bear to give you a big profit!
ATG: Aside from profit, what are the other compensations?
Emma: We’re all here doing what we do because we love objects. We’d make more money in the Square Mile but the reality is we’ve made a career out of a hobby, so that’s a privilege in itself.
Richard: Happy buyers and vendors are the aim. We’re not happy selling anything for which we couldn’t get the best price on behalf of our client. In 2015, we had consigned a very early football programme, for the 1886 FA Cup Final between West Bromwich Albion and Blackburn Rovers. We passed it to a specialist, Graham Budd, who sold it for us for £20,000 (plus 17.5% buyer’s premium) – and we got a percentage. The client was over the moon.
ATG: What are the final words in this whole debate?
Paul: That there’s no right or wrong, that we have to try and give the best level of service the market expects in our respective fields, and charge accordingly. Let’s all work together to do the best job we can, and any challenges we have should be seen in the light of the fact that we are all beneficiaries of this market.
This article is an account of an ATG round table discussion hosted over lunch in London in July 2018.
Do you agree with our panellists?
Give us your views on the following or any other topic raised in this discussion:
- ‘Dealers shouldn’t have to justify their mark-up’
- ‘Auctioneers earn their buyer’s premium’
- ‘Dealers give fair valuations to consignors’
- ‘Auctioneers need to reduce seller’s commission to get good lots’
- ‘The underbidder is valued by auctioneers’
Be part of the debate.
Send us your opinions to editorial@antiquestradegazette.com or to Noelle McElhatton, Editor, Antiques Trade Gazette, 65 Southwark Street, London SE1 0HR
