By Wayne Jordan
We read a lot these days about pricing transparency in the antiques and collectibles business. Historic sales data from eBay and offline auction houses is becoming increasingly available to both dealers and buyers. Indeed, anyone who can pay the price of a database subscription can access sales data going back many years. Opinions vary on the significance and usefulness of such data.
“Price transparency is a good thing,” say collectors, “because it helps determine an appropriate price to pay.”
“Price transparency is a bad thing” dealers say, “because if customers know how much I paid for an item, it’s difficult to make a high margin.”
Various Views of Pricing Transparency
The dominant opinion (which I disagree with) is that price transparency drives prices down. Rob McMillan, executive vice president of Silicon Valley Bank, commented in an article on the wine-searcher.com blog: “I do believe better price information will drive down price. That’s economic fact...If you’re an economist and believe consumers have perfect price information, in a sterile environment price will be driven down to the point where producers can’t make the marginal return they seek and elect to not sell” [http://bit.ly/2pw2HhM].
I agree that in an environment of “perfect information” and a “sterile environment” that prices will trend downward (but eventually stabilize). Do we have such an environment in the antiques and collectibles business? Hardly. Collectibles’ prices are driven by nostalgia and trends, not quarterly economic reports. It doesn’t matter what something sold for ten years ago if no one is buying it today.
Subjectiveness of Value
I loved my 1959 Chevy Impala; it was my first car. But, memories of that car are mine, no one else’s. Besides, in all fairness, it cornered like a tank, got terrible gas mileage, and was so long it was almost impossible to parallel park. Who would want it? What I paid for it is irrelevant. It’s only worth what someone is willing to pay.
Most of the available sales data comes from eBay. How much do you trust eBay descriptions? Not very much? Yeah, neither do I. Deliberate frauds aside, most eBay sellers are clueless about the items they sell. How beneficial is having access to decades of bad descriptions and inadequate photos? Having historic price information certainly helps, but prices don’t tell the whole story. Of course, there are some sellers who are genuine experts. How do you tell the difference between what is reasonably represented and what isn’t? Only by acquiring a certain level of expertise yourself.
Factors Influencing Sales Data
There are other reasons that historic eBay and auction house sales data may be skewed:
• In our business, condition, rarity, provenance and other value factors will vary from item to item. • • Finding reliable comparisons is difficult.
• The way in which fees, shipping costs, and buyer’s premium are accounted for varies from venue to venue, which complicates comparisons.
• Returns are not accounted for.
• Bricks & mortar sellers have different pricing structure than auctioneers.
• Search results will vary if there is any variation in keywords and search parameters.
Antique and collectibles dealers take issue with McMillan’s sterile “banker’s viewpoint” as well. W. Blake Gray, in this article “Turning Price Theory Upside Down” writes for Wine-Searcher.com: (ibid) “Traditional economic theory holds that if consumers have complete price transparency of a product – if they know what everyone is charging for it – competition among retailers for a sale means that retail prices will drop until nobody can make any money on it” ... (But that hasn’t happened in the wine business) ... “What has happened is that price outliers have been eliminated – in both directions. Few stores can afford to grossly overcharge, and perhaps more surprisingly, few stores can afford online loss leaders at unprofitable levels either.”
Understanding and Utilizing Pricing Transparency
Stanley Gibbons, the British stamp trading company and owners of Malletts Antiques and Drewetts Auctioneers, reminds us that “The nature of a trading collectible market is that very rare examples are quite hard to estimate, whilst more liquid collectibles will tend to sell within or just below the lowest cluster of available market offers for sale.” Collectible markets are relatively illiquid, in large part because the things that people collect are rarely interchangeable.” (ibid)
Therein lies the value of a pricing database; current and historic prices are available for all to see. Buyers will be comfortable paying “within the lowest cluster of available market offers,” and sellers will be comfortable selling within the same range. Modest pricing becomes the norm; eliminating extreme highs and low. As collectibles trend, “lowest price clusters” will rise and fall. Of course, we all know that some auction prices – notably for celebrity collectibles and art – can reach outrageously high prices. We also know that buyers who pay those prices will have to hold them a long, long time to recoup their investment (if ever). Who knows what the next generation of buyers will hold in high regard?
Different Time - Different Type of Customer
The days of antique dealers knowing more about antiques than their customers is over. Customers come into our stores armed with historic sales data and points of connoisseurship. In most cases, they will have shopped your online inventory, read your reviews, and done their comparisons before they even arrive at your doorstep. If they haven’t, you can be sure that they will check your inventory against eBay or a pricing database before they buy. Your prices had better be comparable to what they find online or their wallet will stay in their pocket.
W. Blake Gray sums up the topic: “Combine market transparency based on realistic selling prices with direct market access that allows all market participants to buy and sell on a peer-to-peer basis, and the effect is entirely beneficial ... In fact, price discovery is the underpinning of all successful and proper-functioning trading markets. Reliable, actionable pricing data supports buy and sell decisions. It informs counter parties. It breeds confidence, and confidence boosts sentiment.”
Price databases are only as good as the information they contain. Though flawed, they still tend to “level the playing field,” which benefits both dealers and collectors.