Auction Fever

Kiplinger's Personal Finance Magazine, May, 2000 by Elizabeth Razzi

STRATEGIES | Winning the BIDDING GAME can be easy, but getting a fair price takes cunning.

AT THIS VERY MOMENT you could make a serious offer to buy a Wile E. Coyote Pez dispenser being auctioned on eBay.com. In a few weeks, if you have a few million dollars to play with, you could log on to one of the world's premier auction houses, Sothebys.com, and bid on the Declaration of Independence--that is, a copy of the first broadside used to spread the word of revolution throughout the colonies in 1776.

From the silly to the sublime, auctions are changing the way we shop. For example, at the beginning of 1999, online-auction site eBay had 2.5 million registered users. By the end of the year, ten million users were grappling for items worth nearly $2.8 billion. And Internet powerhouses Amazon and Yahoo! have entered the fray, as have dozens of other sites. Forrester Research, an Internet-marketresearch firm, predicts the online-auction market will grow from $1.4 billion in 1998 to $19 billion by 2003.

"We're seeing a really interesting shift with the shopper's dynamic," says Mike May, a senior analyst with Jupiter Communications, another market-research firm. He says auctions and other forms of "variable pricing" are the wave of the future as traditional retailers find ways to fit online-auction technology into their sales strategies.

The online-auction upsurge is in turn driving up interest in traditional live auctions, which have also been given a boost by some splashy pop-culture auctions that drew attention outside the usual art- and antique-collector elite. Jackie O'S pearls. Marilyn Monroe's pots and pans. Streisand's Stickley bookcases. Even if the items never ended up in the hands of the hoi polloi, we could do our share of gawking.

Sotheby's Holdings, the public company that runs the prestigious auction house, reports that its North American sales jumped 18% last year. And the old-line auction house isn't about to let the Internet pass it by. It has taken a two-pronged approach, hoping to attract buyers and sellers who have never set foot in a posh auction house: Sothebys.Amazon.com sells collectibles from Sotheby's and hundreds of chosen dealers "known to Sotheby's." Recently, its offerings included Winston Churchill's no-longer-roadworthy 1954 Land Rover. Minimum bid: $35,000. The auction house's other Web play is strictly a solo venture. Sothebys.com carries high-end art and rarities that you would expect to see in its New York and London galleries.

But just how do you get a good deal in the auction melee? Those of us reared in a retail world governed by markups and markdowns must now learn to set prices for ourselves--and to compete against other buyers.

A day on the floor

A LIVE AUCTION can be intimidating. Few people know the etiquette or the lingo, and there's always the fear that an ill-timed achoo! will make you the owner of a wildly expensive and possibly hideous objet d'art.

In truth, though, a live auction can be easier to navigate than an online one, and you may even stand better odds of winning.

Take, for example, an auction that was recently held in New York City. Two or three times each year, Doyle New York holds its "Belle Epoque: 19th- and 20th-Century Decorative Arts" auction. It's a grab bag of art, fine collectibles, knickknacks and furniture--some of it antique, some of it merely old. Gavel prices at the latest auction in February ranged from $150 for an oil painting by Italian painter L. Cagliani to $37,000 for a highly collectible, though chipped, Teco pottery vase.

Serious bidders are hard at work in the days before the auction. The lots are described in a glossy, $25 catalog published just for the auction (catalogs for upcoming auctions are online at www.doylenewyork.com). Four days before the sale, Doyle opens its galleries for inspection.

The day before the February auction, Hope Tate, a no-nonsense banker and an even less-nonsense New Yorker, took one last look at three lots that had caught her eye: a beechwood piano stool carved in the form of a seashell, a pair of Louis XVI-style gilt lamps and a rococo-style console table that was just the right size for a certain spot in her midtown apartment.

Tare measured the table--again. "It looks tiny here," she notes. She planned to return the next day and bid on all three lots. Based on the estimates printed in the catalog, she intended a major day of shopping: The piano stool was estimated to go for between $800 and $1,200; the pair of lamps was pegged at $600 to $900; and the console table, $600 to $900.

But a practiced buyer takes projected estimates with a grain of salt. Some items actually sell for several times the upper end of an estimate; a smaller number go for less than the low estimate, but not by much. Most sellers place a reserve price on their items, and if bidding doesn't reach the reserve, the item is withdrawn.

At home that night, Tare reviewed her strategy for auction day. She decided to conserve her cash for the console table. "If I bought something else, I might not have enough."