Iíve had several questions about this from customers. Sometimes a customer will say, ďStamps at auction sell for less than what dealers charge.Ē Well, that may be true. Let me explain the difference between the two and you decide what is best for you.
Collectors mainly buy material two different ways: auctions versus retail sales (dealer at a show, online sales, mail order, etc.). Which one is best? There is no clear answer and it mostly depends on what the collector wants to accomplish. Letís walk through a specific example to illustrate some points.
Letís suppose you want a copy of Scott #245, the $5 Columbian from 1893. This is a good example because itís pretty expensive for most collectors, but not entirely impossible. While scarce, it is generally available. Many dealers have one or more copies in stock and many auctions have one or more copies available for bidding.
Suppose a retail dealer has a copy available for $1000. Do you buy it from the dealer or try to get a copy at a cheaper price at auction?
One advantage of retail sales is that itís immediate. You want the stamp. The dealer has it. You pay the price. You put the stamp into your collection. Youíre done and the whole process takes a few minutes. You now own the stamp. The only decision is if you want to pay the $1000 or not. At a stamp show, you could buy it from the first dealer you see, but a dealer five tables down has a similar copy and their price is $950. It could happen.
Can you save money by buying the stamp at auction? Maybe. But it comes at a cost; your time!
You get an auction catalog and there is the #245 that you want. You bid, say, $800 on it. Now you have to wait 3 weeks for the auction to close. You might win that #245 at $800 or not. Unless youíre a floor bidder, you have to wait until the auction ends to see if you won or not.
You could hedge your bets and bid on several copies of #245 at once. This increases you chances of winning. However, there is a chance that youíre the successful bidder on more than one copy. What do you do with the extra copy that you won? You placed a bid which you are obligated to fulfill. You canít tell the auction house that you donít want to execute your bid any more. Some auction houses support ďORĒ bids on auction lots, but not all auction firms do. Before trying to place an OR bid, check the auction rules.
Submitting a bid doesnít mean you win. There is a chance that you will have to bid in more than one auction before you are successful in obtaining a copy. Maybe the second auction you bid in will be successful. Maybe it will take ten auctions before your successful? There is no guarantee. Yes, you might win it at a lower price, but you have more time involved in submitting bids with two or more auction houses. You saved a few bucks on the purchase price. But if you spent, say, 3 hours over several months going through auction catalogs and making bids before youíre successful, was that 3 hours of your time worth it compared to the money you saved by just buying at the retail price? Maybe yes. Maybe no.
You have to ask yourself what is right for you. Do you buy retail and risk paying a higher price? But itís very quick and easy. Or do you bid at auctions and try to save money? You may have to bid several times before youíre successful. That means waiting.
Here is one thing to keep in mind though. If a dealer has an item for $1000, will you find that same item in similar condition at auction for, say, $100? Itís not impossible, but itís very unlikely. To protect the consignor, the auction house may have a reserve price on an auction lot. In the event that no one else bids on that lot and someone submits a really low bid of $100, to protect the consignor from selling it for next to nothing, auction houses will try to implement some kind of reserve price on it. Some auction firms reject bids that, based on their opinion, are not made in good faith. For example, I know of several firms that reject bids that are less than 50% of their estimate.
If you think you can save huge sums of money over time by only buying at auction, I respectfully disagree. If an auction house really felt that an item was worth $1000, I doubt they would sell it for less than $500 or $600. They want consignors to tell their friends, ďI submitted my material to ABC Auctions and they sent me a big fat check. You should consign to them too and theyíll get you top dollar.Ē Auction houses donít want consignors saying, ďThat stupid auction house sold my material for pennies on the dollar. They ripped me off! Donít send your stuff there or they will rob you too!Ē Saving 10% or 20% at auction versus retail is much more realistic. Savings of 20-50% are possible, but it involves some work.