Understanding bidder intent
From talking to our friends in the auction industry, it’s clear that one of the biggest, ever-present challenges is knowing whether bidders will show up to bid on high value consignments, and what their enthusiasm will be for the lot in pricing terms. Further, for mid-size auction houses whose usual customer base normally bids at lower price points, the key is identifying and attracting whales capable of bidding for high value consignments.
In an auction with 100 lots where one lot has an expected price point more than double that of other lots in the sale, the auction house is effectively running the auction for 2 audiences, the firstfor 99 lots, and the second for that one specific high value item.
Because auction house revenue is closely tied to hammer prices, the profitability of the whole sale will likely be materially affected by the success or failure of the one high value lot.
This then shows the three principal challenges with high value lots:
- How to increase the number of bidders and bid amounts for the high value lot
- How to engage the auction house's whole customer base in the high value lot
- How to obtain visibility into bids and potential attendance at the auction before the auction begins
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aShareX, with its fractional bidding system, can add value towards solving all of these challenges:
Increasing the number of bids by:
- Facilitating fractional bidding for high value lots.
- Co-marketing with the auction house to increase consignment awareness.
- Bringing its own customer base of fractional and high net worth bidders to the auction.
Engaging its whole customer base in high value lot bidding
- Encouraging the auction house's existing customers to fractionally bid for lots outside their normal reach.
Improving pre-auction visibility and reducing risk (my main point this week!)
Most, if not all, auction houses ask customers to create an account and register before participating in an auction, and many allow pre and absentee bidding for the full lot.
The aShareX system does this for fractional bidders.
From a user’s perspective the pre-bidding process is straightforward, they register as a fractional bidder, and bid the amount they want to spend (within their pre-approved spending limit) and that bid is placed at each asking price up to the limit they define.
Having collected pre-bids, here’s where it gets interesting
In our May 2nd auction, "Contemporary Artists Series 1", pre-bidding over-subscribed all of the price levels up to $95k, (clearing the reserve of $90k), and the auctioneer knew the pre-bid profile for all price levels up to $155k. As well as encouraging full bids in the live auction, he knew the size of the challenge for fractional bidders at each level.
When the live auction started the auctioneer also knew the accumulated spending limit of folks logged into the live sale, so he could assess how hard to drive the live bidders, and better understand the likely end point.
In this real world example, at the $125klevel, a reduction of $10k in pre-bid support, and the reduction in fractional live bid support of a further $10k left the $125k level significantly short, and the hammer fell at $120k.
Auction House Benefit
Having fractional bidders engaged in high value auctions, both pre-bidding and bidding live, reduces the risk associated with depending on a very small number of whales, and gives the auction house a deeper understanding of pre-bids, and, during the auction, the probable effect of live fractional bids.
Please drop me an e-mail(kevin@asharex.com) if you have any questions, or for a demo of our fractional bidding system.
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