Saturday - 01 November 2014

Christie’s bid to squeeze more out of premiums

27 February 2013Written by Ivan Macquisten

Christie’s have announced a new buyer’s premium structure that points to a period of heightened competition.

While the maximum charged on the hammer price remains 25% and the minimum 12%, the thresholds at which the percentages change have been moved significantly.

The 25% premium currently applies to sums bid up to £25,000/$50,000 for most categories of sale, but from March 11 will apply for sums up to £37,500/$75,000.

The 20% premium, which currently applies from £25,001/$50,001 to £500,000/$1m, will change to cover the band £37,501/$75,001-£750,000/$1,500,000.

Meanwhile, the 12% premium, which currently applies for any sums over £500,000/$1m, will move upwards to £750,001/$1,500,001.

What does this mean?

Christie's say that the changes are the result of a recent business review. They have adjusted them to "ensure that we remain competitive and that our fees are commensurate with the quality of service we provide" and to help meet rising costs.

The advantages of a staggered premium structure are threefold: by charging a higher rate at the bottom end, the auctioneer ensures a better yield for lower-value lots which bring less return for the cost and effort invested in bringing them to sale; it also acts as a hedge against hard times when a higher percentage of lots are of lower value; and thirdly, the falling yield as lot values climb makes bidding more attractive for buyers at the top end. Raising the thresholds as proposed means squeezing those yields.

Consignment Deals

If, as hoped, this generates more income, it will also allow Christie's to be more competitive in striking deals for consignments - attracting the right goods for sale is the lifeblood of any auction house.

The changes also allow the auction house to attract more revenue without raising the top percentage beyond 25%, a level already widely criticised by the trade, long-term opponents of any premium at all for buyers.

Sotheby's are assessing the changes but have not made any decision on what they will do, while it also remains to be seen whether Bonhams will follow suit.

Christie's are also changing the premium charged on wine sales, which will be 22% of the hammer price in New York and Hong Kong and 17% in London, Paris and Geneva, a reflection of where the world's major wine auctions have shifted recently.

"For all collecting categories other than wine, this change represents the first fee amendment we have introduced in nearly five years," say the auctioneers.

"These incremental changes will keep Christie's current with rising costs
while minimising the impact on both buyers and sellers, who rely on our broad global reach as an auction services provider."

Purchase Prices

Examples of the impact on purchase prices (before taxes) for Christie's clients, as given by the auctioneers:

• A client purchasing a lot with a hammer price of £50,000 currently pays £11,250 in premium. They would now pay £11,875 - an increase of £625 (5.6%)

• A client purchasing a lot with a hammer price of £500,000 currently pays £101,250 in premium. They would now pay £101,875 - an increase of £625 (0.6%)

• A client purchasing a lot with a hammer price of £3,000,000 currently pays £401,250 in premium. They would now pay £421,875 - an increase of £20,625 (5.14%)

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