Yesterday’s Sotheby’s auction got me thinking about the role of wine auctions as a buying channel for consumers. I could think of only three reasons for consumers to bother buying wine through auctions:
- Access to rare wine – “Rare” may mean limited quantities in circulation or having a particularly distinguished provenance (especially for older wine).
- Getting a bargain – Reserves (even with buyer’s premiums added) are typically below retail price levels.
- The “experience” – Participating in live bidding or pre-auction events is fun. Even for absentee bidders, when your bid succeeds, it’s often described as “winning.” Who doesn’t like winning?
The counterarguments are as follows:
- Most wine offered is not really “rare” – On average, I would estimate 80%-90% of the wine sold via auctions is available in the retail channel. Many retailers, including us, buy wine for resale directly from the same private collectors that auction houses tap.
- Bargain hunting is time consuming - The disciplined buyer needs to review a catalog of often 1,000 or more items, research retail alternatives and auction price history for each wine of interest, and then “back into” a maximum bid amount. The bid is determined by dividing your desired maximum out-of-pocket price by (1 + the buyer’s premium % + any insurance fee %) and then rounding down to a specific bid level. Once you know your bid amounts, you need to submit them to bid on an absentee basis or invest even more time to participate live. Given that you can expect to “win” only a small percentage of those items bid on, the overhead of your effort often reduces or eliminates the benefits gained.
- Most bidders are absentee – As such, other than the small thrill of learning you have won some bids, why deal with the complicated and inconvenient buying process?
Bottom line: Consumers could consider the retailer channel as a substitute for the auction channel when seeking fine and rare wine. Even when retailer pricing is higher, the convenience of “buy it now” saves valuable time that often justifies a premium.
Vinfolio also provides a quote request service where we’ll seek out any wine not already in our inventory (when 6+ bottles or more than $250 in value) or maintain a record of your interest until the next time we have the wine available.
