Though provenance is still debated, there is absolute truth in the statement, “There are 3 kinds of lies. Lies, Damn lies and statistics.” Today, let’s address statistics as they relate to wine buyers. Many of you have seen the breathless press releases and quotes from auction houses touting their most recent sales. The most abused statistics are sell-thru rate and total proceeds.
When considering sell-thru rate, its important to remember that the house sets the reserve and opening bid in most cases. Some houses staunchly defend low reserves designed to spur bidding while usually touting very high sell-through rates. While high sell-thru can be good, if your wine is sold for far too cheap due to an artificially low reserve, you might not feel so good.
Likewise, an overly optimistic reserve designed to flatter the consigner can result in passed lots and disappointing results. When comparing two or more auction appraisals, a seller is often confused. How do you know what will likely occur and what prices are realistic? We would be glad to help. The vast majority of auction-worthy wines sell fairly frequently and within a narrow range of prices. This is especially true for younger wines that are not Chateau-direct or owned by a celebrity. Much of the potential variance in (sale) results can be mitigated by assessing the commission rates, additional fees and deal terms from a given house.
Keep in mind that the auction house is singularly focused on getting your wine in the door. Before selecting a house, make sure you understand all possible fees and commissions, the timing of sale and payments and what happens if things don’t go well – such as poor prices or low sell-thru – before releasing your wines. Can you pull your consignment without fees? Are there costs to re-list unsold items? A low sell-thru rate can be indicative of may factors. Poor quality offerings, few bidders, or unrealistic pricing. A high sell-thru rate, however, can also indicate items that were offered too cheap. In our opinion, low estimates put all the risk on the consigner, and if you take that risk, you should be compensated by lower fees. A house should be rewarded for earning a high price, not just a sale at any price.
Total sale proceeds are also not indicative of much, from a statistical standpoint. What’s more important to consider is how your consignment is positioned within the larger catalog. Will your wine be overshadowed by a marquee consignment? Are you placed at the end of a 3 day sale when buyers may be fatigued? All consignments are not equal, nor are all catalog positions. All of these variables are negotiable and merit your attention. A bigger sale is not always a better sale, and the single biggest lie in the auction business is the total sale result. Nearly every house issues a pre-sale estimate, which is the range of low to high estimates totaled, excluding the buyers’ premium. The post-sale results, however, almost always include the buyers’ premium. A sale estimated at $4-5m can easily have a result of $5.04 million ($4.1mm plus 23% premium,) and be touted as “beating the high estimate,” when in fact the sale barely reaches the low estimate! The wine media generally parrots the post-sale press release with little analysis, and these stats are often mentioned in multiple outlets. Sometimes results are newsworthy, but often they are not!
Domaine Wine Market
The Domaine Wine Market is not designed to replace auctions. We do however set prices based on realistic estimates of what the same wines have sold for recently. While you see some wild results at auction, most lots sell for exactly what would be expected. In these cases, fees and payment timing really make a difference. Our Wine Market has the silliest and lowest fee structure of anyone in the industry, with zero “gotchas” such as insurance, lotting fees, minimum fees, buy-ins, sailing fees, etc. And should you ever decide to pull a lot or change the pricing on your consignment, we are 100% flexible. In the event that your consignment is a good fit for auction, we will be the first to tell you and illustrate how you your sale will look on various platforms or comparing offers. We also negotiate on your behalf, and we can manage the entire process of selling your wine at auction.
We hope this information is helpful in navigating the wine auction arena. Please consider Domaine’s advisory team and online Wine Market a resource for your wine trading and collecting needs. Reach us via email at Info@DomaineWineStorage.com or 888-627-4556.