Hard to know what “retail price” is. Just to take an example I looked at Wine Searcher for the '86 Mouton and found prices ranging from $880 to $1618, which I would take to be analogous to the low and high estimates at an auction. What I have experienced in five years of observing and bidding at HDH auctions is that fewer and fewer lots of lesser value are being accepted for sale, and from beginning as variable the prices are now pretty consistently at the top or over – sometimes way over – the high estimates. It’s been a long time since I have taken any lot I thought was a real bargain.
Why don’t they just list a “Chinese Auction Estimate”
3-4 years ago I trolled through auction books (mostly Zachy’s to be honest) and either bid on-line or placed advanced bids on a few lots. At the time I was getting what I perceived (and pretty much knew) were good to very good deals on wines (Burgundy) I wanted. I was probably around a lot or 2 over 3 months or so. I wasn’t trafficking in the legendary stuff, mostly 1ers from the less than auction-friendly vintages (got a terrific deal on 3 cases of '98 Gouges 1ers). I don’t even bother anymore. Even in the ground I was looking in both low estimates and then actual purchases became so (mostly) out of whack with what I could find in my regular wine circles that I gave up looking. I think the last time I looked at a catalog I was killing time on an airplane and had no intent of making any bids.
One more post and I’ll let this go. (I do recognize that I’m not being borne aloft on a surge of hosannas here.) By chance, I got around to the latest issue of The World of Fine Wine last night, and lo and behold there’s experimental evidence that supports my point set forth in Charles Spence’s article. It turns out that behavioral psychologists are perfectly well acquainted with “end anchoring” effects. If you tell people what value to expect for a good, it will shift their perception of value - to the point that one experiment assigned a random value equal to the last two digits of the subject’s social security number to common goods and asked the subjects if they would pay it. The next question asked the subjects what they would pay. And, as it turns out, people assigned a high initial value by their Social Security number were willing to pay more than those assigned a low initial value. Of course, this means nothing to us - wine lovers are hyperintelligent and hyperrational, and we are immune to tactics that might work on the plebes.
Now, as I’ve said (and as some of the respondents seem to persist in ignoring, apparently because knocking down straw men is satisfying) this isn’t really a moral issue, in the sense that one can make an argument that an auction house’s job is to extract as much money as possible from buyers. But, as a buyer, I see no reason not to pursue my self-interest, nor do I think that caveat emptor is a moral imperative. Some auction houses inflate estimates for the same reason that retail “sales” present their discounts as a percentage of a nominal price that no sane person would ever pay, or wine sellers might substitute their in-house 90+ point score for the excortiating review of a respected critic: it works. They’re allowed to do that. We, as consumers, are also allowed to call bullshit. And that’s what I’m doing. Just as auction houses can try to fleece the rubes, the rubes can try to convince others not to be suckers - to look at which houses consistently estimate higher than others, to the point of estimating that the minimum price bid for a lot will be greater than current retail, and take their business elsewhere. I choose to focus my dollars on auction houses that seem to function as honest brokers and provide estimates that reflect the wider market. If you disagree and are happy to pay more, it’s your money. Have fun. ![[cheers.gif]](/uploads/db3686/original/2X/0/0ff9bfcdb0964982cd3240b6159868fbdf215b1a.gif "cheers"){kind=small}
Paul, who do you find to be high, and who is significantly lower?
Totally fair question, but I’ve tried to avoid pissing on specific businesses online. There are only so many houses in the US, so I would just encourage people to compare for themselves and vote with their feet.
The auction market is fluid and the current market is about as fluid as I have ever seen. Add to that the need for most houses to put their catalog together well in advance of the actual auction date. HDH has a different philosophy from Acker, but both are hammering in just about the same neighborhood on similar wines. I noticed that even HDH’s estimates were much higher in the last auction.
Retail prices for wines more than a couple of years are meaningless to large collectors, brokers and investors. The fact that some retailer has 3 or 6 bottles of 2003 Mouton at 10 to 20% below what a large buyer is willing to pay at auction is meaningless when that buyer is attempting to buy 10 to 20 cases in owc before it hits $400 a bottle.
In the last few auctions even younger wines are being bid up, especially in this country. I think wine buyers are getting ready for another reset for release prices. A huge amount of these are trophy names that are not coming back. Americans in the past bought a tremendous amount of gray market wines all over the world. We have now become a “gray” market source for the rest of the world. So what may seem like a high estimate here is close to what someone else half way around the world is willing to pay.
Let me preface this by saying that the only wine auctions I’ve ever taken part in are at WineCommune and WineBid - definitely NOT the types you’re talking about here . . .
If everyone was getting wines BELOW retail at these auctions, there would probably be NO discussion - everyone would stay ‘silent’ because of the ‘steals’ they were getting (as oftentimes happens on winebid). The reality is that auction houses realize that that capability of ‘shopping around and doing your homework’ is so much easier now than ever - yet there are scores of people who simply do not partake in this. This, to me, is simply amazing.
Someone will ‘win’ and womeone will ‘lose’ in the auction process, and my guess is that ‘the house’ (ie auction house) usually finds a way to come out on top ![[snort.gif]](/uploads/db3686/original/2X/b/bdc3944606213c4dca6c1169cf0a166c8bc4f8c9.gif "snort.gif"){kind=small}
Cheers.
Excellent point, Jeff.
The hardest job for an auction house is managing expectations, for buyers and sellers alike - but wine collectors are not naïve when observing the trend in any house’s pricing strategy. You might argue the higher ranges bring in higher bids across the boards, but you can also argue that higher estimates scare away potential bidders. You can argue that low ranges bring in more buyers, but many of those buyers are chasing low-ball prices with ineffective bids. I would venture to guess that there is no conclusive correlation between the higher prices realized and higher published estimates. Some years ago, before market conditions and prices-realized were so easily accessible, estimates were a more powerful influence than they are now.
A house that uses ‘optimistic’ estimates is going to overpromise a consignor and concordantly spend a lot of time apologizing for items sold at reserve - though that reserve may have been set to a decent market-average price. A house that low-balls estimates to lure in bidders is giving the impression that a bargain is there to be had though sophisticated buyers know better - but there is no excuse to falling victim to either ploy in the modern marketplace.
Our best and happiest consignors are the folks who have done the research and are not surprised when estimates come back. They know what their wines are worth and don’t necessarily expect to beat the market, however much we are hopeful. Our best buyers know what the market is commanding for a particular wine and tweak the bid up or down based on provenance and their own need for the wine. It has more to do with what winemarketjournal.com has to say about a wine than what the house or the consignor would like to see.
Thanks for the additional perspectives - it is an interesting game. Just a couple more thoughts:
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This is not just a “that’s how auctions work” phenomenon; it seems pretty clear that different houses have different strategies - while I don’t claim to have done a serious statistical analysis, from experience they certainly frequently have substantially different estimates if you look at their contemporaneous catalogs side by side, and which houses are on the high end seems pretty consistent. It doesn’t surprise me to hear (and I appreciate the input) that not everyone in the business thinks the same way.
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I don’t think “collectors want quantity” explains the phenomenon. Typically auction lots are a case or less, and I could point you to examples where retailers claim to have higher quantities available (the Crush example above was one). OWC also doesn’t seem to explain much of the differences in estimates; even within a single house’s estimates, it’s not as if the OWC lots are typically estimated substantially higher than the others.
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It wouldn’t take much for the “highball” strategy to be effective. You only need one high bidder, and if you have two they drive the auction. Let’s say four out of five bidders are highly educated and walk into the auction knowing exactly what the recent auction prices and current retail availability are for every wine they want to bid on. (My instinct is that’s very generous, but let’s continue.) If only a couple of interested people are influenced, consciously or unconsciously, by the estimate range as the “normal” price, raising the estimate still raises the bidding.
Anyway, interesting things to think about. In the end, people will vote with their dollars, but an informed electorate is good for us all.