Understanding Consignment by April Brown Auctioneer

Understanding Consignment

Charity Getaways

Starting with highly desirable travel packages is one the best solutions for getting people excited about your charity auction. Professional consignments are items that are specifically designed to be sold at fundraising events. Unique travel packages, unusual adventures, and sports and celebrity memorabilia to name a few. A professional consignor performs as an agent representing a third party or their own products and services and then offers the same to a non-profit organization below retail. The non- profit sells the goods at auction and pays the consignment fee within days of the event. Unsold tangible items are returned to the consignor. Trips and experiences are redeemed by the winning bidder through communicating with the consignor. The sales and redemption procedure is designed to facilitate a positive and profitable transaction for the supplier, the auction planner and the winning bidder.

To understand consignment, you must first understand the dilemma an auction chair faces. They must find hundreds of donated items in a fixed amount of time and before they know who will be attending the auction. Those items must attract competitive bids at a price this unknown audience is willing to pay. It is a daunting assignment and many auction planners do not have the time and connections to get those items donated outright. You can fast track the entire procurement process by acquiring a few big ticket consignment items with broad appeal early.

What kind of consignment inventory should you consider? Tangible items like art and memorabilia require physical inventory management and certificate items such as travel and experiences are much easier to offer. If the later is unsold, the process is simply over and no further effort is required on the part of the committee. Unsold tangible items must be returned or shipped back to the consignor and other issues can arise like damage and theft, complicating your post auction life. Still, the right tangible items like autographed memorabilia, furnishings and jewelry can be very profitable.

Using consignment inventory is one of the most powerful strategies for kick starting a donation drive and stimulating interest in your auction. You can select the right items in

the right quality and quantity from a reputable source that appeal to what you know right now about your audience. Plus, great stuff will stimulate interest and attract a new following. Consignment inventory is a sales tool and more importantly, consignment goods are free to your organization. 100% of the cost is paid by the winning bidder.

Your Questions – Our Answers

What sells best in the live auction? Unique travel destinations raise more money than any other category.

Why should we sell consignment trips? A dream vacation to Bali, South Africa, Tuscany, will give you and your volunteers something to talk about and something to draw attention to the event. Great travel packages attract donors who look to the quality of donations before they agree to donate, sponsor and advertise.

Can we get donors to sponsor the consignment fee? Major donors like to get as much attention as possible for their contribution. Consider writing in the consignment fee as part of a major donor proposal. The trip is then referred to by the sponsor’s name and that sponsor receives maximum recognition before, during and after the auction.

If we sell consigned items, then we don’t get to keep all the money. That’s right. All consigned items have a consignment fee and that fee is paid to the consignment company after the auction.

Don’t we lose money if we sell consigned items? Actually, you don’t lose money. The winning bidder is paying the consignment fee. The organization keeps all the money after the consignment amount.

Why should we pay for a trip we can find on priceline.com? The non-profit organization does not pay for the trip until the trip sells. The trip is reserved by the organization with the consignor before the auction and a check is mailed to the consignor after the auction if the trip sells. Charity Auction World vacation packages cannot be duplicated by other travel services at these low prices. Travel services like Priceline.com do not make reservations for open dates, nor do they make reservations without advance payment.

What is different about Charity Auction World travel? We work closely with the owners of the resorts so that the traveler has a personal, not corporate experience. We collaborate on every detail with the intent of creating a memorable experience for the winning bidder. All vacation packages have open dates and expire either one or two years after the date of the auction.

We pay our auctioneer a 10% Buyer’s Premium rather than a flat fee. How does that work in relationship to consignment. The auctioneer is paid a percentage of the

difference of the consignment fee and the sale price. The auctioneer should be made aware of all consignment fees and exceptions should be written into the contract with the auctioneer.

Doesn’t the winning bidder think the organization is keeping 100% of the sale amount? First, the organization is under no obligation to tell the winning bidder that there is a consignment fee. Second, the IRS allows the winning bidder to deduct the difference between the fair market value and the amount paid anyway, so consignment has no affect on the final bid and the charitable contribution.

Wouldn’t we be better off selling an item that is 100% donated? It depends on the donation. If you have a donation that nobody wants to bid on and the auctioneer is begging for a bid, that time on the auction block was a total loss. It is better to sell a consigned item that stirs bidding than pass on an item nobody wants. If your organization can get exotic vacations to desirable locations, without restrictions and blackout dates, free and clear, then you don’t need us.

Last year we sold a consigned trip and we only made $200 over the consignment fee. The board doesn’t think it was worth it. Now, there are lots of questions I want to ask you. Was there another item of comparable value and design available? Would that bidder have bought something else had the trip not been in the auction? Did the consignment fee have a profit to the organization built into it (Charity Auction World trips give the organization an immediate profit)? Was the opening bid too high? Did the organization market and pre-sell the trip to the audience prior to auction night? How was the trip described? Was anything about the trip confusing? Was the auctioneer a professional? How was the trip written up in the catalog? How was the trip marketed to the audience? Was there a point of sale display? (Charity Auction World gives you everything you need to achieve maximum sales impact)

I was at an auction where I saw the auctioneer sell 14 trips to Hawaii. Were those consigned trips and why did he sell so many? Yes. It is likely the auctioneer was getting a cut of the action on that trip. Probable scenario: Trip valued at $2500. Consignment fee $1100. Auctioneer commission $200. Opening bid $1500. Trip sells for $1600. The organization made $300 per trip and the auctioneer made $200 per trip. The organization grossed $4200 and the auctioneer gleaned $2800 and the organization wrote a check after the auction for $15,400. Was it worth it? The answer is “yes” if that was the only thing those guests were willing to buy at that price. The answer is a resounding “no” if the auctioneer sold out too soon before the competing bids had dwindled to the 2 highest competitive bids which may or may not have represented a larger profit for the organization but guaranteed a much lower commission for the auctioneer.

Let me explain. Auctioneers have to “do the math” as they go on items with duplicates and multiples available. If that auctioneer had a sense that this audience’s buying power

was not much over $1600 he may have felt this was the best course for the organization to make $4200. The final sold price would have to be $3200 and sold too 2 bidders to raise the same $4200 for the organization. I have no way of knowing if there were 2 bidders willing to bid that high since the auctioneer did not use that tactic.

Did 14 bidders get a deal? Maybe. Let’s face it. It is always great to get a deal if you are the buyer. Sounds like 14 people got a real good deal, and deals have an upside. The deal buzz will attract more ticket sales in the coming year. 14 people (probably 28 since most trips are for 2) will have an amazing experience and talk up the organization and likely return to the next auction. If the travel experience is positive the memories will cement an alliance between the winning bidders and the organization.

Didn’t the organization lose $15,400? Once again, that depends. That money may not have been collected anyway if the organization didn’t have what those buyers wanted at that price point. A trip to Hawaii and a round of golf at a local course are not comparable. It is just as likely that those guests may not have raised their bid card had the Hawaii trip not been in the auction.

The good news is that the trip flushed out an area of peak interest for their guests and they can procure and plan for those bidders at the next auction. I would consider procuring more trips to various tropical locations, and sell those trips throughout the auction.

Our auction has a budget and we keep our costs under 35%. How can we convince our Board to add the expense of consignments? The most important thing to remember is that consignments are not an expense. Consignment generates revenue and the fees are paid by the winning bidder. Consignment fees should not be calculated as an expense. The trips cost the organization nothing. Zero. Zip.

Can we use a consignment trip as a raffle prize? Yes and you should. Ticket sales are driven by trips like our luxurious relaxing trip to Bali or the exciting safari to South Africa. Raffles can also be sponsored and that sponsor fee may completely cover or offset the consignor fee.