Trust: The Value of One’s Word in the Antiques and Collectibles Business
When I first began tracking the antiques and collectibles marketplace in the early 1980s, one of my favorite sources for pricing information was the auction catalogs of Richard A. Bourne Co. of Hyannis, Mass. Bourne sold a wide variety of antiques ranging from New England furniture to maritime antiques. The Bourne auctions produced many of the early duck decoy record prices. I remember the shock when I read in Maine Antique Digest that Bourne was forced to close because of bad business practices. How could such a successful auction house find itself in financial difficulties?
I was naïve. New to the antiques and collectibles trade, I assumed that auctioneers took the funds generated from a sale, put them into an escrow account, paid the consignors first and ran their concerns from the profits. It never occurred to me that some auctioneers would pay their expenses first—sometimes more lavish than necessary—and consignors second. Before long, such auctioneers found themselves paying consignors from a previous sale with the proceeds from their next sale. Once they find themselves in that position, it is difficult to escape.
Before incurring the wrath of the auction industry, I want to make it clear that many states license auctioneers and have specific regulations that prevent the above practice from occurring. Further, the percentage of failures is minimal in comparison to the auction community as a whole. Finally, art galleries, which are not regulated, are more subject to failure by this business practice than are auction galleries and houses.
Thanks to AntiqueWeek and Maine Antique Digest, two trade papers that are not afraid to report bad as well as good news, the antiques and collectibles community has been kept informed about those firms whose business practices are questionable and whose actions have led to bankruptcy and closing. It is a good day when I read the latest edition of these papers and do not find a story about consignors suing an auction company, art gallery or consignment dealer for failure to pay.
Reading the National Section of the June 7, 2010, issue of AntiqueWeek resulted in a bad day. One headline read “Petition filed against defunct JC Devine firm.” JC Devine was a firm that specialized in firearms auctions. A second headline read “Dean Kruse, Kruse Inc. stripped of auction licenses.” Kruse, Inc. is one of the leading sellers of antique cars. I have tracked its sales activities for over two decades. How could Kruse find himself in such a position?
The answer surprised me. He trusted his buyers. Instead of demanding immediate payment, Kruse allowed several of his best customers, whom he assumed were trustworthy individuals, to take their purchases home before receiving full payment. The end result is an uncollected debt of close to $7 million. Starting in March 2008, Kruse fell behind in paying consignors. Kruse’s attorney is filing lawsuits against those who owe him money. As Kruse will find, the law moves slowly. While Kruse’s goal is to resolve all complaints before the Indiana Auctioneer Commission in time to allow Kruse, Inc., to hold its annual Labor Day car sale, the chances for success are slim.
Kruse’s trust is not unique. For decades, Christie’s, Sotheby’s and other major auction houses provided professional dealers with a 60- to 90-day float before having to settle their accounts. Dealers were allowed to take the merchandise upon which they were the successful bidder without paying. Ideally, the dealers sold enough of their new purchases within the 60 to 90 days to pay the auction house. Unsold purchases went into inventory. Most auction companies stopped this practice in the late 1990s, when the competition for merchandise and rising costs no longer made the float feasible.
In an effort to secure merchandise, major auction companies made advanced payments to consignors based upon the anticipated sale of an object or collection. They did this through lines of credit with large banks. Besides incurring the interest cost, auction companies on occasion faced the problem of an item not selling. Although this practice has also been “officially” discontinued, rumors suggest otherwise.
In these tough economic times, more and more dealers are offering layaway. Layaway allows a buyer to make a down payment on a purchase and pay off the balance over a period of time. In the past, the time period was three months. Today, six- to 12-month payment plans are becoming increasingly more common.
In the past, the seller often allowed the buyer to take the layaway piece home at the time of purchase. This practice has virtually stopped. Dealers now retain the purchased item until the final payment is made. Necessity broke the bond of trust. Too many dealers have been stiffed.
Almost all layaway sales are based on a handshake. This approach has its dangers. What recourse does the seller have if the person fails to make the payments as promised or makes only partial payment? In the case of delayed payments, the seller usually tries to work with the buyer to bring the transaction to conclusion. Things become tricky when only partial payment is received. Is the seller entitled to keep the object and the payments with no financial return to the buyer or return all or some portion of the funds paid to the buyer? The answer depends on which side of the sale the person stands.
Furthermore, layaway never involves interest. The seller assumes the cost of keeping the layaway item out of inventory, storing and insuring it as well as the bookkeeping costs involved in keeping track of the payments. Sellers are more focused on the appearance of the monthly promised payment than on the hidden costs of layaway.
I grew up in an era when a handshake and a person’s word were sufficient. I still rely heavily on both in my business dealings. I do not require a contract or non-refundable advance when committing to a personal appearance. Occasionally, clients send me a contract. I sign them for their benefit rather than mine. I have had more than a dozen personal appearance commitments go sour over my career. “Never spend your money before you have it” is a viable business practice, one which I wish I could tell you I have followed religiously, but I would only be lying.
In order to maintain my trustworthiness, I have learned to control my promises. It is easy to make a promise. At the time a person makes the promise, he or she intends to fulfill it. Yet, circumstances arise that result in the promise going unfulfilled. A person forgets. The note is lost. More pressing issues arise. Today, I am more likely to say “I will do my best” than “I promise,” or “if you do not hear from me by such and such a time, call or e-mail. Also, remind me of what I promised.”
Trust has been sorely tested by the Internet. Everyone seems to have multiple stories about how they were deceived in one way or another—never having merchandise shipped or receiving damaged or misrepresented material. It has become a percentage game. As long as the percentage is below two to three percent, it is a livable situation.
Trust plays a critical role in the antiques and collectibles sell-buy process. The buyer implicitly trusts the seller to tell him the truth. It is what people want to believe of one another. But, the antiques and collectibles business is based on caveat emptor; let the buyer beware. While buyers are expected to understand that they must question the credibility of the object and the seller before making a purchase, few do it.
Finally, when a person in the antiques and collectibles field violates the trust of another, the consequences are far reaching. The entire trade receives a black eye. Those who do not understand are quick to assume the malpractice is universal and not isolated.
The burden to maintain the highest level of trust rests with everyone in the trade. Keep this in mind the next time you are involved in a business transaction.
Rinker Enterprises and Harry L. Rinker are on the Internet. Check out his Web site.
You can listen and participate in Harry’s antiques-and-collectibles radio call-in show “Whatcha Got?” on Sunday mornings between 8 a.m. and 10 a.m. Eastern Time. It streams live on the Genesis Communications Network.
“Sell, Keep Or Toss? How To Downsize A Home, Settle An Estate, And Appraise Personal Property” (House of Collectibles, an imprint of the Random House Information Group), Harry’s latest book, is available at your favorite bookstore and via .Harry’s Web site: http://www.harryrinker.com.
Harry L. Rinker welcomes questions from readers about collectibles, those mass-produced items from the 20th century. Selected queries will be answered on this site. Harry cannot provide personal answers. You can e-mail your questions to firstname.lastname@example.org. Only e-mails containing a full name and mailing address will be considered. Please indicate that these are questions for WorthPoint.
Copyright © Rinker Enterprises, Inc. 2010
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