Why doesn't consignment work?

 

We need to talk about a serious matter today. It's called business. If you allow a couple of minutes to familiarise yourself with the core principles, you will have a better understanding of the matter; consequently, you will benefit from the insider knowledge I am happy to share. 1. There are three parties involved in the business of second hand watch dealings. The seller, dealer, and the buyer. 2. A single, one-off transaction could be structured in such a way that it is beneficial to any party. However, multiple transactions with multiple parties can only take place if every party gets what they want, repeatedly. 3. Second hand dealing is a complex process. 4. Expectations and requirements: Seller They are a smart and mature seller who understands two key issues: the security of the transaction and the value of time. A smart seller is not going to waste their precious time dealing with time wasters, nor are they willing to risk their life inviting strangers into their home. Disposing of a large collection of any kind is a serious challenge.  5. Expectations and requirements: Buyer A sophisticated buyer has multiple requirements, coupled with very high expectations. The top priority is price. The price has to be right. The right price is hard to define, but 20-30% below retail for near mint stock is 'about right'. Overall condition of the watch, security of transaction, guarantee on performance, insured delivery and post sale servicing and maintenance are some of the other crucially important requirements. Meeting and exceeding those expectations is essential for repeat business.  6. Dealer's role: The dealer's role is to generate profit, grow the business, and keep both seller and buyer happy.  Selling is easy. Finding desirable stock at the right price is extremely difficult. Dealers are not gamblers, they are risk averse. They are not watch collectors either, they buy with the brain, not the heart. A dealer's greatest asset is their reputation. 7. What is a consignment? Consignments are deals where the seller sells the watch through a dealer. The consignor (watch owner) maintains the rights to the watch until the watch is sold. The selling price is set by the owner, while the risk of transaction is on the dealer. After the sale, the dealer is paid a fixed amount by the owner. While in theory, a consignment sale may look mutually beneficial, in reality, such a form of selling only benefits one party. Since the watch owner is not in a hurry to dispose of the watch, and retains full control of the sale, the asking price is almost always set too high. Practically, the dealer has no say nor authority to lower the price; so the watch remains unsold for a long period of time. On the other hand, the dealer bears all the responsibility and liability for the watch, including the post sale guarantee. The watch is eventually sold to a buyer who is a novice watch enthusiast, who sooner or later finds that they have been ripped off, paying above market price. Such a buyer would never return, and this is why accepting watches on consignment is cancer to the watch dealer.  A dealer who accepts goods on consignment will sooner or later run out of stock and customers.  Dealers who publicly seek goods on consignment either don't care about their reputation or haven't sufficient funds to run a successful business. Entrusting your watch to a dealer could be very risky as well: dealers do go out of business, companies change ownership, and deals where one party has full control over the other are recipes disaster.  In conclusion:  If you are thinking of disposing of your watch collection: find a reputable dealer who is capable of meeting your expectations. Meaning: money in your account, to the last cent, straight away.  As a buyer: the best place to buy a new watch is the brand's watch boutique. The second best place is from a reputable second hand dealer. Everything else is a casino.  No matter what you do, stay away from consignment stock. It's a cancer that will slowly destroy your appreciation for horology and ruin your enjoyment of fine watches - for ever.

Australia's Greatest Art Fraud

A criminal investigation is under way into the art dealer's affairs after he vanished with at least $30 million in artworks and money.


According to the Sydney Morning Herald, three customers "bought the piece (the above paint) from (dealer) and are adamant they own it. Yet none is in possession of it and collectively they are missing $120,000".
http://www.smh.com.au/national/australias-greatest-art-fraud-20090523-biv6.html?page=-1
You must read the entire article - it is definitely and eye opener into murky inner workings of Australian art trade.

You might ask yourself, "how can someone scam so many people with just one single painting?". Well, nobody knows for sure, but my first guess would be abuse of trust and accountability as a plausible factor that could induce people in being conned.

Almost every day, I receive phone calls from prospective customers who wish to sell their watches. In essence, this type of transaction is a straight-forward one - upon inspection, I would make an offer to purchase the watch for a certain amount of money. If the offer is accepted, the personal details of the customer as well as the serial number of the watch are recorded and filed, and a cash-cheque, payable at the Bank across the road, is issued.

Nevertheless, clients sometimes ask me if I would agree to take a watch on consignment. The answer is always NO. And I have more than one reason for not wanting to be involved with consignments.

A consignment is an agreement between the seller and the dealer, where the title of the goods (ownership of the watch) remains with the seller, yet the watch is physically in the dealer's possession. The dealer is entitled to sell the watch on behalf of the seller, keep a profit margin from the final sale amount and pay the rest to the seller.

For laypersons, it would seem that consignment is indeed an advantageous agreement for the dealer: the latter does not need to spend a cent in the process and if the watch does not find an owner, he can always return the unsold item to the seller.

Unfortunately, this is not always the case: When entering into a consignment agreement, the dealer takes on full responsibility for the watch in case of loss or theft, accepts to undertake any eventual repair or restoration and provides a guarantee on performance to the buyer. Being 'locked in price' and 'left at the mercy' of the seller, who can at any time opt out of the consignment contract for any reason whatsoever, is like walking on thin ice. And if I didn't have enough money to buy that watch in the first place, then obviously I cannot afford it (and obviously should not be trusted to take care of it!)

But there is still one more fundamental reason why I would never consider consignment:I do not want to be trusted unconditionally. Taking care of other people's goods is nothing but a burden.

So here is my advice to sellers and fellow dealers that could help everyone save time, money and headaches:
limit your level of trust to an absolute minimum - or even better: trust no one! Always exchange your goods for a real and tangible asset - cash.

"I owe you" is as bad as "you owe me".