Innovation breeds diversity, and auctions are no exception. So in the coming century, diverse auction models will proliferate. Buyers will more often find the exact coins they want, while consignors will buy only the services they need.
To better imagine where auctions are headed, consider where they've been. Ten years ago, the typical coin auction differed little from those held fifty years earlier. True, the printed catalogs were nicer in 1990, but that was more a function of rising coin values than technology. In fact, the numismatic auction business's only major late-20th-century innovation occurred in 1986 when Bernard Rome invented Teletrade. Rome fashioned ingenious new commission structures, marketing, and protocols (phone and computer bidding only) based on speed, economy and convenience.

Heritage's Bullet Auctions, also limited to certified coins, followed suit shortly thereafter, and gained popularity by sacrificing a little class for a lot of speed. We connected a gigantic, programmable Xerox machine to our database, and reduced turnaround -- the span between receiving coins and paying the consignor -- from 80 days to 30. A nice innovation, but like Teletrade, a niche market, not a revolution.

Then the Internet happened.

To understand the scope of the Internet revolution, you must start with eBay. Founded in 1995 during the Internet's infancy, eBay allowed everyone to buy and sell everything with everyone else. Anyone with a computer and credit card can run auctions there, and if you can write nice descriptions and use a digital camera, you'll often get great prices for whatever you're selling. Since eBay handles no merchandise or payments, commission rates are a fraction of what traditional auctioneers must charge. With an astonishing four million auctions currently running, maybe 80,000 involving numismatics, I expect eBay to dominate the person-to-person auction space indefinitely. eBay's "critical mass" creates a nearly insurmountable competitive advantage. Time is valuable, so buyers go where the most sellers are, and vice versa.

eBay's genius is its bare-bones model. Sellers provide their own cataloging, imaging and marketing. Buyers research each item, then decide what to bid. Recently, a swarm of companies have emerged to serve eBay users (and competitors). For an additional commission, consignment services describe and image your coins, list them, and deal with the buyers. Andale, AuctionRover, AuctionWatch, and numerous others cater to larger users with automated listing, image hosting, global search functions, timed bidding, order fulfillment, payment, escrow, credit card services, customer relations, etc. Innumerable books and software programs teach how to build an eBay business, or to buy more effectively there.

Competitors often stress eBay's lack of consumer protection, but fraud is rare, and will abate further through automated escrow-payment services, expertization, and other checks and balances. eBay has already invested in companies whose technology will address confidence issues.

I think eBay's only major long-term disadvantage involves high-end merchandise - at least until bidders can grade as accurately by computer as in person. Until then, no knowledgeable collector or owner of premium-quality coins (i.e. that grading services might upgrade upon resubmission) will give up the potential-upgrade premium by consigning to a strictly online venue. Thus, I'm pleased to predict, eBay won't likely put Heritage, Stack's or Superior out of business anytime soon.

Heritage's most recent Long Beach auction exemplifies the opposite approach to auctioneering. We spared no expense on the catalog, mailing thousands of them to our best customers, and sustained huge additional costs by bringing our entire auction and staff to a major coin show. We posted every lot on our Website, too - including descriptions, full-color images, third-party pricing and rarity data, and interactive bidding (Heritage notifies Internet bidders by email the minute someone else outbids them).

We also introduced "Previous Prices from Heritage Auctions" on every lot page. To help determine bids, bidders could easily compare each coin to descriptions, prices realized, and images (if sold recently) of similar coins. Needless to say, such information exponentially increases bidder confidence, and thus, bidding activity.

In fact, Internet bidders outnumbered mail bidders by 2:1 - and outspent them by 5:1!

Now consider that Heritage spends over $100,000 producing and mailing our catalog. Granted, our Internet software cost $1.5 million to develop, but posting each catalog incrementally adds just a few thousand dollars in extra labor. Within three years, we might produce hundreds of printed catalogs rather than thousands, and maybe someday, none at all.

The subsequent logical steps for high-end specialists like Heritage seem obvious:

Paper catalogs replaced by CD-ROMs, enabling bidders to view lots on computer screens, or even print full-color catalogs at home on laser printers.
So-called "narrowcast" e-catalogs, geared to each bidder's individual interests.
Pricing and population information updated hourly until each coin is sold.
Buyers participating worldwide in real-time from computers and other connected devices.
Artificial Intelligence and expert systems software helping buyers determine optimal bids for each coin based on need, budget, and historical availability.
Loans, storage, and other options available to buyers.
Collection inventory software, wantlists, and public coin registries synchronized automatically at the moment of purchase.
Seamless connections between auctioneers and grading services, whereby coins can be consigned and catalogued for sale within minutes after certification.
And that is likely just the beginning. Next month, I'll cover some of the more radical possibilities.

Copyright 2000, published by permission from the March 13 issue of Coin World.