There are many reasons for sellers to want to set a reserve price. Some sellers see it as a way to protect their investment while other sellers might want to make sure that bottles that have sentimental value don’t sell for too little. Occasionally a bottle is so rare that we recommend a reserve, but when does placing a reserve become a barrier to selling your bottle? When does adding a reserve become the difference between achieving a good price for your bottle and it failing to sell at all?
Here are some tips on how to set a reserve, and when not to place reserves at all.
First of all, what is a reserve price?
A reserve price is the minimum price set on a bottle that must be reached before it can be sold.
A reserve price is the minimum price that a seller will accept as the winning bid on their bottle.
The bottle can only be sold if bidding reaches the reserve price.
The winning bidder who offers a price lower than the reserve that the owner will accept is prevented from winning the auction.
So, is setting a reserve recommended?
This is the big question and there is actually a lot to consider. It’s true to say that in most cases we don’t recommend reserves at all.
The reason for this needs a bit of explanation, but basically it comes down to one thing. In our experience we find that the mere presence of a reserve can put off potential buyers from bidding at all.
Think of it this way, in order to achieve the best price possible for your bottle you want to attract as many potential buyers as possible.
Auction bidders are ultimately looking for good value. When there is no reserve on a bottle, bidders know that their next bid may be the one that wins it for them, and bidders can become invested in a bottle earlier in the auction.
If a bidder keeps seeing the ‘reserve not met’ message, they may lose interest too early.
Look at our past auction results online. There are countless examples where two identical bottles, one with a reserve and one without, were sold in the same auction and the one without a reserve reached a higher price.
For example, in our January 2020 auction a bottle of Whyte & MacKay 1966 50 Year Old with no reserve sold for £150 more than a bottle which had a reserve price set.
Look closely at the bidding history on these and you might notice that more bidders competed for the bottle without a reserve.
When doesn’t a bottle need a reserve?
Look at market trends. If the bottle you are selling appears at auction regularly look at the prices it achieves. If the hammer prices tend to be quite stable it is a good indication of the price your bottle will fetch, and means it is less likely that yours will suddenly sell for a much lower, or higher, price.
Don’t want to take the risk?
This is perfectly understandable too. If you really want to set a reserve price then here are some simple tips to set a reserve that helps achieve the best hammer price.
Don’t set your reserve at the upper range of its estimated value or even on the most recent auction sale results. It may seem counter intuitive but this tactic doesn’t tend to work and bidding often stops well short of the reserve price.
Don’t set your reserve based on retail list prices. Retailers’ prices include a retail margin and VAT. There is no VAT charged on the hammer price on the Auctioneers Scheme.
Do set the reserve at around 50% of it’s higher valuation, and no more than 70% of its lower valuation. The aim is for bidding to meet your reserve early on in the auction, this allows plenty of time for bidding on the bottle to build momentum.
We provide free valuations and are happy to advise on reserve prices too.
When is it a good idea to set a reserve price?
In some circumstances a reserve price is a good idea. There is no hard rule for when, but here are a couple of examples:
A valuable bottle that has limited niche appeal might not attract many bidders, so here we might recommend a reserve along the guidelines above.
An unusual bottle where there is no recent sales history won’t yet have a market value, so a reserve provides a safety net and limits risk while allowing the bottle to find its market value.
A reserve price is a minimum price a seller is willing to accept for their bottle from a buyer.
If the reserve price is not met the bottle remains unsold.
Reserve prices are unpopular with spirits buyers because there is uncertainty about the minimum price that must be paid to win the auction.