First. We get the rush to “zero %” in digital marketplaces like OpenSea and Blur. These operate as highly liquid markets (where “floors”make up a lot of the volume turning NFTs into semi-fungible assets). Clearly on these marketplaces zero % (or very marginal) fees are the norm.
Now. Contrast that to major auction houses like Christie’s, Heritage, Goldin or PWCC. All of these houses have a standard fee structure around 20% for their live/catalog auctions which is added as a buyer’s premium to the final hammer bid.
The buyer’s premium is certainly considered by prospective bidders in their purchase decisions and when the market looks at past “comps” we clearly look at the final price paid (inclusive of the buyer’s premium).
The Buyer’s Premium offers market transparency which also helps more efficient peer-to-peer transactions because there is a clear understanding of what the net would be (to a seller) for choosing to an asset on their own, via catalog auction at a house, or on a scaled seller fee marketplace (like eBay).
First we have to acknowledge that buyer’s premium auctions specialize in truly non-fungible assets.
Whether it’s a Picasso, a Jordan rookie card or a rare game used jersey, there may be a rough idea of a “comp range” but any auction lot’s success is far more dependent on how well the auction is marketed and how many of the (right) eyes see it. These assets are unique (truly non-fungible) and they benefit from being in a catalog auction where their unique attributes can be highlighted.
- Serving as a trusted platform for buyers which increases buyers confidence. Creating custom themed experiences to assist buyers with better asset discovery.
- Helping to identify unique nuances in the assets that are relevant to prospective buyers.
- Structuring auctions in such a way to provide maximum discovery of all assets.
- Marketing the auctions via paid digital media.
- Bring the auction houses existing buyers to the auction to create exposure among known collectors
- Working with asset brokers to insure passive collectors are able to deploy their liquidity into auctions without having to participate themselves (sometimes auction houses offer this service in house themselves).
- Getting the best price for assets.
A major part of the decision is market consistency. We want those familiar with traditional auction house experiences to have a seamless understanding of our mechanics as much as possible.
We already have the unavoidable “friction” of requiring a crypto wallet, a purpose built currency and a “spot bidding” mechanic that is very different from a traditional auction house, and we decided against also using a different (unfamiliar) fee structure.
In addition, as we work to develop a long-term business model it’s important that we have room to earn fee revenue from our efforts perform the various services discussed above.
So why have a buyer’s premium on an NFT (like a CryptoPunk for example) when there are already liquid zero fee markets?
Well. The short answer is auction consistency and it’s how our platform is built. Buyers can easily price it in and pay in line with market price (what they could get the asset for on OpenSea). We fully acknowledge it wouldn’t make much sense for a seller to consign a “floor NFT” for a catalog auction (whether that’s with us or any auction house).
That said, we certainly want to offer some digital only NFTs (meaning no underlying physical asset) as part of our $BPX rewards and auction framework. So we will either offer NFTs we own or we will work with consignors for special promotions as it relates to their buyers premium.
It is worth noting that we do plan to add a peer-to-peer trustless marketplace (that trades exclusively in $BPX) for zero fees. This marketplace will benefit from the exposure created by our auctions and will be a better home for purely digital NFTs in the future.
Buyer’s premium is part of the total price paid by bidders. It’s easy to see the final amount (with buyer’s premium included) and account for it in your bids.
- 1.Buyer’s premium is part of the total price paid by bidders. It’s easy to see the final amount (with buyer’s premium included) and account for it in your bids.
- 2.Our #1 projected growth driver for the years ahead is onboarding existing IRL collectors into our ecosystem. These people are overwhelmingly “buyer’s premium natives” and they will instantly understand this aspect of our auction mechanics.
- 3.The buyer’s premium can be reduced (by giving sellers a % above the hammer) until we have the appropriate scale to justify full fees. At full scale the market will either support the fee or we need to work harder to make the market do so. Simply stated, if the buyer’s premium isn’t beneficial, consignors won’t send us cards and other assets to sell on their behalf.