Guest Blog: Consignment Items
This is a guest blog, by our friend Mike Hanley. Thanks, Mike!
Consignment items are becoming more and more common in Charity Benefit Auctions today and I thought for one of my Blog Posts we might discuss the various sides to this issue. There are many strong opinions on both sides of the issue and I’ll try to cover them both.
First let’s define what we are talking about and what we mean by “Consignment” Items. Recently we conducted an Auction Gala where two of the items sold were a Framed Untouchables Movie Poster signed by Actor Kevin Costner and a Guitar signed by Country Music Singer George Strait.The items weren’t donated. Rather, the Non-Profit acquired them from a company that specializes in memorabilia auction items on consignment. The pieces sold for a total of $2250.00 The reserve on these two pieces was $450 each. Therefore the consignment company was paid $900 and the Charity realized a Profit of $1350.
Signed sports and music memorabilia, and experiences like tickets to events such as the Grammys or Oscars become more difficult to find as the competition for these items grows. This is of course a natural progression and is to be expected as more and more organizations hold fundraisers with an Auction component. (Which we heartily endorse). Enter consignment companies: for-profit enterprises that have access to these items and that sell them to nonprofits for their silent-auction tables and Live Auction Galas. They are not all big companies, some are small one man operations. In full disclosure, we have worked with Chris Tyson of Tyson Sports Fundraising here in Austin Texas. http://www.tysonsportsfundraising.com/
If the item does not sell, it’s returned with no fees attached. If it does sell, the Charity realizes a profit of whatever the winning bid was, minus the reserve price of the item and donors go home with a signed jersey, guitar or hard-to-get tickets for example.
The appeal of this kind of thing is easy to understand. It’s a risk-free way to get popular, hard-to-obtain items in front of donors. It also makes it easy on the organization, which doesn’t have to do the work of finding an item and assigning a fair market value. It’s so much more fun to just plan the party that some committees will take any chance to avoid the uncomfortable step of asking their friends and colleagues for money and items. In some cases procurement companies will ask the Charity if they can just stock the entire Silent and Live Auction.
So this is a Win/Win Right? Well, Maybe..
Those that advocate against this kind of Auction Item Booster say that a majority of the guests at any given charity gala normally think the auction item (Trip, Jersey, ect.) they are bidding on is 100% donated. Therefore they feel good about bidding way more than the value. Some Auctioneers call this “irrational philanthropy”. The issue can be that once they find out that some of the proceeds from their winning bid are actually heading out the door to a “for profit” organization they might feel a little “Swindled or deceived”. (Or not)
What varies in this equation is how nonprofits tell donors that the auction item they placed the winning bid for was purchased, not donated. “No one’s ever asked, and whether they care or not, I don’t know,” said one Non Profit Executive. She continued,“People like nice items, and if they can afford them . . . they know the Charity is getting the money.”
Another side of the issue is how Non-Profits are rated on such sites as Charity Navigator. These organizations are now rated by what percentage of their revenue goes directly towards services, rather than expenses. So, even though they could made $1,000 gross and $500 net on a consignment item, they would need to report that as receiving $1,000 with only $500 going to direct services.
Finally take a look at this story by Hagit Limor of Fox 19 in Cincinnati Ohio. It refers to some “Fake merchandise” sold at Charity Auctions recently at the Rusty Ball.
In the end if you are going to work with a vendor you should do your due diligence and make you trust them. Back to Chris Tyson. When a Charity asks us for these types of items we refer them to Tyson Sports Fundraising. I’ve been at events and seen Chris getting the Autographs (From Jay Leno and Mack Brown) and he always provides a time stamped photo of himself with the Celebrity with his item. This is a good business practice and much better than a “Certificate of Authenticity”.
Of course Trips and Experiences need no Authenticity but there is still due diligence needed when offering these types of items.
So if you are considering this type of thing for your Auction here is some free advice. (Worth what you pay for it)
- Ask yourself and your committee, do you really need this? If your committee is not strong enough to procure high dollar items on your own do you have the right committee members?
- If you decide to employ this strategy don’t allow the vendor or the Auctioneer to fill our entire or (even half) your Auction with consignment items. Keep the expectation on your committee to get items. That’s 100% profit for you.
- Get references. Talk to other non-profits who have used this service and don’t just talk to the ones that the Company gives you. Ask around.
- If it’s a trip voucher ask this question: How Long will it take my donor to get their voucher after they have paid us? One week, Two weeks? 30 days? Longer than 30 days on a Trip Voucher? Our advice is to walk away
- Disclose, Disclose, Disclose. Tell the Donor that there is a reserve on the item. When they pay inform them of the deal. It’s been our experience that most people who buy at Charity Auctions want the item and are fine with a Consignment item.