In My Opinion
by John Fiske
Editor-in-Chief

Good Buying

I’ve had a bunch of emails lately from various people in the antiques business about their various ways of responding to the recession. I’ve also cruised the New York shows during Americana Week, and talked to many dealers there. There’s little doubt that we’re under a dark cloud at the moment, but equally, there’s no doubt at all that that cloud has a very silver lining. There’s a lot of business being done, despite the troubled times.

Good Time to Buy
For starters, a recession can be a great time in which to buy. 1stDibs, for instance, has recently instituted a Saturday antiques market, just like the weekend yard and barn sales we used to attend in those rosy pre-Internet days. At 8 a.m. every Saturday, their dealers post items at reduced prices. Last Saturday, for instance, there were about 1,000 items in the market and the reductions were substantial – a random selection includes $2,400 down to $950; $9,500 down to $4,500; $750 down to $350 – yes, most were in the 50 percent range. I didn’t get there when the “doors opened” at 8 a.m., because I was browsing it to report on it, not shopping it. Consequently there were a lot of “Sold” signs by the time I wandered through.

A 50 percent reduction is obviously tempting: the DOW is down 40 percent, the housing market between 20 and 30 percent, so 50 percent should tempt. That means buyers should, and did, succumb to the temptation. Fifty percent off makes a good time to buy.

We had an experience in our own business that made the same point on an individual level. A collector wanted to sell us a piece and gave us the price he wanted (it was in the $2,000+ range.) We told him that a year ago that would have been a fair price, and we would have paid it. But now, with the falls in the stock market, the housing market….yadayadayada…. He agreed to rethink what he really needed to get out of it. A day or two later he came back to us with a 30 percent reduction. We bought it, priced it at 35 percent less than it would have been a couple of years ago (we reduce our margins as well as our prices) and sold it quickly. It was a good time to buy, both for us and, what matters more, for our customer.

James D. Julia, the auction house in Fairfield, Maine, emailed a brief note to their customers explaining that now was a great time to buy, and particularly to buy by attending an auction in person. The main point Julia wanted to make was that there is far less competition at auctions today than there has been for a long time. The death of eBay Live and the subsequent loss of online bidders was one reason. Of course, Julia pointed out, companies like Artfact Live and others have moved in to fill the gap, but their client base is “infinitely smaller” than eBay’s, so they bring less competition to the buyers in the room.

A depressed economy, Julia explained, always means that fewer participate in the bidding process, so the competition is less. In a recession, any auction will have weak areas where the competition is almost zero, but you can’t predict what they will be. If you’re there in the room, you can spot them, and take advantage of them.

Julia’s point was underscored by the January auctions in New York where the dealer community was buzzing with the bargains at the three major auctions. One told me that he’d left 23 “insultingly low” bids, and had won 17 of them! Another told me of a great piece of American furniture for which he’d left a cover bid of about half of what he’d have run it up to last year. He bought it for 60 percent of his cover bid.

Raising Cash
A recession can be a good time to buy, no question. But to buy we have to have cash or credit, and going out too far on a credit line is not the best of business strategies these days. Banks are doing nasty things to creditors, even those with good credit histories. So cash. But that means selling something. One dealer in New York told me that he’d just run a “50 percent off everything” sale. It had been successful, and he’d been able to feed his family for a month, pay the bills and still have cash to re-invest in inventory. But, he said, “I just had to forget what I’d paid for anything, and that wasn’t easy!”

There’s a lesson here. In a market that has recently fallen, and may be still falling, the comparison we have to make is between selling price and replacement price, not between cost price and selling price. We have to look forward, not back. Say I bought a jigger last spring for $2,000 and put $3,500 on it retail. Sadly, I still have it. I reduce it by 50 percent to $1,750 and sell it. If I look back to last year, I lost $250. But if I then buy another jigger for $1,000 and sell that as well for $1,750, in a recession year I have brought in $3,500 cash for an outlay of $1,000. I can now buy my third jigger for $1,000, have $1,500 to pay my bills, and potentially another $1,750 cash ($750 profit) from my third recession-priced jigger. Of course, I don’t have to replace it with another jigger, anything with the same price structure will have the same effect. Cash flow enables me to take advantage of good buying opportunities, immobile inventory doesn’t. I can’t think of a better way to “lose” $250.

What I have actually done with my jiggers is what the business gurus advise – I’ve reduced the value of my inventory while maintaining enough items in it to attract my customers. I’m better off owning a $1,000 jigger than a $2,000 one. But I’ve also made it a good time to buy, for my customers and for me.

I know some dealers are reluctant to reduce their prices either because they don’t want to appear to devalue their antiques, or because they’re hung up on the cost:sale comparison and not sale:replacement, and they think it’s bad business to lose money on an item. I’d ask these dealers to consider another scenario. You still have your jigger at $3,500, and you went to one of those New York auctions and bought a second for $1,000. Now, how do you price it? Do you want two jiggers that aren’t selling at $3,500, even if your margin on the second is mouth-watering? Do you try and sell the second quickly for $1,750 and hope nobody notices the one at $3,500? Or what? You know my opinion. We have to make sure that buying opportunities for us become buying opportunities for our customers.

Where We Are and Where We’re Going
My conversations with dealers in the New York shows led me to three very broad conclusions. First, times are tough (OK, I know I didn’t need to go to New York to come to that one). Second, the market has more life in it than we might expect. People are definitely buying, but they’re buying more cautiously and, more than ever, they’re buying with a sharp eye on the price tag. At the Winter Show, one of the legendary dealers in American art and antiques told me that he’d reduced all his prices, and he’d sold well. Two of his biggest sales went to buyers who told him, “Archibald (that’s not his real name), your price is so good, I just can’t pass it up.” Most dealers at the Winter Show were doing OK, and as Irene Stella said to me, “OK is the new Great!” There was still a week to go at the time of my visit, and many had big deals pending, hoping that they would happen over the next few days. At Stella’s Armory Show, most dealers were at the OK-but-OK’s-the-new-Great level. Every one, sensibly, had come with modest expectations, most had met them, and a few had surpassed them. The American Antiques Show was perhaps the spottiest of the three, with some dealers having done very well, but others being disappointed. My feeling was that the ones who had done well had very good stuff at realistic prices. But others also had good stuff at realistic prices, and had done less well; there’s no magic formula for success.

My third conclusion is that the antiques business is going to rebound very healthily. At all the shows the gates were excellent, there was terrific enthusiasm and appreciation for the great stuff for which New York is so well known. The fact that fewer people are buying at the moment does not mean that antiques have fallen out of favor; the New York shows made it abundantly clear that the passion for good antiques is alive and kicking. There’s a pent-up demand building that means that the rebound, when it comes, will be powerful.

When we’ll see it is the unanswered question. Obviously it depends largely upon the global and national economy, and more locally upon the state of the housing and credit markets, and upon consumer confidence. Traditionally, the antiques business has been a laggard, trailing the general economy by a few months. We don’t have any control over the general economy, but we do have some control over how laggardly we are – we can hasten the rebound, or we can delay it. The way to boost the rebound is to create good buying conditions for our customers. The antiques business will inevitably go through some price corrections, it will inevitably go through a general process of leveling – areas that were once super-hot will moderate. The dealers who offer good buying are the ones who will survive the recession, and more importantly, are the ones who will spur the recovery.

I came away from New York feeling that the antiques business as a whole is flexible and is capable of responding to dire market conditions; that there are enough dealers at all levels of the market who are capable of adjusting to tough times; that buyer desire is far higher than buyer performance; and that we’ll come out of the recession fit and healthy, though almost certainly leaner. The silver lining is there.

John Fiske