What is an online wine auction?
A wine auction is a dedicated marketplace to buy and sell wine and other
bottles of alcohol in an online (internet) setting. They are
mostly used to sell unobtainable and rare wines typically sourced from
private collectors. The auction process enables a negotiation between
interested participants (buyer and seller), consisting of placing bids via
a third party (an auction house) to determine the price at which the wine
is now valued.
Live auctions? Don’t drink and bid!
Nowadays, there are very few auction houses that deal with live wine
bids. Live auctions are usually reserved for charity events. Whilst these
events have honorable intentions, the resulting hammer price, typically
induced by free flowing alcohol and live bidding, can give a skewed effect
to the realistic market price of wine bottles.
Why buy wine from an auction house?
- Aged wine; Fine wine is meant to change flavor, texture
and complexity as it ages over the decades. A slow, and sometimes, a hit or
miss proposition that requires a large proportional investment in patience
and capital. They give everyone the opportunity to buy well
stored, already aged wines at a fraction of the cost of DIY.
- Value for money; Well stored fine wine will often come
to auction because of unfortunate circumstances (death, divorce, debt,
doctors orders). This creates an availability of stock at unprecedented
prices, typically 40% less than retail but always valued at market price.
- Discovering liquid gold; Many wine dinner tales have
kicked off with stories of discovery and exploration at auction, of secret
cellars revealed and treasures obtained. There is a limited and closely
held pool of information available about the quality of older wines and it
is often impossible to find out how good an older wine is drinking now.
With research, patience, tolerance and experimentation it is very feasible
to pick up incredible discoveries of excellent wines for a pittance that
everybody else has been ignoring.
Where do the wines come from?
Typically from private collectors, restaurants, wine investors
liquidating their portfolio, estates, divorces, foreclosures, doctors or
dentists orders – anyone who has bought wine and decided they can no
longer hold on to it. Many of these sellers have been collecting for years
and they generally have the eye and knowledge for selecting excellent
vintages, varietals and producers. As such you have a great opportunity to
pick up a decent bottle of wine for a very competitive price, without the
time and expensive of having to cellar them yourself.
Are auction wines a good investment?
Whilst wine should never be considered an alternative investment choice,
you will get much better value when buying wine at auction than you will
buying it retail.
Any wine, typically, loses around 40% in value when you walk
away from a retailer, the value resets to wholesale prices as a default
and it is only over time that a reputation may start to form value-added
critical mass around one or more attributes such as the winery, the
vintage or the label.
The reality is, unless you have the money, time, knowledge and patience –
not to mention the appropriate storage, investing in wine is likely to end
up in salty tears rather than vintage champagne.
How do I buy wine from an auction house?
If you are looking to buy wine at auction, as with most things these
days, the secondary market primarily lives on the internet and google is
your friend. There are many specialist auction houses both in Australia
and overseas that deal exclusively with wine, whiskies and other spirits
that have become increasingly popular to both buyers and sellers wanting
to start a collection or cull their existing one.
The best way to start buying is to research websites that specialize in
selling wine on the secondary market. Auction houses such as Wickman’s are
some of the most prominent companies in Australia for buying and selling
wine, both collectable investment lots and items that are ready to drink
now or in the future.
What is a ‘Lot’?
The term ‘Lot’ refers to the items for sale in the auction. This can
include one or several bottles of the same wine, a mixed number of wines
from various producers, a case of different vintages, or even accessories
that come with a bottle (i.e. a specialty stopper, presentation box, set
of glassware etc.). Each lot has a designated number to differentiate it
from other items and will detail in the description what is included in
that lot number.
An auction lot should consist of the following information:
- The item you will be bidding on.
- Quantity you will be bidding on.
- The date and time bidding closes.
- A short description describing the condition of the bottle.
- Any provenance (ownership and storage history in the case of wine).
- The opening and current bid.
- The history of the bidding (often not available until the auction closes).
How many am I bidding on?
The auction house will state in the listing how many bottles are
included in the item lot, and whether the reserve price indicates that you
are bidding a certain price per bottle, or for all bottles combined as one
lot. This can appear confusing, as multiple items listed for a reserve
price might seem like a bargain, until you read the fine print and
discover that you are bidding your preferred amount for each bottle,
rather than as a collection of three for the one value. It always pays to
read the entire listing before placing a bid, otherwise your $30 bid could
turn into a $90 bid when you realize the price was per bottle for 3
bottles, not 3 bottles for $30. Remember, all sales are final, and you
will be expected to pay for your mistake.
How do I know what condition the wine is in?
All items that pass through a specialist auction house are inspected by
a team of experts before they even make it to the auction itself. Bottles
will be assessed, photographed, catalogued and professionally stored in a
temperature-controlled environment until they are sold. The latter is
especially important, as wine that has been improperly kept could bake
inside the bottle at temperatures near or above 30 degrees (Celsius),
leaving you with homemade vinegar instead of that incredible wine you were
hoping for.
Lot items will usually include a written description of the wine being
offered for sale, stating the producer (winery), the varietal (what kind
of wine), the vintage (what year it is) and what condition the bottle is
in. Photographs of the item make up part of the listing information, and
can often be a very valuable source of information for the buyer, as this
gives you the chance to assess the ullage (the level of the wine in the
bottle), the condition of the bottle, the labels, and if there is any
indication of historic or active weeping. It is imperative that you check
the authenticity of a photograph that accompanies an auction item, as
occasionally you will find a stock image in place of the actual item you
are bidding on. This is especially important when dealing with an older
vintage of wine, where a small variation to the condition or level of a
wine can mean a big difference in the value. If in doubt, always double
check with the auction house.
Provenance may also be included in the listing, which details the
ownership history of the wine being sold, whether its from a private
collection, a restaurant, a museum release, or straight from the cellar
door of the producer.
Making sure to read over an auction listing is the best way to answer any
questions you might have about the wine on offer, as all the information
is usually included within. It can even be as simple as helping to
recognize the label from a wine you enjoyed at a friend’s wedding, when
the name may have escaped you, but the memory of the good drop remained.
What is ‘weeping’?
Weeping is when wine has leaked through the cork or seal of the bottle.
It can indicate poorly treated bottles, either stored at too high a
temperature - which can expand the liquid in the bottle and push it up
past the cork or rapid fluctuations in storage temperature - which can
cause a vacuum in the bottle and break the seal letting in more oxygen to
the bottle and creating an undesirable chemical reaction. These conditions
can oxidize and prematurely age the wine, creating a veritable Russian
roulette situation with the condition of the wine itself, which cannot be
guaranteed until it has been tasted. These wines will generally have a
lower reserve price than market value to compensate for this possibility.
What is Ullage?
It is the description applied to the distance between the bottom of the cork and the level of the wine. It is a rough indicator of how well the wine has been stored and the potential risk involved that the wine may be stripped of all flavor.
What is a reserve price and how is it set?
The reserve or starting bid price is the value amount that the auction
house places on an item lot to start the bidding. This is generally a
reduced percentage of the lowest common secondary market value for that
item. All auction lots will usually indicate an expected range of value
for that particular wine, from the lowest average market price to the
highest, as dictated by the performance of the wine on the secondary
market – retail markets will not give you a good indication of the value
of a wine, as these are a separate market value designed to cover the
costs of the retailer’s overheads, markups etc.
Bidding, Hammer Price and Buyer’s Premium
An Auction house will set a starting value to begin the bidding. In the
past most auction houses have used a figure lower than the reserve set by
the vendor to encourage bidding. However, most progressive online auction
houses, such as Wickman’s, found that bidders preferred the honest
approach of setting the opening bid at the reserve price.
When placing a bid on your desired item lot, you are encouraged to enter
your maximum amount that you are willing to pay for the item lot (called a
proxy bid) to ensure your success in winning the bid. If another bidder
enters a higher amount, you can place another bid. Once the auction
closes, the bidder with the highest amount on each item lot is the winner.
They will usually receive a confirmation email, stating which items they
have won, the amount per item. A buyer’s premium is applied (generally a
percentage of between 10-30% the total amount, depending on the auction
house and their terms), plus any sales tax or GST, and the shipping cost
of the items to your location.
Advice for first time bidders?
Always read the description of the auction items you are preparing to
bid on and the terms of their sale. Be aware that by placing a bid you are
entering into a contract to pay for the wine you are bidding on if you are
the successful buyer, so do your research and be patient. Auctions will
generally run for a duration of 7 days, unless stated otherwise, so it
pays to take your time, to read reviews of the wines you are interested
in, to thoroughly look through what’s on offer, and to keep an eye on your
favorites. If you have any questions, or something doesn’t feel right
about an item, get in contact with the auction house’s owner or
administration team, as they are your best option for help and advice when
buying your wine online.
You can also seek assistance when looking for what to bid on through
online research, friends, sommeliers and even cellar door attendants.
Winery and distributor tastings, such as Yalumba, Peter Lehmans and even
Dan Murphy’s, are a handy and inexpensive way to get a feel for what you
prefer in a wine. Experts like Robert Parker, James Halliday and Jancis
Robinson have written many books and articles discussing and
deconstructing thousands of wines - these are an excellent resource for
getting a feel for which wines would best be bought to cellar, and which
are ready to drink now.
And remember - whether you’re buying wine to store, to gift,
to sell or to drink, wine was made to be enjoyed. So, take the plunge,
bid now, and let the good times flow!