Buying Collectible Wine at Online Auctions
By Elisabeth Townsend
"The most expensive wine ever sold remains a single bottle of Chateau Lafite 1787, which purportedly belonged to Thomas Jefferson," said Peter D. Meltzer, "Wine Spectator" auction correspondent. "It was bought at Christie's London in December 1985 for $155,242 by the late Malcolm Forbes."
No one is sure who has sold the priciest bottle at an online wine auction. But certainly a contender is the six-liter bottle of Domaine de la Romanée-Conti La Tache 1990 for $35,000. This was WineBid.com's biggest sale since it began selling wine online in September 1996.
Today, there's a "huge demand for the most expensive wines," said Jerry Zech, Napa-based WineBid.com's chief executive officer, especially Burgundy, first-growth Bordeaux, and California's best vintages.
There are two places to buy fine wines in an auction: in the Internet wine auctions held by such companies as WineBid.com, WineCommune.com, Acker Merrall & Condit (www.ackerwines.com), and Morrell & Company (www.morrellwineauctions.com), and at the traditional bricks-and-mortar auction houses such as NYWinesChristie's, Sotheby's London or Zachys Auctions in Los Angeles.
In 2004, major auction houses marked a milestone with a 13 percent increase over the previous year, and for "the first time since 1999, worldwide sales of fine and rare wine at auction topped the $100 million mark," according to Meltzer, with wine sales totaling $109 million.
Worldwide Internet auction sales also increased 29 percent over 2003, from $14.7 million to $19 million. "The (entire) auction market actually appreciated at a greater rate than the Dow Jones and the Nasdaq, which gained 3 and 9 percent respectively," said Meltzer.
Many wine collectors are turning to online wine auctions where, "You don't have to wait for the next big auction," said Meltzer. Rather than travel to the auction, fans can bid online on Internet auctions that are held more often, sometimes every week. Wines are sold in different lot sizes including cases, and individual and large format bottles, whereas in brick-and-mortar auctions lots are typically larger. Online wine auction companies accept credit card payments and provide many online features that make bidding easier.
Some companies offer "AutoBid," an online function that allows the buyer to set a maximum bid, and if there are competing bidders, the site will bid automatically up to the maximum bid specified by the bidder. "If there are no competing bidders," explained Meltzer, "you'll pay the minimum bid." The online auction automatically notifies buyers if they're outbid. And every buyer can be completely anonymous.
Auction houses and online wine auctions differ in significant ways. The auction house sale is held at the location of its choosing on a specific day and time. These houses usually sell in larger lots such as 12-bottle cases, and may or may not accept credit cards. The bidder has to be available either in person or through other communication lines during the auction. "Consignor's fees vary from 10 to 20 percent of the gavel price. Very large or valuable consignments may be further negotiated. Additional charges may be levied for insurance, shipping, handling and in the event the wine goes unsold," said Meltzer.
One of the advantages of buying from an auction house is the reliable inspection of wine, verification of the wine's provenance, and ensuring the proper storage of the bottles before and during the sale.
Much like a traditional auction house, WineBid.com also appraises, inspects and stores every bottle of wine in a climate-controlled warehouse, an advantage with a product that is especially susceptible to damage from temperature fluctuations.
Most of its sales range from $20 to $2,000. Profitable since 2003, WineBid.com, according to its website, has grown into the largest online auction site, offering weekly auctions beginning every Sunday featuring "more than 4,000 lots" of "first growth Bordeaux, wine futures and hard-to-find historic vintages."
In 2004 WineBid.com's annual sales were $16 million, and Zech expects its sales to be over $20 million this year. With 37 employees, it offers wines in three different auctions in North America, the United Kingdom and Europe, and Australia to its 33,000 to 35,000 registered bidders.
Zech, who has 25 years of management experience and was the founder of the start-up Supreme Corq, Inc., the manufacturer of synthetic corks for the wine industry, described the typical buyer as male and between 45 and 50 years old. But, he said, there has been a shift to younger buyers in their thirties and more women.
Michael Stajer, WineCommune.com's chief executive officer and co-owner, agrees, reporting that over 80 percent of the buyers at his Internet auction site are middle-aged males. His buyers are collectors with an income over $150,000 and are evenly distributed geographically. The average amount paid for a bottle is $100 and the average transaction is $300 or 3 bottles. Most sellers are high-end collectors who are trying to make room in their wine cellars.
Though competitors may have standard wine ratings, WineCommune.com provides wine guru Robert Parker's ratings plus, with a subscription to Parker's newsletter the "Wine Advocate," descriptions of the wines being sold.
That was Stajer's idea, who in 1999 co-founded WineCommune.com along with Shaun Bishop, co-owner and president. This company has a different business model than Winebid's, more like eBay, where transactions occur directly between sellers and buyers. "There are no fees to buy (or register) on WineCommune!" says their website. Fees to sell are low. Auctions begin every Friday. On a late September day when Stajer was interviewed, there were 15,269 lots open - or wine for sale.
The biggest risk seems to be that the wines sold through WineCommune.com have not been appraised by impartial experts. Stajer said they "do a lot of checking on the sellers," who are primarily retailers who use the site as a storefront, and that their fraud rate is "almost none - one to two complaints a year."
Stajer said that the numbers of registered bidders and annual sales were proprietary. He also said that they had been "profitable since 1999, never took VC (venture capital) money, have no debt and have eleven employees."
Buying Wine Online
To get started buying fine wines, consider attending an organized tasting at an auction house or at a retailer, which might cost around $75, to become acquainted with wines you enjoy, and attend a live auction, suggests Meltzer, author of the upcoming "Keys to the Cellar," a primer on wine collecting,
Researching wines you like is a good way to get acquainted with prices before bidding. That way the buyer will not be paying more than in a retail store. Several sources provide pricing information: Wine-Searcher.com lists retail prices; WineZap.com provides retail prices with over 800,000 inventory items from 500 U.S. retailers (run by WineCommune.com); and a Wine Spectator subscription will provide twice yearly indexes and access to their database of 10,000 wine auction prices.
Has the May Supreme Court ruling affected the shipping of wines purchased through online wine auction sales? (It directed states to eliminate the differences between the regulation of local and out-of-state vineyards.)
"So long as it focuses on vineyards, there's not much of a problem. But it has a potentially disastrous effect if limits are placed on the number of cases that can be shipped (by a retailer or auction house) at a time," said Meltzer. So for the time being, it's business as usual.
Buying wines online for investment can be fun and exciting, and it's clearly a phenomenon that's growing. But as Meltzer, who has about 1000 bottles in his own wine cellar, cautioned, "If you do not appreciate wine in a glass - if you don't love wine - you shouldn't do this."
About the author:
Elisabeth Townsend is a freelance writer specializing in food, wine, travel, and feature writing, and photography. She took her writing, editing, and photographing skills into the freelance journalism world after 13 years of business experience including corporate communications.
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