Liquidation auctions have a trust problem. All of us are paying for it.

Clearance stock auctions should be one of online sales’ success stories. Too often, buyers arrive wary, bid accordingly and leave with a mixed bag of results. Sheldon Miller, Founder of STOCS, on why buyer trust is the sector’s biggest untapped source of value.

I owe this industry a good part of my career: a quarter of a century in retail liquidations, first at John Pye Auctions as BD Board Director, co-founding the Nationwide Disposals Agency, a consortium of twelve leading independent auction houses serving banks, government, insolvency practitioners and industry. Then founding STOCS. I have spent much of my working life making the case for independent auctioneers. So nothing here is aimed at any one house, or at the trade. It’s about the road travelled and the intersection the auction industry now finds itself at in a world moving at rapid technological pace.

We digitised the bidding, but not the viewing

The advent of eBay and subsequent migration from physical live traditional auction to online auction – whether timed, webcast or hybrid – has been the most seismic in the auction world of the last 25 years.

Bidding has been digitised but viewing has not and therein lies some inconvenient truths. The physical viewing was never a courtesy — it was the information mechanism: the day the bidder and ultimate buyer touched the lot, opened the box, formed a view and assessed risk and reward knowingly. “Sold as seen” did what it said on the tin and above the door – and descriptions could stay brief because the viewing did the work.

Then we all moved the bidding online and left the viewing where it was. In two decades of weekly viewing days, I watched footfall drop from thousands to a trickle while the bidder list and online activity grew from far and wide, as many auction houses that made the migration experienced. Take any current online auction in play and most people bidding right now have never stood in front of the lot in question and never will. Those who attend are rarely a cross-section — local, trade or the regulars.

That leaves the listing carrying a job it was never built for — hence inconsistent lot descriptions, the lot box of ‘miscellaneous,’ vague manifests, photographs of mystery boxes and pallets - all “sold as seen” – a term that hands the bidder all the risk and none of the access. Buyers price that risk into every bid or – at worst - stop bidding.

This isn’t only about goodwill; it’s about money — and not only the seller’s. Milgrom and Wilson were two names never heard of in the auction world before 2020, but in October of that year the two Stanford professors were cast under a global spotlight — and the auction industry with them — when they were awarded the Nobel Memorial Prize in Economic Sciences for their work on auction theory.

At a high level, their work explains something every auctioneer has felt but few of us have ever had the language for: why two near-identical lots, listed differently, make different money.

The price of bidding blind

Wilson described the winner’s curse. The bidder who wins is, by definition, the one who most overestimated the lot. Every experienced buyer knows this in their bones without ever having had the language for it, which is why they shade their bids downwards to protect themselves — and the less they know about what they are buying, the harder they shade. That shading is a tax on uncertainty, and the bidder pays it on every lot.

Milgrom’s linkage principle follows from it. The more credible information a seller puts in front of bidders before they bid, the less they need to shade. A bidder who doesn’t need to shade can bid what a lot is actually worth to them, rather than what it might cost them to be wrong.

That matters more than it sounds. Shading isn’t caution, it’s a cost, and the bidder carries it three ways: losing lots they would gladly have paid more for to someone braver or better informed; the occasional lot that turns up worse than the photographs suggested; and the low hum of treating every sale as a gamble rather than a purchase.

For an auction house, the implication is blunt. Grading, photography and condition reports are not a courtesy extended to buyers. They are what lets a bidder buy with confidence rather than guess — and confidence is the one thing our listings have been quietly rationing.

There is a fairness question in here too. The viewing that remains isn’t neutral. It hands a real information advantage to the handful who attend — the local, the trade regular, the buyer who can spare a Tuesday — and everyone else is bidding against people who know more than they do. Bidders work that out quickly, and when they do they bid cautiously or stop turning up. Standardised grading is what levels that floor.

I’m not arguing viewings should go: for high-value lots and buyers who will travel, they earn their keep. The mistake is treating the viewing as our answer for everyone else. If most of your bidders never come through the door, the grade, the condition report and the photographs aren’t a supplement to the viewing. They are the viewing.

The fix is complex but necessary

The standards are simple to state: stock graded honestly, photographed as it actually is, and described in terms a buyer can rely on. Delivering them at volume is another matter, and here the trade has been under-served rather than found wanting. Grading thousands of lots consistently, photographing each to a repeatable specification, standardising and holding condition data a buyer can search — none of that works with tooling built for a saleroom and a viewing day. It needs real technology underneath. The will was never what was missing in this trade. The infrastructure was.

Each of those does the same thing: it lets a bidder price a lot accurately instead of defensively. Accurate prices are better for everyone in the room — the buyer who stops paying a premium for risk, and the seller who stops absorbing one. Trust is the economic engine of an auction, not the wrapper around it.

That infrastructure is what we are building at Bid STOCS: better inputs, for better outputs. We are building it because we need it — but this is a market problem before it is a company one, and proof has to come first. Thereafter, I doubt it will only be useful to us. For now the argument costs nothing to act on: what you tell a bidder before they bid is the cheapest confidence you will ever give them, and the most valuable thing they take into the sale.

Sheldon Miller is the founder of STOCS which sells surplus and customer-returned stock through auction, e-commerce and B2B wholesale channels. He has managed liquidations in the UK, EU, US & UAE.

Sheldon Miller - [email protected]