We talk daily to fundraisers who are sourcing prizes for their live and silent auctions. It can be a challenging and time consuming job. So, it's no surprise that 3rd party fundraising prizes are hugely popular.
3rd party fundraising prizes are supplied by external providers on a ‘sale or return’ basis. They can also be known as prizes/Items on Consignment (IOC)
This means if the prize sells at auction the charity receives a portion of the sale price (usually the winning bid amount minus the cost to buy the prize from the supplier). If there are no bids there is no cost to the charity and the fundraising prize is returned to the provider.
1. What are the pros and cons of using prizes/items on consignment?
Instant access to a wide range of tried and tested prizes that can be difficult or time consuming for charities to source as 100% donated prizes, e.g. luxury holidays.
Consignment prizes save the fundraiser considerable effort as the supplier not only provides the item but also manages the booking process with the winner.
Discounts are often offered on the prize/item provider’s auction software and services in return for including items on consignment in a charity auction.
Only a portion of the winning bid amount is received by the charity, versus 100% from a donated item.
High ticket IOC can take money out of the room that might have been spent on donated items.
Event guests participating in the auction may expect 100% of the winning bid on all prizes will be donated to the charity. They may be reluctant to bid or feel misled if it’s not clear at the point of bidding which prizes are on consignment (more on how to counteract this later).
2. How many IOC should be included?
When running a silent auction fundraisers should aim to include enough prizes to offer a variety of item types and price points. However, there should also be few enough items to generate competition amongst bidders.
There is no definitive answer on this, but many in the industry agree on the guideline of 1 fundraising prize per 10 guests. Take your expected guest total, plus the anticipated number of donated prizes to work out an approximate number of IOC you would need to add to your silent auction.
3. How does the 3rd Party Auction Prize/IOC provider make its margin?
Most providers offer a fixed cost price for the prize to the charity which includes their margin. The charity then earns 100% of the proceeds above the cost of the prize. This is the most common approach.
If the cost price includes the provider’s margin consider the starting bid. If there is only one bid would you be happy with the amount received for the charity?
Some providers share their cost to buy the prize and then share the profit above their cost with the fundraiser. Profit share pricing schemes can be complicated to understand as profit is typically shared differently prize by prize. If considering this option look at examples of prizes at different cost prices and winning bid amounts.
Some providers take a variable percentage of the winning bid. In this case you will likely find that instead of paying for the item they will work on securing donated items and take the percentage of the winning bid as payment for their time. This is probably the least common approach.
4. Who sets the starting bids and what will the charity receive from the sale?
If the fundraising prize only receives one bid how much will the charity receive? Many providers (GalaBid included) set the starting bid to include an amount guaranteed to be received by the charity if the item sells with a single bid. This can range from 5-20%.
The benefit of a lower percentage is a lower starting price to entice bidders into the auction. The benefit of a higher percentage secures a good amount for the charity if the item only receives one bid.
If you are receiving discounts for auction software and services in return for adding prizes/items on consignment (whether they sell or not), you will have effectively added to your amount raised before you have even started your auction (whatever the starting bids are).
5. How important is prize exclusivity?
Everyone loves money-can’t-buy items at money-buys-cheaply prices, but this can be difficult to achieve.
The best sellers are often prizes with a broad appeal, like holidays and dining experiences that have some level of exclusivity. Add to this a good price point and you have a winning item.
For example take a luxury villa holiday that is not available to book online and includes some extras like a concierge and airport transfers. If the villa sleeps 10 people a starting bid of $3,600 translates to a very reasonable $360 per guest for 7 nights accommodation.
6. Should I highlight to my supporters that there is a cost associated with the prize?
We believe that this information should be made clear to bidders, but it’s at fundraisers’ discretion.
7. Which prizes should be included in my auction?
Most auction prizes providers will have a wide range. Ask for recent winning bids and advice on which prizes are best sellers and why. Fundraisers can then choose prizes to fill gaps in their own list. Often the prize provider will shortlist the prizes most suited to your auction based on your donated prize list and your audience profile.
Prize providers will typically have different profit margins on different prizes. For this reason to receive a discounts on silent auction software and services you may be required to include a larger number of lower margin items (usually lower priced) or a smaller number of items with higher margins (usually the ones with high price points). Your discount may be secured in return for items sold or, as is most common - items included.
8. What is the small print and how to make bidders aware?
Check all terms and conditions and ensure that they are presented to bidders. In silent auctions this is easily facilitated as bidders are placing their bids and reading the description, t’s&c’s etc. on the same page.
If using 3rd party fundraising prizes/ items on consignment in your live auction ensure to point bidders to where they can read any terms and conditions.
For this reason it’s best practice to include your live auction items on your silent auction platform and ensure your auctioneer directs guests there to read them. Typically fundraisers also ask live auction winners for a signature to indicate they agree to any t’s & c’s.
9. What is the item booking/fulfilment process?
a) How do the winners book/receive their items?
It’s important to understand how your supporters will be taken care of once they have won. As an example, IOC winners in auctions GalaBid facilitate receive an automated notification on how to book their prize directly from our software once payment has been made.
b) Are there time limits on when the prizes need to be booked and used by?
Most prizes on consignment will have time limits. Some providers require the booking to be made within a certain timeframe of the auction date. Most experiences will need to be used within 12 months of the auction date.
Changes to bookings can be time consuming to facilitate and are sometimes not possible or commercially viable. That said, most providers will do their best facilitate changes, but you should ask.
c) What if winners try to book after the time limits?
IOC providers will have different policies so it’s really worth asking this question.
Sometimes winners get in touch 2 years plus after the auction date so it can depend on availability.
d) What if the winner has a change of mind
Providers’ policies also vary on this subject. Some will enforce a no refunds policy; most will allow the prize to be transferred to another person. Some offer periods where a refund is available from 24 hours up to 2 weeks.
These questions and answers will hopefully help you understand the many facets of 3rd party auction fundraising prizes.
There’s a lot to consider, however, compared to the time and effort to secure donated prizes, 3rd party prizes can be the silver bullet for silent auction planners with lots to do and not a lot of time.
If you have any further questions about 3rd party fundraising prizes/IOC, or if you would like a copy of our latest prize catalogue, get in touch with our team.