Dargate Galleries: Auctioning off the auction

PITTSBURGH – Dargate Auction Galleries of Pittsburgh had sales of $3.9 million last year. So why are Larry and Carol Farley putting the auction itself up for auction?

“Well,” said Farley, “I went down the other day and picked up my Medicare card. That was a real eye opener. We have 14 grandchildren and have been doing this for 12 years. It just seemed like it was time to transfer ownership.”

But along with the sale of their “fixed assets, on-going business, goodwill, Web site, mailing lists, trademarks, trade secrets, know how, e-commerce relationships, archives, library, etc.” the Farleys are also willing to add whatever management and training the new owner wants to negotiate with them.

“Our participation could range all the way from zero to running the place, depending on what the people who take over will ask. We have indicated in our material that we are totally flexible.”

What the Farleys won’t be selling is the building where the auction gallery is housed. They bought it after they outgrew their original gallery space, and now live in an apartment on the top floor. The auction space will be leased to the new owner.

Retirement business.

Dargate Galleries was a retirement business for the Farleys in the first place.

Farley was in Pittsburgh after a long business career and serving as chief executive officer of several companies to run National Intergroup, the corporation formed by National Steel when it sold off half its steel operation in order to diversify into other industries.

But by 1989, Farley said, he thought he’d done enough of that. And he had already tried retirement once and found it not a good thing for him.

So he and his wife decided to buy out the small retail art and antiques shop where they had been doing a fair amount of buying for themselves.

Dargate Galleries had been in business since 1982, and looked as if it would make a good family business in an area they both liked.

And it did go well, growing nicely, for a couple of years, Farley said.

Then the recession of 1990 hit, sales slowed to the point he had to lay off sales people, and he and Carol began manning the sales floor themselves.

It was like watching the town rust, Farley said. Nothing was happening.

Tried an auction.

They held their first auction in 1992 in order to move some of the stock out of the gallery.

“Technically you could say it was a success,” Farley said, “but we overinvested, and financially it was a disaster.

“What I learned, however, was that you could sell at some distance from an auction. We had advertised in the trade journals, and had a bidder who bought a Chippendale stool for $4,000 sight unseen.”

At the end of June 1992, they closed down the gallery and reopened the next day as an auction gallery. They used their own goods to get the new business off the ground, and were fortunate enough, Farley said, to get a couple of good estates consigned to them almost immediately, “just by being there.”

One belonged to the mother of someone who had bought from them in the retail gallery, a second was a bank that wanted to keep the estate out of the hands of a local small-town auction house.

Full-service auction.

Dargate has made its reputation by being a full-service auction house, Farley said.

He has worked at keeping high end items from being sent out of the area by being willing to take everything from an estate, which includes the kitchen utensils. Most of his consignments, he said, come from the area.

Then he holds just a few very-large multi-day auctions during the year with the smaller and low-end items auctioning on the first day, working toward the high end sales on the final day. In a four-day auction, he will sell 2,500 lots.

With that kind of auction, Farley said, people don’t always buy just what they came for. They come for their business, and then see something they want for themselves.

“Buyers who come in to buy tray lots of glass will find themselves bidding on something else that attracts them, or I’ll sometimes find some of my high end customers in the trade lots buying.”

It’s the action.

What is great about the auction business, Farley said, is the action.

“There is plenty of action and everything sells. We don’t have to buy anything, so there is a good return on the investment, and there are no hard assets.”

With sales averaging $3.6 million over the past five years, Farley said, the business more or less breaks even. But his hope and expectation is that with aggressive marketing and more Internet involvement, sales will soon rise to the $5 million level.

“The challenge,” he said, “has been and will continue to be to achieve more consignments at higher values,” which is the most competitive aspect of the high end auction gallery business.

Internet advantage.

While Dargate is already selling most of its high end items out of town, and ships about 30 percent to customers overseas, Farley said, participation in eBay’s new live auction site, “eBay Premier,” has more than doubled the number of bidders.

At the last two auctions, he said, there were 500 and 649 bidders registered at the gallery, including those who were bidding by telephone. There were 978 and 1,089 registered on eBay.

The eBay customers have captured 17 percent to 22 percent of the lots that were offered. And they have sometimes held up prices on items that weren’t selling that well in the gallery, he said.

“Now the gallery buyers are bidding against the world. There have been times when all the bidders have been on eBay. It’s kind of strange, since all I have to do is stand there and pass the bids along.”

Dargate Auction Galleries will be auctioned off Sept. 7, at 2 p.m. on the premises at 5607 Baum Blvd. in Pittsburgh. Farley said so far he has had inquiries from five potential buyers.

(You can contact Jackie Cummins at 1-800-837-3419, ext. 23, or by e-mail at jcummins@farmanddairy.com.)