Price tags are strange things. What makes someone pay $2000 for a toy that was a freebie in a chocolate or $40,000 for a piece of a propeller? Alex Brooks writes for Sunday Life about what dictates the cost of the things we covet.
Economist and social researcher Clive Hamilton likes to tell a story he first heard 10 years ago. When a Canberra retailer couldn’t shift a swag of woollen jumpers that had been discounted and left in the bargain bin, he doubled the price and sold out in a week.
A hand-painted Smurf figurine that came free with Kinder Surprise chocolates before 1990 can now fetch between $1500 and $2000 – provided its skipping rope is still attached. And last month actor William Shatner sold what might be the ultimate Star Trek collectable – his kidney stone – for $33,000. Prices may be in dollars but do they make sense?
As we have become richer – the Australian Bureau of Statistics says the average weekly wage has grown from $544.80 in 1995 to $784.50 in 2005 – the idea that price reflects the cost of making an item has been upended. People now use price to assess the quality of an item, says Hamilton, co-author of Affluenza: When Too Much Is Never Enough and executive director of the Australia Institute think tank. “People are prepared to pay more for a product if the price is higher, regardless of intrinsic value,” he says. “Economists think a market becomes more limited as the price goes up but today that is just not true.”
Now all kinds of products from toilet paper to movie tickets have their own “luxury” niche. At the same time, supermarkets sell basic food products with virtually no retail margin, preferring to offer low prices and petrol discounts to attract as many consumers as possible, says Ross Honeywill, a director of the Melbourne-based Centre For Customer Strategy, a research and marketing agency that advises on consumer behaviour trends.
Price is a topsy-turvy concept in today’s wealthier world so just how can the everyday person work out the value of things?
“It only takes two people to want something and you have a market” – Susanne Koppon, founder of GS Trading International
Susanne Koppon is sick of chocolate. Until five years ago, she bought five to 10 Kinder Surprise eggs each week to amass her collection of toys, which is worth between $10,000 and $50,000. “I have a few rare toys in the safe deposit box but I don’t have them for the value of them,” says Koppon, 43, who lives in Brisbane. “It’s about having something special.”
Koppon’s affection for Kinder toys (“I love to assemble things”) drove a desire to trade her “overs” in the hope of finding better toys for her collection. So in 1993, the former bank worker started a website (www.gascp.com) listing the toys she had to trade. That website has proved so popular that she and her husband, Gunter, formerly an IT worker, have all but abandoned their own collecting to start a web-based business specialising in low-cost collectables – from The Lord Of The Rings merchandise to McDonald’s Happy Meal toys to Care Bears and Pez dispensers.
“For years I traded and swapped toys from all over the world but now the business is so busy I don’t get a chance,” says Koppon. “People will collect everything. Once there are two of them after the same thing, it becomes a market.”
“We are looking for something more unique, worthy and rare than any other people have” – Rob Parsons, PR and marketing manager.
Christie’s Cultural and heritage valuer Simon Storey says everything has a value. Even the rarest item that will never be sold has a dollar price. It has to, according to Australian accounting standards that require all of our nation’s cultural goods to be valued.
Phar Lap’s heart? $1 million. The splinter of propeller from Charles Kingsford-Smith’s Southern Cross plane? $15,000. And the value of that same piece of propeller after astronaut Andy Thomas took it into space in 1996? “Anything between $30,000 and $40,000,” says Storey.
Australia’s museums and art galleries hire Storey to independently value their collections to comply with government accounting standards. He makes a living valuing the priceless and “trying to keep the auditors happy”. Sometimes, there is a formula to create the value – Storey is now calculating how much it would cost to re-collect 350 body parts on loan from a museum to Sydney University’s medical faculty.
Other items are so rare that only “gut feeling” creates the value. “With Phar Lap’s heart, I had to create fair value by asking taxi drivers and people in the street what they thought it would be worth,” says Storey, who was a fine-art auctioneer before he began valuing art and artefacts when accounting rules changed in the 1990s. “The valuation came from what I thought it would cost this country to wipe away the tears if the thing ever got pinched.”
Prestige property valuers such as Andrew Tunbridge from Sydney’s LandMark White say while there is no science to valuing, there is a whole lot of art. “It comes down to a purchaser’s personal tastes and what they perceive as value,” says Tunbridge, who points out the fundamentals of valuing property are location, aspect, topography of the land, the architectural significance of the house and the identity of the previous owners.
“The prices are determined based on comparable sales and supply and demand,” he says. But even the best property – such as the Vladimir Chernov-renovated castle on the beachfront at Brighton in Melbourne – will fetch less than its “intrinsic” value if the market dictates.
Take last year’s sale of the prestigious Rona, the Bellevue Hill, Sydney, property of financially troubled businessman John Schaeffer. Rona was listed with expectations of $30 million but eventually sold for just over $20 million, far below its longstanding valuation of $28 million. “It was well known that Rona was a forced sale and that usually warrants a discount because there is a range of superstitions that go with that,” says Tunbridge. “With high-end properties, the marketing has to be very discerning. It has to appear hard-to-get and exclusive.”
“We had 14 Paddington bags [by French fashion house Chloe] in store and they sold out in a week – although they cost $2500 – because Sienna Miller was photographed with one” – Ann-Maree Kelly, marketing specialist publicity, David Jones.
One thing that will almost invariably force up a price is rarity. Koppon says the reason the Kinder Surprise Smurf with its skipping rope is worth more than a run-of-the-mill Kinder Surprise toy is that it is so rare. The skipping rope is easily damaged so very few are available to trade.
Melbourne-based Rob Parsons, from Christie’s auction house, says coal-hole covers – a cast-iron drain at the front of Victorian-era houses – were sold for scrap until the 1990s when their rarity made them collectable enough to start buying. Now that the pieces sell for upwards of $200, some areas of London have problems with the theft of items such as coal-hole covers and drainage grates, leaving gaping holes in pavements and walls.
“Things like teddy bears were never auctioned at Christie’s until the mid-1970s as they weren’t perceived to have a value but now the record price for a teddy bear is half a million pounds,” he says. Storey also points out that provenance – the origin of an object and its past owners – has the ultimate bearing on value. “A flea is just a flea,” he explains, “but a flea that has been owned by Charles Darwin is worth more than the flea off Spot the dog. That’s provenance. Tiepolo’s Banquet Of Cleopatra is Australia’s most valuable painting – I would say it’s worth $200 million – not only because it is rare and beautiful but because it has a wonderful provenance, having been owned by Catherine the Great.”
However, provenance is not just about a famous owner. Often, says Storey, “collections that have been owned by someone discerning and diligent have a better provenance than something that has just been hoarded by a collector.” He explains that collecting is about more than just amassing objects. “Some hoarders have no dedication to collection.
A heap of scissors that have been hoarded in a box and kept in a shed is not necessarily a collection. It’s about a great collection of scissors. Does every pair of scissors in the collection tell a story?”
“Price is only the cost of falling in love” – consumer behaviourist Ross Honeywill, Centre For Customer Strategy.
“The price,” says Honeywill, “is just the cost for deep desire.” An authority on consumer behaviour since he was a director of KPMG in the late 1990s, Honeywill adds that the rise of “luxury” to describe even the most unlikely products is an opportunity for people to stay ahead of the Joneses. “Everyone’s trying to work out where they stand in relation to everybody else.”
Clive Hamilton is more blunt. He thinks humans are happy to pay over-the-odds for two reasons: they are wealthier than ever before and they just want to be loved. “The irony is that it often doesn’t work,” he says. “If you buy a red Maserati, you will probably receive more comments about what a wanker you are than how loveable you are.”
Below are five recently sold items and five prices. Can you match them correctly?
1. A heart-shaped ice-cream scoop made in 1925, sold on eBay.
2. What Cosmos magazine founder Alan Finkel (far left) paid for he and his editor to be the first Australian space tourists on Virgin Galactic.
3. The journal of Willem de Vlamingh’s 1696-97 voyage of discovery along the west coast of Australia, sold at Australian Book Auctions.
4. The starting price of a leather Hermes Birkin bag.
5. A chance to drive in the 2005 Formula One Grand Prix Celebrity Race, sold on eBay.