Interview: Smith House Toys' Craig Thompson

With the Smith House Toys auction of Alan "Mr. Mint" Rosen's robot collection ending tomorrow night, I thought now would be a good time to present an interview I recently conducted with Smith House owner Craig Thompson. It's an intriguing, behind-the-scenes look at how a rather unique auction company operates. It also demonstrates how it's possible to turn a love for the hobby of toy collecting into a thriving family business, one that's survived multiple owners, a changing market, and cutthroat competition.

DOC ATOMIC So, right now, are you surrounded by Alan Rosen's toys?

CRAIG THOMPSON No, I've got the toys in a storage unit.

You're not sitting in a fantasy room surrounded by the greatest robots ever?

[Laughs] Nope, sorry!

Before we talk about the nuts and bolts of running an auction, how about some history? Smith House was originally started by Herb and Barbara Smith in 1986, and I know they were one of the first couple mail-order auction catalog companies. How did you get involved, and when did you end up buying the company?

I'd been involved with the hobby since the early Eighties, as a collector and a dealer. I met Herb in the mid Nineties, and had bought a few things from him. Then, when I was doing some toy shows, he'd come up to me and be like, "Craig, you should consider consigning. I do way better than other guys." He finally talked me into it, and I sent him a few things for three or four auctions in a row -- and they all did fabulously! From then on, I started consigning pretty regularly.

We kept the relationship going, and other friends of mine, including my former business partner Dave Hendrickson, did very well, too. A year or so later, in 2003, Herb approached me and Dave and asked if we wanted to buy the company because he wanted to retire.

Did this take you by surprise?

It's funny, Dave and I had contemplated any number of times opening a similar auction. So it was a weird coincidence when the opportunity came up. We said, "Why not? Let's try it!"

And then eventually I bought out Dave, and now I run the company.

So how did the Alan Rosen collection come together?

I've known Alan for, oh God, I guess I met him the year I bought the business from Herb. Alan and I struck up a friendship and maintained contact since then. He's been a regular consigner since I've been involved in the business, selling off duplicates and extra toys.

Last year, when the economic... "swoon," shall we say, settled in, he decided it was finally time to sell. It was obviously a great opportunity for Smith House. At its height, before he started to sell off bits and pieces, Alan's collection was probably one of the top 10 collections in the world. Robots -- there just weren't a lot of holes. He started buying space toys because he couldn't find robots he didn't already have!

What's involved in a sale like this? Can you walk us through the preparation process?

Well, I bring stuff here to my home, I unpack everything, organize it, figure out a rough order for it to appear in the catalog, and then write the descriptions and take the photos. Getting through all that -- we're talking 435 lots, and maybe 450 or 460 toys total -- takes me about 90 days. Three months of 60, 70 hour weeks.

Three months of getting to mess around with toys.

Yep! [Laughs]

Part of this stage involves setting starting prices and, in the case of some auctions, establishing estimates. Can you talk a little about how that all works?

Well, one area where I differ from other auction companies is that I don't put estimates anywhere. There's a starting bid and that's it. To establish that price, I do research on the toy to see how much I've sold it for in the past, or how much it's sold for elsewhere.

Unless it's something ultra rare, I'll take an average of what I think it'll sell for and then set it back 30-60 percent. I base that on rarity, condition, the condition of the box if it's there, and how much interest I think there's going to be in it. This, then, establishes that opening bid.

Now, if a toy is worth $1000, why not just start it at $800 or something?

Obviously, you want as much activity as possible. Taking a robot that's worth $1000 and starting it at $800 or $900, you'll take away 80-90 percent of the activity the item might get. If that toy's worth $1000 and I open the bidding at $400, yeah, it might sell for $400 or $600. But it might also sell for $1000 or $1200 dollars if it's a pristine example and two people want it.

It's about going for that emotional attachment, right?

Yeah, and we've all done it. If there's something you want, you've spent five years searching for it, and now you've spent two weeks following it, you're not going to let it go for $50 or $100. Five years from now, are you going to remember you spent an extra $100 for it, or are you going to look at it and admire it as it sits on a shelf in your collection?

Now, you mentioned that you don't use estimates.

No, I don't. So many places put ridiculously low estimates on their toys, and then they advertise afterwards that the toy brought three times the estimate. Well, anyone who's got any brains in their head at all will look at the original estimate and see that it's ridiculous to start with.

It's a marketing tool?

Absolutely. I can't tell you how many times I've seen an estimate for, I don't know, $1200 and I know the toy is going to bring $4000. Later, they'll say it sold for three times the estimate, and that looks impressive to the people who aren't in the industry. It's false advertising, as far as I'm concerned.

That's not the only difference between Smith House and other auction companies. For one thing, you allow bidding via the internet and phone, but there's no live auction component. Why's it set up this way?

It's been like this since the beginning when the auction company's original owner, Herb Smith, was running things. And actually, he did very little with the internet, he was pretty much just phone bids.

My feeling is, if it's not broken, don't fix it. The auction company's working well this way. It also keeps the price down to not have a live component, of course. I mean, if a consigner wanted to do it and it was the right consigner, I guess I'd do the auction live. It would have to justify all the extra time and expense. Frankly, I don't know if the results would be any better, and they might even be worse!

Another interesting component of the Smith House auctions has to do with its ending time. Starting at 11 p.m., the entire auction remains open for 15 minutes until no lots receive any bids within that time. Can you tell me how this came about?

It was in place when I bought the business, and it worked really well. As far as the structure, and the way I end the auction, there are any number of benefits, depending on your point of view.

Let's say you have 10 items you're interested in as a bidder. You have X amount of dollars to spend in the auction. If you let the first four or five pieces go by because the ones you're most interested in are at the end of the auction, you risk getting to those items and then losing the actual auction. Now, in this situation, can you look at the items that have already ended and then go rebid on them? No, you can't.

Well, in a Smith House auction, you can do just that.

I know I've been in situations where there were a dozen things I wanted, but the priorities were at the end of the sale. I let the others go, and then ended up losing the two items I really wanted. In that case, I would have gladly gone back to bid on those earlier items if I'd been able, and that would have made them close at substantially higher prices.

And that's how it benefits the consigner, right?

Yes, it maximizes the results. If I'm a bidder, I go back and bid on those earlier items, and it's going to raise those individual results. The consigner stands to make much more money.

Is there any dark side to this process?

[Laughs] Yes, that I have to stay awake until the whole thing ends!

You had a preview of the toys in the Lesser auction, but haven't done so with the Rosen sale. Given how many top-notch toys are available this time around, I'd have thought you might do one. Why not?

That was an experiment, and when combined with the Botstock event of that year, I figured it was worth giving it a try. Alan and I talked about it this time around and with the extra expense involved, he was kind of luke warm about it.

Also, this auction wasn't supposed to be until the end of November, and my plan was to perhaps showcase some of the toys at the Allentown Toy Show. But with the recent addition to the market of the Morphy auction, I was forced to move this sale up. So that preview idea became impossible.

Do you think the preview at the Lesser sale affected the final prices?

I don't want to say it was a failure, but I don't think it added anything to the results. It was a nice event, and it was great seeing everything displayed in one place, but I was disappointed at the interest level. I had a couple guys come in from overseas, but for the most part, it was just the collectors from Botstock.

Your online catalog features a lot of photos, anyway. I've found it to be a pretty good gauge of the toy's condition.

I take multiple photos of everything, yeah. And most of the people who deal with Smith House know how tough I try to be with my condition ratings. My consigners complain all the time that I rate stuff too difficultly!

One of the big complaints that people have about bidding on toys is the buyer's premium -- the fee imposed upon sellers by an auction company once a toy has sold. The argument is that, if a toy sells for $1000, why is there an additional cost attached to it simply because it's being bought at auction, and not at a store. Can you explain a bit about how premiums work, and the logic behind them?

There are several different ways to look at it. When you buy something from a store, the profit margin is already factored into it. Auctioneers, we charge the consigners a certain percentage, and that's what pays for the expenses of running the auction. And honestly, that doesn't leave much room for profit. Our costs include the ads, print mailers, and the catalogs -- it's not an inexpensive venture.

So adding the additional fee to the final sale price... I don't want to say it's "the industry norm," but that's kind of what it is. Every auction house operates very similarly. The percentages can be very different, depending on who you're dealing with, but it's generally how it works. There's a tremendous expense and time put into this. I often joke with my friends -- they'll ask, given how much time is involved, do I make any money? I say that, by the time I've added up all the printing costs and I've figured out the amount of hours I put in, I make about 23 cents an hour!

While I love the hobby, I'm not here to do this for free -- which a lot of people sometimes think I should do!

That said, buyer's premiums have risen a lot in the last 10 years, but I'm still probably the lowest in the business. If you pay with cash or check, my premiums are 13 percent.

You're a small company, as you said. How much of the work is done yourself, how much do you farm out?

I don't farm out anything. I do all the photography and descriptions for the catalogs, the layouts, everything. I once asked a local printer for an estimate for the layout, and it was $20,000. Add the printing costs and it was $40,000! So I'd rather do it myself. I also do all the shipping myself. I once tried hiring some people to help out, but it just didn't work well, it wasn't worth the headache.

Speaking of catalogues and cost... and I'm probably the only one to say this publicly... There are a whole lot of people out there who have the mentality that they deserve a free catalog. Honestly, if I looked at the amount of catalogs I sell compared the cost for how many I have to print, I don't think I'd be printing a catalog. It's a huge loss. Huge.

So why do you continue to do it?

Believe me, I've come close to stopping. But again, it's the industry norm. The day is coming sooner rather than later when I don't do it, except for really big, interesting auctions like Lesser's or Rosen's.

You only do two or three auctions a year, compared to some companies that do many more. Why is that?

I'm definitely pretty particular about what I'll accept and what I won't. I could do six auctions a year if I took everything that presented itself, but it'd be 20 percent nice stuff and 80 percent not nice stuff. I'd have to expand the business, rent office space, hire more staff -- I'm a small business, and I like the niche that I've got.

How would you describe that niche?

I do very well with certain toys, particularly the tin toys, whether they're robots or automotive or character toys or Japanese or American tin, there are very few guys who do as well with them as we do.

I'm not interested in being a Morphy of the world, handling guns and marbles and artwork and pottery and toys and furniture. I got into this business because I love the hobby and that's where I want to stay. Does that mean I pigeon-hole myself a bit? Yeah, probably.

Oh well! [Laughs]

You said that when you bought the company from Herb Smith, you were already buying and selling toys. Can you tell me a little bit about how you became involved in the hobby?

My dad got me involved when I was real young. He was a general antique dealer, and always handled toys whenever he could. One of his friends owned a hobby shop and got me a job there when I was 13, and it just grew from there.

I started going to different markets with my dad. Neither of us had three nickels to rub together, but at that point, you could go out to flea markets and many different areas and buy stuff and then be able to resell it in order to get more money to buy the toys you actually wanted to keep in your own collection.

It must have been nice to be able to connect with your dad in this way.

You know, it was. I was always a sports fanatic and I played a lot of sports in school. My dad didn't really have a lot of interest in that, but we shared an interest in the toy hobby. He wasn't a collector per se, it was more of a money making vehicle for him. But still, it was something we both enjoyed doing.

So what do you collect personally?

My tastes vary widely. My core is pre-war Japanese stuff. If I had the deep pockets to really collect,t hat's where my first love is and always has been. You know, I keep my display space limited on purpose -- if I buy something to put in the case, I have to take something out of the case!

Do you ever find yourself consigning stuff that you'd want to bid on?

Yeah, absolutely.

Is that something you're allowed to do? Or is there a rule saying that you can't bid on the things you sell?

No, I'm allowed to do it -- I bid just like everyone else. There's no advantage, especially because it's a computer-based bid system. But I still try not to do it, generally, because it's expensive! Also, unfortunately, I don't get a whole lot of pre-war Japanese toys.

Maybe that's for the best.

[Laughs] Yeah, maybe!

Over the years as an auctioneer, have you had any particular highlights?

You know, just doing this for a living, compared to working a "real job," is pretty cool. I still to this day see stuff that I've never seen before, and that's absolutely cool! It's part of the fun of doing this job in the first place.