Switch to online – part 2: Sotheby’s has a head start

[05 May 2020]

An online“Hong Kong sale that generated much better results than expected… a good level of transaction fluidity new buyers and online bids on the up the switch to ‘online only’ is bearing its first fruits. Forging ahead of their competitors in the online sphere, Sotheby’s strategy and (good) results deserve a closer look.

 

Art auctions have existed for 300 years, and in 2019 the global art auction market hammered an all-time record high number of transactions with 550,000 works of fine art sold worldwide, a figure that will be very difficult to equal this year due to Covid 19. But, as they say in showbiz, “the show must go on”… That’s why auction operators are looking for a way to continue their activities while most of the planet is in lockdown. A switch to online sales seems like the obvious solution.

In fact… for several years now, Sotheby’s has shown that online sales are at the heart of its growth strategy. In 2019, the global firm sold 3,924 fine art lots online, generating turnover of $42.8 million. These figures represented only 1.2% of its total fine art turnover. However, in the first quarter of 2020, Sotheby’s online fine art sales already amounted to $25 million, representing 6.4% of its total sales revenue, suggesting that Patrick Drahi’s arrival at the helm has encouraged this development.

Of course, this doesn’t mean Sotheby’s is going to switch suddenly to 100% online sales in an attempt to generate online the $3.7 billion it hammered in 2019 from its fine art sales. Sotheby’s strategy will most likely be an intensification of online sales, but maintaining a healthy unsold rate of around 20% and gradually raising the quality of the works on offer.

Ultimately Sotheby’s is not pursuing a ‘new’ strategy, but the health crisis has given its online activity a massive boost. The auction house has decided to include the so-called ‘middle market’ in its online strategy with two ‘day sales’. This seems like a natural and well-balanced choice because the mid-market is experiencing very high demand.

 

Hong Kong… without Hong Kong

The results for April show that Sotheby’s is moving in the right direction. Its Contemporary Art sale – due to take place in Hong Kong but subsequently switched to online only – was a resounding success in mid-April. Admittedly, the works on offer in the Sotheby’s sale might be described as ‘easy to sell’, primarily because they were generally affordable (many under $5,000) but also because of the ultra-popular signatures in the catalogue, including KAWS, INVADER, Shepard FAIREY, Takashi MURAKAMI, ZHANG Xiaogang and YUE Minjun. In sum, it was a collection of works likely to attract new bidders, with low financial risk for buyers… but probably not generating much in the way of margin for the auctioneer. The catalogue contained one ‘more serious’ lot – an old painting by Yayoi KUSAMA (1929) entitled The wave inside a memory of illusion (1978) – which fetched over $120,000 after 17 bids. In total, Sotheby’s Contemporary Art | Hong Kong sale generated $1.3 million, substantially beating its overall high estimate of $750,000.

Two records in one…

Judging from what we have seen this month, the levels of online bids and the quality of works offered are bound to increase in the future. On 21 April last, Sotheby’s achieved its first online result above the million-dollar threshold with a painting by Georges Condo in its Contemporary Curated sale. Titled Antipodal Reunion (2005), George CONDO’s work was bid up to $1.3 million, the highest price ever paid for a painting in an online sale by the American auction company. That same Contemporary Curated sale generated another record by taking a total turnover of $ 6.4 million, an online record for Sotheby’s, and better than its pre-sale high estimate of $5.75 million.

Sotheby’s has also indicated that new bidders at its recent online sales accounted for between 30 and 35% of participating buyers, so purchasing habits look like they are changing fast… The auction houses now have to convince the market, encourage supply and demand, but also, resolve certain logistical problems (notably relating to authentication, storage and shipment).