As online sales emerge as the new auction battleground, Sotheby’s has scrapped buyer’s premium on all its online-only auctions.
It is a bold statement of intent. The auction house introduced online-only sales just last year, but David Goodman, Sotheby’s executive vice president of digital development and marketing, says that they are its “best tool for attracting first time buyers”. In the first half of 2017, 45% of buyers in online-only sales were new to Sotheby’s and around 20% have gone on to participate in live auctions. The first sale to be affected is Sotheby’s contemporary art online sale, starting on 16 September.
The announcement is in line with Sotheby’s second quarter earnings announcement on 3 August, in which the chief executive Tad Smith stressed the importance of online sales and digital marketing in the future of the business. Last year, Sotheby’s held 16 online-only sales and, Smith says, “is on track to double that number this year”. The average price in Sotheby’s online-only sales is now just under $10,000, although it cites two pieces sold for more than $150,000; these were a sculpture by Frederick William MacMonnies, sold for $175,000 ($140,000 without buyer’s premium), and a Victor Vasarely painting at $162,500 ($130,000 without premium). Clearly, the need to attract new clients and desire to be an increasingly digital business outweighs the not inconsiderable revenue generated by the current buyer’s premium.
In a letter to shareholders dated 22 August, Smith wrote: “The online marketplace is a related, yet distinct business opportunity for Sotheby’s beyond our live auctions— one with a different competitive landscape and reduced traditional expenses—that demands a different approach to pricing.” The move will, Smith says, “simplify the auction process” but Sotheby’s “will continue to charge a vendor’s commission”.
However, the reduction in online charges was a softener for the simultaneous announcement of a slight rise in buyer’s premium rates for Sotheby’s bricks-and-mortar auctions, including lots purchased online during live sales. As of 1 November, for live auctions excluding wine sales, the charge will be 25% up to and including $300,000 (previously $250,000), 20% from $300,000 to $3m (previously $250,000 up to and including $3m), and 12.9% above $3m, up from 12.5%. For wine auctions, buyer’s premium will be 23% in New York and Hong Kong and 19.5% in London.
While Christie’s declined to comment on Sotheby’s announcement, it is also making a determined play for a slice of the online-only market, holding 34 online-only sales so far in 2017, with around 79 more planned this year. In its 2017 half-year earnings announcement in July, Christie’s, like Sotheby’s, stressed that online-only sales “continue to attract the largest number of new buyers (29%)”, with total spend remaining “stable” at £19.8m ($25.2m) and average price per lot increasing to $7,222.
Christie’s held its first online-only sale in 2011 for the actor Elizabeth Taylor’s collection. This was a “companion sale” of lower value pieces, which ran in parallel with a series of live auctions in New York, a model that Christie’s pursues with other estate sales, such as the forthcoming sale of the actor Audrey Hepburn’s collection in September. Following the closure of Christie’s South Kensington in July, historically a feeder saleroom to King Street in terms of both consignments and new clients, it was announced that some of the branch’s more niche sales categories will migrate online.
As such “companion sales” show, the secondary saleroom of the future is set to be virtual.