Sotheby’s scraps buyer’s premium on online-only auctions

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Just a click away: Sotheby's abolishes buyer's premium for online-only sales in an effort to attract new clients. However, the charge will still apply to live auctions, both for those bidding in the room and online (Image: courtesy of Sotheby’s)
As online sales emerge as the new auction battleground, Sothebys has scrapped buyers 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, Sothebys 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 Sothebys and around 20% have gone on to participate in live auctions. The first sale to be affected is Sothebys contemporary art online sale, starting on 16 September.

The announcement is in line with Sothebys 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, Sothebys held 16 online-only sales and, Smith says, is on track to double that number this year. The average price in Sothebys 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 buyers 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 buyers premium.

In a letter to shareholders dated 22 August, Smith wrote: The online marketplace is a related, yet distinct business opportunity for Sothebys beyond our live auctions one with a different competitive landscape and reduced traditional expensesthat demands a different approach to pricing. The move will, Smith says, simplify the auction process but Sothebys will continue to charge a vendors commission.

However, the reduction in online charges was a softener for the simultaneous announcement of a slight rise in buyers premium rates for Sothebys 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, buyers premium will be 23% in New York and Hong Kong and 19.5% in London. 

While Christies declined to comment on Sothebys 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, Christies, like Sothebys, 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.

Christies held its first online-only sale in 2011 for the actor Elizabeth Taylors 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 Christies pursues with other estate sales, such as the forthcoming sale of the actor Audrey Hepburns collection in September and the philanthropists Peggy and David Rockefellers in 2018. Following the closure of Christies 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 branchs more niche sales categories will migrate online.

As such companion sales show, the secondary saleroom of the future is set to be virtual.



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