When thinking of auction houses such as Sotheby’s, the abiding image remains one of gilded rooms with a bidding process chaired from a podium and wealthy would-be purchasers sitting in rows to place their bids. That’s unlikely to change anytime soon, but the impact of digital transformation is being felt even here. In a world of e-commerce, even the traditional auction houses are seeking an ‘eBay angle’.
In the past month alone, Sotheby’s has conducted five online-only auctions. They were relatively small auctions, but they beefed up business, reckons Chief Executive Thomas Smith:
Throughout the month of July, we presented a series of five online-only sales at a time when historically the company, and our engagement with clients, was particularly quiet. We offered a range of property from prints to books and Contemporary Art and the results were encouraging. We had nearly 1,000 clients register to bid, an average sell-through rate of 79% including two-sales, by the way, they were 100% sold and 33% of the buyers new to Sotheby's.
The top selling work of the series was Untitled [Four Works] by Bosco Sodi that sold for $125,000 in our Contemporary Online sale to a first time buyer at Sotheby's. Looking ahead, we recently announced an online-only sale of jewelery by designer Tony Duquette that closes on August 30 and we are currently filling out a full schedule of sales for the Fall season.
Online sales also have an interesting impact on internal Sotheby’s staff:
We really liked both the effect that they had on our specialists, because part of what happens here is to explain to a specialist [that] we’re going to do an online-only auction, you have to get them excited about online-only. And then, when they see the results, they get excited about it, and so that will create more demand.
And that demand is there, he argues:
Online sales in excess of $90 million were achieved in the first six months of 2016, a growth rate of 27% versus the same period of 2015. There has been a 54% growth in the number of lots sold online, accounting for 18% of total lots sold globally by Sotheby's, compared to the same period last year. The behavior is global and in nearly every category, London, Paris and New York have each held sales that sold over 25% of lots to online buyers.
It’s an attractive operating model for the auction house as well, he adds:
Remember, we didn't have any production cost, or catalog cost or anything like that That’s a very attractive business model for us, and so, scaling those up is very exciting. That is a very attractive customer acquisition cost. So the combination of more consignments, relatively less acquisition cost, relatively less customer acquisition cost, substantially greater volume over time, should have a very, very beneficial effect on our middle market strategy.
While those online-only events may have been comparatively small auctions to date, a new benchmark was recently set for online bidding with the purchase of a pair of Important Pear-Shaped Fancy Blue and Fancy Orangey Pink Diamond Earrings which sold for $6 million.
Smith sees it as essential to invest in technology for both internal processes and client-facing propositions. On the client-facing front, the auction house is launching The Sotheby’s Museum Network later this month, an online digital hub for video content to be featured on its website and on an Apple TV channel.
The network will include major museum such as the Tate, the Metropolitan Museum of Art, and the National Palace Museum in Taiwan, as well as newer institutions founded by private collectors such as the Garage Museum of Art in Moscow. Smith explains:
There is a growing audience here eager to learn about art, and increasingly, they are using digital means to explore. At the same time, the world has many public and private museums that may not have an efficient digital platform to promote their collections. Many of those institutions are supported by some of the world's great collectors and we believe we can create an engaging digital hub for audiences interested in learning about art, while at the same time creating a distribution channel for our most important clients in a way that differentiates us.
It will be available across Sotheby's digital platforms, most notably an updated version of Sotheby's Apple TV app, which was submitted to Apple last week. In addition to syndication, the initiative will also include original content conceived and produced by Sotheby's, launching with the Treasures of Chatsworth, a 13-part series in one of Europe's largest private houses and most significant art collections that is currently in production and will debut this autumn.
This is the sort of innovation that Smith wants to see more of:
In the past year, we launched iPhone, iPad and Apple TV apps. We've continue to refine those products and have successfully added functionality including search and auction results. We recently added an Exhibition Audio Guide to our iPhone and iPad apps, making visits to the Sotheby's, both online and offline, more dynamic. Next steps for our mobile and app strategy through the end of the year include expanding our footprint onto the Android operating system and increasing distribution of our video and auction streaming services through the likes of Amazon Fire on Samsung Smart TV. We will also deepen integration into messaging platforms, specifically WeChat for our Asian audience and begin to look to roll out transactional bidding capabilities on our apps.
It’s also going to be essential to have skills in-house and to build out a network of e-commerce partners, he concludes:
Awareness is an important part of engaging new and existing audiences. We continue to work with our network of e-commerce partners to access the largest audience of bidders and buyers in the market. We remained at the forefront of social media with the industry's largest audience, embracing the latest trends including Facebook Live, which has driven tens of thousands of viewers to live streams about our auctions. We've also successfully filled the important positions in our digital and technology teams including heads of e-commerce and product development. We have an outstanding team and we are even now making it better.
Even the most traditional of industries can be reinvented by digital transformation. Sotheby’s is an excellent case in point.