Sunday, November 04, 2012

Auction House - Private Sales - A Very Big Deal Getting Bigger

ArtTrak has been following the increase in private sales by the major auction houses for some time. The trend is certainly gaining momentum as both Christies and Sothebys are now investing in brick and mortar galleries. We have mixed feelings about private sales at the auction houses on many levels. Cursory analysis says that this will give customers more options and the opportunity of having more liquidity in their art collections without having to wait months to be paid. But less transparency in these business transactions does create not only the opportunity but also the incentive for the auction houses to do bad things. We all recall the price fixing scheme that impacted the art market and led to customers viewing auction houses with some skepticism. But in price fixing you do have a choice to play regardless of how the commissions were established. Now as a buyer or seller you really aren't seeing the whole deal and maybe that's not very good. I believe given the opportunity to do bad things most people will. On a more philosophical level we have been made to believe that the auction house is an objective third party acting as a facilitator serving both buyer and seller. Sometimes the interests of the seller and the house do coincide; however, with the emphasis on private sales even this bond is tenuous at best. Business relationships are built on need and the major auction houses will survive quite nicely without most of us.  The only alternatives are gallery owners most of whom definitely need us to survive in a precarious art market. Earning your trust with their loyalty and service may be an important consideration for you to get that second opinion before making big decisions. For those that are not following the art markets closely this can be a precarious time. It is also interesting to note that Sothebys is making their private exhibition gallery invitation only in order to respond to this "high demand". Why would either the buyer or the seller create a high demand for an auction house to create a private gallery unless it was about money. The buyers are certainly not patronizing such an operation because they want an opportunity to pay more. The sellers are not consigning their property because they hope to net less for their objects. Certainly the only incentive on the sell side is getting paid quicker. Cynicism rears its ugly head here for many believe that the auction houses must by the constraints of the business  model make contradictory promises to the buyers and sellers.

In other news, Sotheby’s is opening a new space named “S2” for private sales. Designed by architect Richard Gluckman, S2 is accessible by invitation only. Art Media Agency reports, “This announcement highlights how auction houses are turning more and more to private sales and this investment will allow Sotheby’s to organise exhibitions of its own choice. There has been a massive surge in private sales of late. For example, in the first semester of 2011, Christie’s recorded a whopping 70.5% progression. Therefore, the creation of a private exhibition area is also a way of Sotheby’s responding to this high demand.” Sotheby’s has also launched “Your Art World: The Documentary Series”, exploring the perspectives of various personas under the headings The Artist, The Collector, The Rostrum, and The House. Resembling the PBS series ART:21, “Your Art World” further promotes Sotheby’s as much more than an auction house. Visit the following link for more details:
 Sotheby’s will be hosting a selling exhibition of works by Sam Francis from 17 September – 14 October 2011. This will be our inaugural selling exhibition in our new gallery, S2. The exhibition will coincide with the launch of the Sam Francis Catalogue Raisonné of Canvas and Panel Paintings, 1946 – 1994, published by the Sam Francis Foundation and University of California Press.
 Sotheby’s is pleased to introduce S2, a newly-constructed gallery space within our York Avenue headquarters that is dedicated to special selling exhibitions of contemporary art. Designed by architect Richard Gluckman, who also created the celebrated auction galleries on the 10th floor of our building, S2 will host unique shows that focus on singular artists and themes within the contemporary genre. All of the works on display will be available for private sale, offering a new and exciting dimension to the Sotheby’s experience.
If you’d like a brick-and-mortar demonstration of how profitable private treaty sales have become to Sotheby’s and Christie’s, take an elevator to the 20th floor of 1230 Avenue of the Americas, Christie’s private sales offices and showrooms.
White walls, polished floors, and elegant furnishings provide an attractive place to do business. You can buy and sell everything here from a diamond to a $50-million Picasso.


A few years ago this space was an unrenovated empty shell—those who frequent the auction house previews will recall it was the setting for a terrific 2006 display of some two dozen sculptures from the Judd Foundation, which sold at auction for a total of about $24 million. In May 2008 Christie’s moved its newly purchased dealership, Haunch of Venison, into the space.
Discretion is a key attraction of private sales, so details of individual transactions seldom come to light. That said, the overall figures released publicly are extremely positive. Private sales now account for approximately 10 percent of the turnover from all sales departments at Christie’s. As of June 2012, their year-to-date private sales totaled $661.5 million, which, we are told, represents a 53 percent increase over the same period in 2011.
Sotheby’s, as a publicly traded company, is obliged to release more detailed financial information. Its first-quarter financial results for 2012 show private sales grossing $186.7 million. This represented a whopping 78.6 percent increase over the same three months of the previous year. Private sales look like a long-term breadwinner.
Auction houses have always dabbled in the private sales market, but what we are seeing now is nothing short of a revolution in how art is bought and sold. Auction houses are competing with dealers for consignments on every level, from the big-ticket paintings that make headlines to less valuable objects offered for sale through online galleries and curated selling shows. Sotheby’s even has an exclusive line of diamond jewelry available through its private sales department.
Providing their clients—both buyers and sellers—with more distribution channels makes good business sense. The auction houses have the international staff, so why not leverage it? Some collectors prefer to trade privately because they get around the annoying fee structure of the auctions; others simply like the personalized attention that private treaty sales can command. And then there is discretion.
For the auction houses, private sales have benefits beyond merely allowing them to participate in more transactions. They also build personal relationships among auctioneers and collectors and help the houses keep track of prized items. Two years ago Brett Gorvy, chairman and international head of postwar and contemporary art at Christie’s, brokered the sale of Andy Warhol’s 1962 Statue of Liberty from a Swiss collector to its current American owner. Now that the latter is ready to part with it, Gorvy is in the perfect position to bring in the work to headline the house’s New York sales next month.
As this tale makes clear, auctions are definitely not a thing of the past. Sellers still turn to them in the belief that they can get the top price and maximize profits when an item is put up for bidding—and they are often right. But there is a limit to how many auctions a house can do each year, while the treaty sales can keep expanding without limit. You just need a fancy showroom and staff.
As that growth advances, of course, the houses will face increasing competition. Galleries will continue to dominate the primary market sales of contemporary art, where they play an important role in nurturing careers. And the two big players are finding themselves vying with their own former employees, such as the partners in the formidable new firm of Connery, Pissarro, Seydoux. The ultimate winners are the clients, who now have many more options to be in the game.

No comments: