More on the Sotheby's eBay Partnership

The NY Times takes a closer look at the newly announced Sotheby's/eBay partnership. The question is can Sotheby's maintain its own brand and luxury item status while selling items on the eBay platform.  Reports indicate the partners plan on moving slowly with Sotheby's maintaining control of sales, and eBay more as a technology partner.  Christie's is also leveraging its brand with more online sales, but it is doing so on its own or in conjunction with other luxury brands.  It will be interesting to see how each strategy turns out.

The NY Times reports

Convinced that consumers are finally ready to shop online for Picassos and choice Persian rugs in addition to car parts and Pez dispensers, Sotheby’s, the blue-chip auction house, and eBay, the Internet shopping giant, plan to announce Monday that they have formed a partnership to stream Sotheby’s sales worldwide.

Starting this fall, most of Sotheby’s New York auctions will be broadcast live on a new section of eBay’s website. Eventually the auction house expects to extend the partnership, adding online-only sales and streamed auctions taking place anywhere from Hong Kong to Paris to London. The pairing would upend the rarefied world of art and antiques, giving eBay’s 145 million customers instant bidding access to a vast array of what Sotheby’s sells, from fine wines to watercolors by Cézanne.

This isn’t the first time the two companies have teamed up; a 2002 collaboration fizzled after only a year. But officials say the market has matured in recent years, making the moment right for a new collaboration.

The announcement comes just months after the activist shareholder Daniel S. Loeb criticized Sotheby’s for its antiquated business practices, likening the company to “an old painting in desperate need of restoration” and calling for directors there to beef up its online sales strategy. It also signals a new phase in Sotheby’s age-old rivalry with Christie’s. After years of running neck and neck, Sotheby’s has recently been losing business to its main competitor — and Christie’s is planning its own bold move to capture more online business, a $50 million investment that will include more Internet-only auctions and a redesigning of its website scheduled for October.

Online auctions are not new to either auction house. Registered bidders can compete in certain sales in real time with the click of a mouse. What is new is the way Sotheby’s is trying to reach beyond its traditional customers to an enormous affluent global audience for whom online buying has become second nature. Luxury shopping websites like Gilt and 1st Dibs, with their broad mix of décor, designer fashion and antiques, have shown that shoppers are willing to spend many thousands of dollars on everything from handbags to sconces without inspecting them in person. And while the auction houses are seeing their online bidding grow — Sotheby’s, for example, says its sales on its website increased 36 percent in 2013 over the previous year — they believe the full potential of online sales has yet to be tapped.

A report in March by the European Fine Art Foundation in Maastricht, the Netherlands, found that online sales of art and antiques in 2013 represented only 5 percent of the $65.9 billion fine art market. The report expects online art and antiques sales to increase by about 25 percent a year for the next few years.

Capturing the online market means reaching out beyond Sotheby’s relatively exclusive pool of customers — which it numbers at more than 100,000 — to 145 million on eBay, most of whom have never seen a gavel fall. It is also a striking reversal from Sotheby’s decision in 2006 to concentrate primarily on the high end of the business. The company’s own research shows that more than 50 percent of all lots sold at auction last year were in the $5,000 to $100,000 range — a chunk of the middle market it hopes eBay will help it reach. “Even if we only reach point 1 percent of eBay users, that’s huge for us,” said Bruno Vinciguerra, Sotheby’s chief operating officer. “The point is to make our sales more accessible to the broadest possible audience around the world, all the while remaining totally committed to our high end.” While those big-ticket artworks get the most attention, officials at Sotheby’s say that sales in the $50,000 to $5 million range make them the most money — though they declined to say just how much.

Recently, both Sotheby’s and Christie’s have glimpsed this hoped-for future. Christie’s sold a Richard Serra drawing in an online-only auction for $905,000 in May; officials there said there were eight serious bidders competing. In April, Sotheby’s sold a “The Birds of America” John James Audubon folio for $3.5 million, a record for an online purchase in a live auction.

What Sotheby’s is hoping to achieve in a partnership, Christie’s is trying to do on its own. The company has hired experts from Gilt and from Mr. Porter, a men’s wear online retailer, to reimagine its online sales approach. “Last year we launched 60 online auctions, and we will continue to double that number,” said Steven P. Murphy, Christie’s chief executive. “Thirty percent of our buyers this year were new to Christie’s, and one-third of that group came to us online.”

For eBay, which reported overall revenues of $16 billion in 2013, and $8.3 billion for its online auction unit, the goal of the partnership is to create a shopping mall with Sotheby’s as its anchor tenant. The company hopes that customers who might go there first to bid with Sotheby’s will then explore the rest of the site.

“We want eBay to be a destination, not just a utility,” said Devin Wenig, president of Global EBay Marketplaces, which has been trying to gussy up its garage sale image by selling $100,000 shiny red Ferraris, designer clothes and yachts. “If you look at what we were selling 10 years ago, it’s really different now,” Mr. Wenig said. “We sell a lot of expensive items, including roughly 13,000 automobiles every week to mobile shoppers. Customer trust in e-commerce has evolved.” When it comes to art, a Sotheby’s deal via eBay will also carry the Sotheby’s imprimatur of authenticity.

In 270-year-old Sotheby’s move to broaden its customer base, some analysts say it risks tarnishing its storied image. In October eBay hired RJ Pittman, a former head of Apple’s e-commerce efforts, to oversee a redesign of its website, which now features a much heavier emphasis on lavish photographs that mimic the look of an upscale magazine. Meanwhile, Sotheby’s has dispatched its own team to make sure the eBay display doesn’t look cheap.

“Both sides know that the look and feel of the site needs to showcase the elegance of the Sotheby’s brand,” said Sucharita Mulpuru, a retail analyst with Forrester Research. “EBay can’t just bring its old product detail page to this feature.”

Details of the arrangement between Sotheby’s and eBay remain confidential. Sotheby’s will pay eBay a commission on each sale that takes place on eBay, according to Ryan Moore, an eBay spokesman. Though eBay also owns PayPal, for now Mr. Vinciguerra of Sotheby’s said shoppers would pay Sotheby’s directly for their purchases, although PayPal could become an alternative payment method in the near future.

The main concern for each company is that the failures of the past not be repeated, especially the one they shared more than a decade ago. In 2002 — well before the smartphone revolution — eBay and Sotheby’s formed their first partnership and started to introduce online live auctions. Sotheby’s hired close to 200 staff members. The project folded after a year.

Before that, Sotheby’s partnered with Amazon.com in 1999 in an effort to sell art and collectibles on that retail site. Back then Sotheby’s was trying to create a marketplace separate from its existing auctions by teaming up with a network of dealers and presenting auctions online. Consumers were leery, and authenticity was often an issue. “It was too early,” Mr. Vinciguerra said. “People weren’t ready for it.” Between 1999 and 2003, the auction house reported losses of nearly $150 million.

For its part, eBay was experimenting with eBay Great Collections, a 1999 attempt to sell more expensive merchandise — from fossilized pine cones to Hepplewhite armchairs — primarily through dealers. That same year, eBay also bought Butterfield & Butterfield, a San Francisco auction house, only to sell the business three years later to Bonhams, the eclectic London-based auction house.

Mr. Vinciguerra is hoping the failures were just a matter of right idea, wrong time. And now Sotheby’s can piggyback on eBay without making another heavy investment in technology.

“Over the years the quality, speed and experience online has changed tremendously,” Mr. Vinciguerra said.

In a sign of caution, the new arrangement will roll out gradually. At first Sotheby’s will present live New York auctions in 18 collecting categories on eBay’s website and through its own website. Sotheby’s big-ticket evening sales — the Bacons, Richters and Renoirs — will not be offered on eBay, nor will certain of its antiquities sales. Josh Baer, an art adviser who was hired by eBay to help shape its own art initiatives, said the new venture was not designed “to take away from selling a Jeff Koons sculpture for $58 million.”

And with its second marriage to eBay, Sotheby’s has a chance to gain a competitive edge. In the past when Sotheby’s competed for estate property, it was primarily hunting for the multimillion-dollar paintings, sculptures or furniture, Mr. Baer said. “Besides being able to sell the Renoirs and Picassos, Sotheby’s will also be able to have a platform to dispose of grandma’s silver and china to a huge audience.”

The advantage works both ways. “For some 25-year-old who is used to shopping online,” he added, “it’s a perfect way to break into the art world.”

Source: The New York Times