The Search for New Collectors

The Wall Street Journal has run an interesting article on how the major auction houses are soliciting new collectors. The article gives some insight into how Christie's and Sotheby's track wealthy clients and collectors, what they are interested in and how much they pay for art and other collectibles. As the article notes, fully one third of Sotheby's 1550 employees track close to 9,000 wealthy collectors and clients. Christie's has a list of 141 collectors who may be willing to spend more than $50 million on a piece of art.

During the first half of 2014 first time buyers at Christie's and Sotheby's spend over $2 billion. This large amount of new spending and collectors has to be encouraging to the auction houses and supports the continuing hunt for new and wealthy clients.

The auction house outreach is to try to turn buyers into collectors, who will be spending money at the auction houses for years to come.  Past strategies of selling dealers has now shifted to selling to individual collectors.

In early May, Christie's invited a group of 18 new collectors from China to visit New York. The auction house escorted the guests on guided tours through the Museum of Modern Art, arranged VIP tickets to a local art fair and threw a lavish dinner in the Rockefeller Center ballroom of Christie's. Auctioneers also reserved two discreet skyboxes overlooking the house's saleroom so the group could watch its major spring sales of Impressionist, modern and contemporary art.

Christie's efforts paid off: During its May 13 contemporary art sale, members of the group placed bids on at least half the top 10 priciest pieces in what became an historic, $745 million auction. The group, mostly women, used telephones in their skybox to call a Christie's specialist standing in the saleroom, Xin Li, a former actress and model in China. She often had to toggle three telephones at a time in order to field their overlapping bids. By sale's end, members of the group bid on or won a gallery's worth of masterpieces—including a $66.2 million Mark Rothko abstract, a $33.7 million Jeff Koons sculpture of a train, a $29.2 million Gerhard Richter squeegee abstract and a $26 million Alexander Calder sculpture of a "Fish," a Chinese symbol of prosperity.

Christie's CEO Steven Murphy watched the action from the sidelines, stunned. "We didn't know anyone from that group a year ago," he said. His staff in Shanghai and Hong Kong had been alerted to their interest by other, established Chinese collectors, and specialists had been courting them for months through visits and leisurely conversations about art.

If you're even remotely curious about starting a blue-chip art collection, there's a good chance the world's biggest auction houses already know who you are, and exactly how much you might spend to own a masterpiece. Gone are the days when auctioneers simply mailed sale catalogs to strangers after reading reports of their newfound fortunes. Today, climbing art values and an influx of new international collectors have thrown Sotheby's and Christie's into a global frenzy of research and genuflection. They've dispatched armies of experts to identify potential bigwigs, and satisfy their ever-expanding art whims.

A third of Sotheby's 1,550 employees are assigned to look after at least 9,000 top collectors, a job that entails everything from researching bidders' financial standing to digging through catalogs for objects that might intrigue them.

Christie's contemporary specialist Brett Gorvy keeps a revolving list of at least 141 collectors who can afford to spend $50 million or more on art trophies. At least 16 of those names were added to the roster in the past year alone. Mr. Gorvy, who declined to reveal the names on his list, said he started it 15 years ago using information from Christie's client database. He shuffles his rankings regularly to reflect changes in their bidding activity. At the outset, he said most of the collectors on his list were at least 70 years old and worked for major corporations. Today, a majority are in their 40s and 50s and run their own companies.

Some 26 people on the list are from Asia, including four who were "completely new to us" last fall when they separately placed bids above $80 million for a Francis Bacon triptych that Christie's offered for sale. The Bacon ultimately sold to Elaine Wynn for $142.4 million, but the sale flagged the deep pockets of the rest—including a young Korean collector and dealer living in New York, Hong-gyu Shin. Within days, Mr. Gorvy said he dispatched his staff to meet Mr. Shin and fly to Asia to meet the other newcomers.

"I told my team, 'Go create some excitement,'" he said. "We're trying to turn buyers into collectors."

Auction specialists say they're willing to do whatever it takes to find big bidders. Some monitor collectors' Instagram accounts in hopes of spotting them posing with wealthy friends who don't yet collect. The specialists then seek an introduction. Others throw parties for collectors' children in hopes the youngsters will "invite their school friends—and parents," said Christie's expert Giovanna Bertazzoni. Sotheby's gave a children's party two months ago in London and the house said at least 30 Eastern European families, including some newcomers, showed up. Activities included an art-themed scavenger hunt.

Behind the scenes, auction houses say they are ferreting out collectors by teaming up with insurers to offer art appraisals. In India, Christie's joined with a luxury hotel chain to tap its Rolodex two years ago, in exchange for giving occasional art lectures at several hotels. Christie's said its roster of clients interested in Indian art has since ballooned from a few hundred people to at least 4,000, attributed in part to the hotel deal.

Belgian collector Mark Vanmoerkerke is certainly flattered. After the real-estate investor began collecting contemporary art in 1998, auctioneers started cold-calling him, seeking to visit his home in Oostende, he said. Since then, at least 50 have come by and he gets invited to dinners and studio tours, although he rarely attends. He does go to the major sales in London and New York, though, and buys between 10 and 20 pieces a year at auction.

"It's a badge of honor if an auction house calls to see your collection," he added. "The first time I got a call, I felt like I joined the inner circle."

New buyers are driving the current art boom, auction houses and dealers say, so finding people first is key. During the first half of the year, Sotheby's and Christie's said first-time bidders took home $2 billion worth of art, winning a quarter of everything they offered at auction. The unusually large sum has driven auctioneers to look beyond their own circles for wild-card clients whose tastes and wallet sizes may vary.

Both houses said they began retooling their client-wooing strategies in the early 1990s after the Russians began earning overnight fortunes. Before that, auctioneers said they were more focused on selling to dealers and hunting material from potential sellers, taking notice of new collectors only after they began bidding often and heavily. The purchasing power of the Russians fueled a sudden run-up in prices for Old Masters and modern art. The houses began hiring Russian speakers to seek bidders who were likely to start spending more for art in other categories as well. Specialists like Alina Davey at Sotheby's also befriended high-profile contemporary art collectors like Roman Abramovich in Russia and Victor Pinchuk in Ukraine, hanging out on their yachts.

Two years ago, Sotheby's staff noticed a fresh generation of collectors across the nearby Balkans and Central Asia launching telecom companies and technology-related industries. So the auction house created an annual London sale of contemporary art from the same regions. Shortly thereafter, London's Tate Modern created an acquisitions committee for Russia and Eastern Europe. The Tate invited at least 16 people to join the group, who essentially advise the museum on what to buy. Sotheby's Ms. Davey said she made a point to befriend the committee members. "I know all of them now," she said, including Igor Tsukanov, a Russian hedge-fund manager, and Graznya Kulczyk, ex-wife of Polish billionaire Jan Kulcyz.

Auction courtship doesn't end after the introduction, either. Methods vary, but the more collectors spend, the more tailored their auction treatment tends to be. After a new Chinese client paid Sotheby's $15.8 million for Claude Monet's "Japanese Bridge" in May, Patti Wong, chairman of Sotheby's Asia, rounded up every art book she could find that included an image of the canvas and shipped them to the new owner. Ms. Wong said she also asked a London colleague to travel to Paris for a few hours recently to escort a newcomer couple through the Rodin Museum. "They like sculpture but haven't bought a Rodin yet," she said of the couple.

Around the same time, Sotheby's contemporary-art expert Cheyenne Westphal arranged for 30 of her best collectors, including some newcomers, to tour artists' studios in Peckham, a once-gritty neighborhood in Southeast London that's becoming a hub for younger artists. Ms. Westhphal said she capped the outing with lunch at a "cool" café located atop a car park.

Historically, auctioneers have always tried to cultivate cradle-to-grave ties to aristocratic families and their collections. Sotheby's Old Master expert George Wachter said one of his colleagues is nicknamed "The Vicar" because the colleague turned up at a longtime collector's funeral, only to be asked to give the eulogy.

Sotheby's jewelry specialist Lisa Hubbard said she once spent three years sewing a needlepoint pillow portrait of a jewelry collector's beloved Maltese, Serena. By the time Ms. Hubbard finished the job, the dog had died—but she said the collector still displays the pillow: "Serena is still in the living room."

What's different now is that instead of orienting a few dozen new buyers every season, specialists today are memorizing names and wish-lists for hundreds of new buyers lining up for paddles all at once. These buyers also hail from every corner of the world instead of just a few well-known countries, compelling auction houses to provide translators to handle queries in dozens of languages. So far this year, Christie's said it has fielded bids from collectors in 170 countries, twice the number of nations represented in the Sochi Olympics.

Mr. Murphy said he retooled Christie's outreach efforts once he realized that their challenge wasn't to convince wealthy collectors to buy more art—but to find and befriend people who were already living well but weren't buying art at all, yet. During the recession, Sotheby's started a "Preferred Program" for its top bidders, offering free entry to 150 museums around the world and hard-to-get tickets to shows so that collectors wouldn't have to wait in line, said Alfredo Gangotena, Sotheby's chief marketing officer. Christie's has a "Top Client" ranking as well, but "basically anyone who spends over $10,000 gets a follow-up call," said Francois Curiel, chairman of Christie's Asia.

In China, both houses have staffed up by adding people known for nurturing long ties to important local families. Chinese collectors, who primarily collected Asian art a decade ago, are now serious buyers across a broad array of categories. A few weeks ago, Chinese collectors took home four of the priciest pieces in Sotheby's series of Old Master sales, including a $13.2 million George Stubbs painting of two leopard cubs, "Tygers at Play," and a $3.8 million clock from 1790 that was adorned with swans.

Ms. Wong, the Sotheby's expert, was at the sales and said she bee-lined through the crowd afterward so she could introduce herself to the winner of the swan clock, an Asian man she had never seen before. Sure enough, the man told her he had never bid for that kind of object before. "I told him how great it was," she said later, "and I gave him tips on how to clean the clock."

Paul Hewitt, Christie's managing director of growth markets, said at least 300 Indians registered for the house's inaugural auction in Delhi last December, and a third of those were brand-new names to Christie's. For the most part, Christie's said these collectors were interested in buying Indian modern artists—but six months later, he said he was surprised to learn that a handful had also bid on paintings in Christie's Impressionist and modern sale in London, including a Monet. "That felt out of the blue," he said.

Market-watchers expect the global hunt to intensify, as long as the broader financial markets keep thriving. Of the world's 32 million millionaires, only about 2% currently collect art, according to the latest Tefaf Art Market Report by art-market researcher Clare McAndrew published in March.

"When I started, the art market had this colonial atmosphere of 'We don't need to bother with him—he's foreign.' Now we'd never say that," says Sotheby's specialist Philip Hook, who started working in the auction business four decades ago.

Source: The Wall Street Journal