Sotheby hones the fine art of selling fine art
On Friday, Oct. 17, Sotheby Parke Bernet auctioned off a Winslow Homer painting for more than $1.7 million. Earlier this year a painting by the English artist J. M. W. Turner brought a record $6.4 million.
As John L. Marion, Sotheby's president and chief auctioneer, notes, "there is that kind of money around" to be spent on paintings by masters.
And because there ism that kind of money around, the auctioneers, such as Sotheby's and its rival Christie's, are having record-breaking years.
Sotheby's recently reported that its North America sales for the 1979-80 season came to $249,010,000, up $100 million from the previous year. Christie's reported sales of $113 million, about double its 1978-79 season.
Sotheby's reported net earnings of $2,697,000, compared with $1,978,000 for the first six months ending Feb. 29, 1980. Sotheby's earnings come from commissions, usually in the form of a 10 percent seller's fee and a 10 percent buyer's premium. In the case of large estates, however, the buyer's fee can be negotiable. Christie's is privately held and does not report its earnings.
This burst of sales, coming during a down time in the economy, is partly the result of inflation, and individuals' attempts to hedge their assets by buying tangible items, and partly because of a well-orchestrated expansion by the auctioneers.
David J. Fitzpatrick of Merrill Lynch's international staff notes that the "inflationary environment and increasing real incomes have encouraged the overall growth of the art market, particularly in Western Europe and the United States."
Sotheby's Mr. Marion added in an interview that the declining dollar and various political uncertainties have acted like allies for the auctioneers. When the dollar has dropped, for example, foreign bidders have filled the void. Nor have uncertainties in the Middle East hurt sales, either, as oil-rich Arabs have sought safer havents for their money. "We may not be recession-resistant," Mr. Marion says, "but we are a lot more protected than a lot of businesses."
At Sotheby, the success in the American markets has encouraged the auction house to expand. Tis expansion has included the opening of new offices in key cities such as Chicago; Philadelphia; Washington; and Vancouver, British Columbia. The auctioneer hopes to open offices soon in Mexico City, to tap the Latin American market, and Montreal. In the US, future expansion may include Atlanta and Denver.
Christie's, since its opening three years ago in New York, has opened a branch in Beverly Hills, Calif., and has hired representatives in most parts of the country.
The competition has been beneficial, Mr. Marion says, because it has widened the market and exposed a broader segment of the country to the auction houses' advertising and public relations.
Although Sotheby's, founded in 1744, hasn't changed the basic auction system, which still exists much as it did during the 18th century, it has done what Mr. Marion calls some "fine tuning."
The fine tuning begins with the preparation for an auction. A newsletter is sent out to 60,000 potential customers high- lighting the forthcoming sales, while some 30,000 expensive catalog are mailed out to even more likely prospects. If an exhibit is considered particularly important, it may be exhibited in foreign countries. An Andre Meyer sale scheduled for next week, for example, was shown in Switzerland and London before the auction. Just before the exhibition, receptions are held to allow collectors a closer look at the artwork.
At the same time, Sotheby's tries to make certain that important collectors will be at its auctions. This involves sending personal invitations, taking collectors to lunch or dinner, and otherwise cultivating important buyers. "The absence of one important buyer at an auction," says Mr. Marion, "can mean a difference of several thousand dollars in bids." So successful is the Sotheby's method of pinpointing important clients that when the Turner oil painting was sold, Mr. Marion had correctly identified beforehand 9 out of the 10 bidders who offered to pay multimillion-dollar prices for the work.
Sotheby has also made some changes in the auction itself. For example, it was the first major auction house to use a revolving turntable on the auction stage so that artwork could be moved into the gallery quickly. And on a screen above the auctioneer, all bids are electronically converted into six currencies. Important families such as the Rockefellers or Mellons are likely to have an aide supplied by Sotheby and may have bids made for them by Sotheby representatives.
At the same time the auction is being conducted in New York, the chances are good that several other Sotheby offices are connected by telephone so that bidders in Los Angeles, for example, can participate.
Eventually the auctions may be tied into a cable television system so an individual can bid on an object without leaving home. And Mr. Marion expects that computers will play a larger role in the auction house's future.
Recently, in fact, it bought its own computer system and is having programs written for its business. Computerization will enable individuals who are selling art to find out exactly where an object is before a sale. Thus, if it is under study by the auction house's expert, or is on display prior to sale, this information can be retrieved easily. Until recently, Sotheby's only computer was a small Apple model which a top executive, Fred Schultz, brought in from his home for the accounting department. The company did use time sharing on an outside computer, however.
The "meat and potatoes" of Sotheby's sales come from the auction of fine art, particularly Impressionist paintings. But as part of its expansion, Sotheby's has just completed a $7 million building devoted entirely to the sale of the decorative arts." Last year, sales of the decorative arts, including art sold at Sotheby's lower-priced auction house, named PB84, totaled about $87 million, but this year, according to Robert Wooley, senior vice-president, sales should total just under $100 million.
As an indication of how much demand there is for decorative art objects, Mr. Wooley shows a visitor a six-foot porcelain vase that could have been bought at the 1893 Chicago World's Fair for $50. Mr. Wooley expects it to be auctioned off for $30,000 to 40,000.
In the spring, the new auction center will begin what Mr. Wooley terms a "revolutionary" new technique in selling decorative art. An individual wishing to sell an object worth $300 or less can bring it in and have it sold in two to three weeks. The item is listed on a computer printout given to potential buyers before the auction, thus eliminating the illustrated catalog and a delay of several months.
Another Sotheby innovation was the introduction of "heirloom discovery days." Individuals with full attics can get their treasures appraised for $5. This has resulted in the discovery of a 15th-century Ming Dynasty bowl (sold for $76,000) and Faberge porcelain eggs (appraised at $100,000).
Sotheby has also expanded its scope by entering the real estate business. Last year, real estate sales amounted to $80 million, up from $40 million the year before and $20 million in 1976-77, the first year. Although expansion in the real estate market has been slow, Mr. Marion says it was planned that way. The company did not enter the California market, for instance, until it found the right person to run the operation and the right locations.
Sotheby has also been slow in developing its institutional business. For example, its joint venture with Citibank, which involved buying and selling art for trust department customers, has gotten of to a slow start. Mr. Marion says the bank's customers proved not to be "robots," buying whatever Sotheby suggested, but were cautious, mainly asking for information. Now, however, Hugh Hildesley, a Sotheby senior vice-president, says the trust customers are producing a significant volume of business. "They are buying good artworks and paying good money for them," he says.
Pension funds have also been slow in entering the art markets, partly because of their cautious nature and questions about liquidity and valuation. Mr. Hildesley says he thinks a lot of the problems, like valuation and liquidity, can be solved, but will require more talking. There is also the question about what the entry of pension funds into the art market will do to prices.