Introduction
In 2014, Sotheby’s and eBay announced a collaboration that could see the former sell its art through the former via online auction. Sotheby’s, a 270-year old company, is a world leader and an iconic international art business and auctioneer. On the other hand, eBay is a global giant in e-commerce.
It has over 145 million customers. It offers a prime avenue for Sotheby’s to take its auctioneering business to the masses. However, it is worth noting that this observation is not the first time the two companies have entered into such collaboration. In 2002, the two companies entered into the same collaboration, although it was not successful.
To many business analysts, online auction of art was seen as an idea that was ahead of its time. At the time, fine art was regarded as a field for the elite in addition to being out of reach for the masses in terms of prices. Although this perception continues to persist, eBay and Sotheby’s have been keen on changing it within their new collaboration.
The two companies will create an online platform for mid-priced inventory, which will feature online subsisting public sales and instantaneous ordering. While Sotheby’s already offers online auctions and sales, its collaboration with eBay is a good move that targets customers for mid-priced art.
On the other hand, eBay will have the right to use classy commodities and purchasers and hence the importance of the collaboration for the two companies. This paper will discuss the viability of this new collaboration and its implications and importance for the global art network development.
Analysis of Sotheby’s and eBay 2014 Collaboration
In the last decade, the global arts sector has grown enormously across the world. For instance, in 2002, the sales of art stood at approximately €18.6billion as compared to the present-day sales that reached approximately €47.4billion as at 2013, representing a growth of 155% as Deloitte & ArtTactic confirms.
During the same time, the use of internet grew significantly starting from approximately 720 million users to 3 billion in 2013, which was a growth of over 315%. At the same time, online sales or e-Commerce has grown enormously. Billions of sales are done each year through the platform.
In 2013, over €1.3 trillion-worth transactions were carried through e-Commerce. According to Andrew, the figure was a rise of 20% from the previous year. The trend is expected to grow enormously in the next few years to reach €2.3 trillion by 2017, which will represent a growth rate of 180%.
In the e-Commerce categories, Beales asserts that mobile phone e-Commerce will experience the highest growth rate of approximately 230% to reach €1.4 trillion in the same period. From these statistical observations, it is evident that as more and more transactions are made online, it is disastrous for the arts sector to lag behind.
The time for online auctioning of the contemporary artworks is now perfect as evidenced by the above findings, which show a significant shift in the market situation as compared to 2002. In addition, it is worth noting that by collaborating with eBay, Sotheby’s will only be expanding its online auctioneering and exposing it to more potential customers.
Already, the company has successfully carried out its online auctioneering with good and impressive results. However, its journey has not been without its challenges. The first online platform for the company was launched in 1999 when it collaborated with the Amazon Company. This collaboration did not see the light of the day, as it pulled off within a year.
In 2002, its new collaboration with eBay ended in the same year after it was pulled off within a year. Lessons that were learnt at the time were very valuable. They have helped the company in its subsequent online platform known as BIDnow, which it has solely been running. In 2013, the company redesigned its BIDnow platform to allow more integration and streamlining within mobile and tablet devices.
With these changes, the company has seen its online bidding grow by 45%. The figure is an increase of 50% in the Asian client traffic and a 25% increase in the time spent on mobile devices. The company’s online catalogue distribution has grown to over 3 million as compared to the print version catalogue, which stands at approximately one million.
In addition, Sotheby’s preferred client programme web traffic doubled. It has shown impressive growth since 2013. Bids of more than €1million have become a common occurrence. The commendable progress of Sotheby’s reflects the current trends in the wider arts business in the world. A close competitor of Sotheby’s, namely Christie’s, has also experienced impressive growth in its online sales of arts services.
The company controls approximately 46% of the world’s arts auction together with Sotheby’s. According to Hiscox, the two generated €18 million from online-only sales, which were from 49 online only sales as compared to €4.1 million from seven online-only sales that were achieved in the previous year of 2012.
Further, the company’s 45% of registered buyers through the online platform were new clients from over 100 countries. According to Caines, its testimony of an online sale was recorded in July 2013 when it sold an Apple 1 computer for €335,395 while the record that was set through its Christie’s Live (an online extension of the ‘live’ auction) was achieved through the sale of Zao Wou-Ki’s 09.05.61 at €1.47 million.
Other major players that have joined the online arts sales sector include Amazon that announced its entry in August 2013. Such close of interest and prospects for online auction in the arts sales are key indicators of the confidence that players in the industry have. On the wider auction business, Vogel and Isaac present the-saleroom.com, which had one of its best years where it hosted over 7200 auctions, 3100 live auctions and sales of €97 million.
In the United States, the Invaluable.com realised a record-breaking 102% growth in the fourth quarter of 2013 during the same time for the previous year. This tremendous growth was attributed to an 80% increase in buyer transaction, owing to the increase of excellent commodities that were available on the platform.
Another major player, namely LiveAuctioneers.com had its best years with gross online sales reaching € 195 in 2013. According to Beales, one of the best indicators of the confidence that the online arts auction market is experiencing can be clearly indicated through the money that is flowing to the sector in terms of investment. In 2013, the year saw increased rounds of investment for various online arts auction platforms.
For instance, Paddle 8 received €5.2 million from various investors. Further, Artsy was able to raise €4.8 million in new funding to propel more growth. According to Shatkovskaya, Artspace was also able to raise a considerable amount of outside investment totalling to €7.4 million.
Lofty.com, with an initial investment of €2.6 million, joined the auction business for fine art. Other major investment trends included €7.6 million investment funds that were received by 500px, €36 million for 1stdibs and €5 million for the French Expertissim. Such trends present important indications for the confidence that the industry is experiencing from investors and hence a promising future ahead.
Sotheby’s and eBay Collaboration
Many questions have been asked by different opinion experts on the viability, convenience, and other areas relating to the 2014 decision of Sotheby’s to eBay to collaborate. These questions are much warranted, owing to the fact that the two companies have had the same kind of agreement in the past.
In 2002, their collaboration did not succeed. It failed within a year after its launching. How will this situation be different this time? Is the risk worthy? Above all, why is eBay in the mix again? Such questions are an indication of scepticism regarding the viability of online arts auction, especially in an industry that is known for its target of the high and wealthy members of the society and not masses.
However, apart from the trends that have been well discussed concerning the state of the market, it is important to understand the nitty-gritty details of the collaboration between the two companies. Firstly, the new online auction programme aims to bring arts to the masses as a way of breaking the notion that it is only for the elite.
However, who are the masses? According to Hiscox, the main target for the online auction platform collaboration between eBay and Sotheby’s is the $5,000-100,000 range. The range is taking an increasingly large share of the company’s transactions. In 2013, dealings under this category are attributed to approximately 30% of all transactions, thus bringing in 1.5-2% of the company’s revenues.
Despite such small figures that the country accounts for in terms of the company’s income, the potential is enormous since more people and online dealers continue to embrace arts merchandise. Such an increase in interest has been fuelled by growth in the emerging markets, especially in China and other Asia Pacific nations.
For instance, the Chinese market led the world in terms of arts purchases in 2013, accounting for $4.1 billion of all sales. In addition, the number of registered users and auction signups increased by 43% and 35% respectively. Such growth in these emerging markets represents a platform that Sotheby’s must target in its expansion plans and push for becoming a leader in the online auction for the arts business.
Secondly, eBay makes a great platform for Sotheby’s to expand and reach its online target customers in the $5000-100,000 category. The company has over 145 million customers in over 180 countries worldwide. Further, according to its statistics, over 3500 transactions are made daily in the $5000-100,000 category of goods. Such transactions are not just in the US but also worldwide.
In addition, with an experienced running for nearly two decades, the company has a very secure and efficient online auction platform that will go a long way in supporting Sotheby’s aspirations of joining eBay’s large network. However, this arrangement is not only beneficial to Sotheby’s but also to eBay. It is worth noting that most of the big Sotheby’s clients are super rich individuals.
Hence, the growth of this online auction platform is an opportunity for accessing high-end clients and incomes that will be a great boost to the company’s revenues. Consequently, the collaboration between eBay and Sotheby’s comes at a great time that will be devoid of factors that hindered the initial collaboration of 2002. During that time, the internet was still a new invention.
People had little confidence if any regarding e-Commerce, especially on the selling of highly valuable arts merchandise. Further, owing to the low number of people who regularly used the internet, it was impossible to reach a high number of potential customers. Another important fact was that the target population comprised high-end customers who were not ready to purchase arts worth millions on an online platform, which at the time would have been equated with blind faith.
In addition, without support from key stakeholders such as collectors and customers, the idea was much ahead of its time. Hence, the collaboration was headed for failure. Therefore, when the association failed, it did not come as a surprise to many since it was expected.
The situation has changed drastically since that time. The years ahead offer a great promise, owing to the support that online auction platforms have received in the recent past. Consumers are becoming more comfortable as evidenced by the efforts to make large and costly ticket items online.
For instance, in 2014, Sotheby’s facilitated the online auction of John Audubon’s “The Birds of America”, which went for $3.5 million, thus setting a record for the company. Such high-end arts can only indicate one thing: confidence in the market.
According to Hiscox, the global online arts market in 2013 was estimated at $1.57 billion. At a growth rate of 19%, it is expected to reach $3.76 billion. The available data is very impressive. It clearly indicates where the focus of Sotheby’s and other arts companies should be.
On the other side, collectors who act as the major stakeholders in this market have expressed their confidence in other online arts markets. In the same report by Hiscox, as confirmed by Shatkovskaya, 77% of the collectors and 69% of arts professionals seem confident that the online arts business model will be highly successful.
Swot Analysis
To understand the collaboration and its viability, it is important to carry out a SWOT analysis. The SWOT analysis is an important tool for understanding the market dynamics and other key factors that help an organisation to decide whether to go on with an idea or not. The following SWOT analysis table will represent the key factors concerning the viability of eBay and Sotheby’s collaboration:
From the above SWOT analysis, it is evident that the strengths and opportunities for the collaboration greatly outweigh the weaknesses and threats. Therefore, it is important for the collaboration to go on to address the weaknesses and threats as they arise while maximising on the strengths and opportunities.
Opinion on the Collaboration and What it Means for the Arts Industry
To many critics and supporters of this new development, it is evident that the movement to online auctioneering for arts is unstoppable. Any efforts to stop it are minute. With trillions of people having transacted for years through the online market, it will be unfortunate for one of the oldest businesses in the world to remain behind.
According to Shatkovskaya, support from different opinion leaders and key players in the industry towards the online sale of arts is overwhelming. For instance, as previously stated, more than 77% of the collectors are confident that the new business model will be highly successful.
In addition, 63% of the collectors have confirmed the convenience of the online bidding and buying over showroom and physical presence that focuses on traditional auction. It is also encouraging that 71% of collectors have purchased arts online, with 26% having spent over $50,000. Over 75% of them claim that the online platform offers them the advantage of finding artworks that they would have otherwise not found in the traditional physical space.
Of great importance are the trends that are going on in the sector. New arts companies have emerged with a focus on making online auction part of the business. The entry Amazon and Alibaba among others into the sector is an indication of the confidence that is exhibited across the board.
Further, the many live auctions that run concurrently with the traditional auctions, especially at Christie’s and Sotheby’s are an indication that even though the transition to solely online platforms may not be instantaneous, the journey has already begun. As the challenges that come up are addressed, the online auctioneering will become more integrated in this important sector.
Relevance and Importance of the Collaboration in Contemporary Art Field
The move to online auction of artworks has far-reaching impacts on the contemporary arts industry. As more and new art establishments are realised on the online platform, changes are bound to happen. Hence, there is potential to change the industry and usher in a new process and a contemporary way of managing art. The traditional gallery model of auction and market will likely begin to lose its share of the market.
Hence, online auction will be more cemented. From the experience of sales of other artistic creations such as music and publishing services that have gone online and slowly pushed out the older models, it is evident that the contemporary online platforms offer more efficient and cost-effective model of managing art than the traditional methods.
While many experts claim that art is different and that it requires the interested parties to see, it is true that many of them are warming up to the idea of online auction. With the support of major online sales leaders such as Amazon and eBay, online auction of art will likely redefine the contemporary art and usher in a new way. One important fact is that the traditional art gallery and the conventional auction model are going to shrink over the next few decades.
On the other hand, the existing and new galleries will come up with aggressive online strategies as seen in Sotheby’s and other contemporary art companies. The idea might have come of age, but not on the specific segment within which Sotheby’s and the wider arts sector exists.
Accordingly, critics assert that the idea is still ahead of its time. Hence, they do not understand the hype about it. In addition, their citing of other issues such as authenticity, which is a major problem for the industry, is a valid reason for their concern. Another problem that critics have raised relates to the quality of arts merchandise, which in many instances has to be proven by the dealer.
Visual presentation has been one of the most important experiences that collectors seek. Therefore, in this case, it is obvious that many collectors will choose the traditional auction over the online auction. Among other reasons, critics have laid the above reasons as to why online auctioneering may not be that big after all.
Regardless of the position that has been taken by various opinion segments, one thing is guaranteed. The impact of online auctioneering on the arts sector is that it will open up the market to the masses and reach other segments and individuals of the society that would otherwise never participate in this prestigious and lucrative side of the economy.
According to Vogel and Isaac, online auction of contemporary arts will lead to what has been referred to as ‘democratisation’ or ‘globalisation’ of arts. For a long time, art commodities were associated with the super rich individuals of this world, especially in the United States and the United Kingdom. However, with the launch of the online platform, things will change.
It will begin with Sotheby’s and eBay. Now, Sotheby’s has a client base of 100,000 people. Under this collaboration, it will be ‘bringing arts to the masses’ when it will expand its client base to 145,000,000 people through eBay. The move will be indeed a democratisation and globalisation of the arts industry.
Socially and culturally, the trend is likely to lead to major changes. Firstly, with the internet spreading worldwide, new forms of arts are likely to emerge from different areas of the world that the traditional auction market had ignored.
Secondly, it will present an opportunity for new cultures to display their arts and/or sell the works to a worldwide audience. Consequently, it is evident that the impact of the collaboration of Sotheby’s and eBay will open new doors and trends that will have the potential of changing the arts sector forever.
Conclusion
From the discussion, it is without doubt that the collaboration between eBay and Sotheby’s has come of age and that it has the potential of succeeding in the highly internet-connected world that is characterised by growth in e-Commerce. The failure of the collaboration in 2002 was a matter of an idea that was ahead of its time.
In 2014, the time was ripe for the collaboration. By bringing the 270-year experience of Sotheby’s and eBay on online auction as well as its client base of 145 million customers who are spread across the world, the success is highly possible. At a growth of 19% annually, the $5,000-10,000 segment that the two organisations are targeting offers a great growth opportunity.
Despite the challenges and criticisms that have been advanced on online auction of arts merchandise, the benefits outweigh the disadvantages. It will also usher a new period that will change the sector forever. In this case, online auction will democratise the arts market and ensure that it is no longer a segment for the elite. Culturally, it will offer an opportunity for the often-ignored culture to display its arts. The world will wait and confirm how the collaboration will fair.
Bibliography
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Caines, Matthew., ‘International Art Market 2013: new report examines the facts and figures’, The Guardian, 2014. Web.
Deloitte & ArtTactic., Art & Finance Report 2014 (London: Deloitte, 2014).
Hiscox., The Hiscox Online art Trade Report 2014 (London: Hiscox, 2014).
Shatkovskaya, Irina., Sotheby’s and eBay: Entering the same river twice? (New York: Internet Liv Stats, 2014).
Vogel, Carol, and Mike Isaac., ‘Warhol With Your Moose Head? Sotheby’s Teams With eBay’, New York Times, 2014. Web.