June 22, 1999
By: Janelle Brown
Snooty Sotheby's dives into an online auction world shaped by scrappy eBay. How will its objets d'art fare amid the Furbys?
A tour of the public galleries at Sotheby's New York is not a heartening endeavor for the weak of wallet. The anterooms of this Manhattan institution -- rooms that are free and open to all visitors -- must make up one of the world's most extraordinary museums, by measure of the sheer volume of antiques, paintings, memorabilia, furniture and jewelry that passes through each week en route to the auction block. It's a paradise for the culturati, and everything is up for sale.
On a recent visit, Sotheby's was conducting tours of the private collection of Mr. & Mrs. John Hay Whitney (yes, those Whitneys), an extraordinary assemblage of Impressionist artworks, most going up on the block for a cool million -- or $25 million. "This is probably your last opportunity to get a fine Seurat," admonished the refined and decorous curator, chuckling over its hefty price tag. "Don't we all wish we were still collecting art in the 1950s?"
This hushed, moneyed spectacle is a far cry from the ragtag realm of eBay, the capitalist empire built on Pez dispensers and Beanie Babies, where the average objet d'art might set you back $40 or $50. Or is it?
Sotheby's is gambling that the two worlds aren't so far apart, and is poised to launch not one, but two major online auction ventures by September. One is a $25 million project at Sotheby's.com and the other is a just announced joint venture with Amazon.com's fledgling auctions division.
The leap from the world of fine antiquities to the frenzy of digital bidding may seem odd, but it is an act that Sotheby's expects will pave its way to 21st century success. And Sotheby's isn't the only venerable auction house with this vision: Its biggest competitor, Christie's, is also planning an online auction venture for later this year. And even as Sotheby's imitates eBay's online success, eBay is itching for some of Sotheby's real-world clout -- it bought the California auction institution Butterfield & Butterfield in April. The common gamble here is that the online market is ready and willing to become fine art collectors.
"On the one hand, there has been more wealth created in the last several years than in any time in history. People have at their disposal so much more income to go out and buy collectibles," explains Diana Brooks, CEO of Sotheby's. "Set against that is that people are so much busier; there is so much less leisure time than there ever has been in the past that it's hard for a busy professional to become a serious collector. The Net takes down all those barriers to entry -- we know people have the appetite, it's just a matter of how we get them to actually do it."
Sotheby's has long maintained a site at sothebys.com, but even as eBay was making its meteoric rise up the Net traffic charts (as well as the stock exchange), the Sotheby's site served primarily as a promotional vehicle for upcoming live auctions. That all changed in January, when Sotheby's announced its $25 million online auction project at the same URL.
It's all part of an expensive makeover that Sotheby's is undergoing in hopes of shedding its staid image for a more amenable mien -- including the erection of a new, steel-and-glass emporium at Sotheby's New York headquarters that Brooks describes as a "destination location for entertainment and learning."
Today, more than 80 percent of the objects sold by Sotheby's are priced at less than $5,000, but the Sotheby's name continues to evoke million-dollar masterpieces. As David Redden, executive vice president of Sotheby's, puts it, "There is still trepidation about coming across the threshold of Sotheby's. It's a real problem for us. Our reputation causes a certain sense of bashfulness."
This, then, is what Sotheby's is hoping to dispel not only by moving online but by partnering with Amazon.com, the final word in entrepreneurial e-commerce. As Brooks puts it, "In one fell swoop, you take that [trepidation] away when you have a partnership of these two companies. Amazon is totally approachable and accessible to people."
This partnership is Sotheby's great hope for reaching the common person -- like those 10 million Amazon.com customers -- who might have never considered buying an antique diamond watch before, and for eliminating the dividing line between wealthy collectors and online hobbyists, reaping the profits that ensue.
But anyone who is already familiar with online, person-to-person auction sites will find that the two Sotheby's sites, launching in September at sothebys.com and sothebys.amazon.com respectively, will be very different animals indeed. Although the auctions will have the basic transactional methods familiar to denizens of the online auction world -- a searchable database of items that you can digitally bid upon -- there will be some key differences.
While the sothebys.com site will focus on the traditional paintings, drawings and art objects you'd find at live auctions, the sothebys.amazon.com site will serve up more pop objects: "toys, fashion, animation art, coin, stamps -- as well as more general art, decorative objects, jewelry and collectibles." The difference between the two auction sites, says Brooks, has less to do with price or quality and more to do with "character."
Beyond simple price point, the Sotheby's projects distinguish themselves from current offerings by bringing in professional appraisers. Think of it this way: EBay and other person-to-person auctions are a free-for-all, where any anonymous enthusiast (or huckster) can stick grandma's silver up for sale for any random price. To auction it at sothebys.com, however, you would have to take your silver to Sotheby's, or else to one of its 2,800 "partners" -- primarily experts, dealers and antique resellers -- to have it examined, appraised and photographed.
That appraiser will serve as the vendor for your silver, pricing it and answering all questions from bidders regarding history and authenticity, in exchange for a cut of the deal. It's what Sotheby's and Amazon.com are calling "professional-to-person," and is an authenticating process that they believe will assuage the fears serious collectors might have of online auctions.
This authentication issue -- the question of whether that Queen Anne table is really what the seller says it is -- has long been troublesome to many who frequent online auctions. It may not matter when you are picking up a $5 tchotchke, but when you are spending $1,000 on a fine antique it is crucial to know that the person who is selling it to you is knowledgeable enough to describe it. This, of course, is what Sotheby's has spent 255 years perfecting.
As Jeff Bezos, CEO of Amazon.com, explains, "What Sotheby's and Amazon.com are going to try to build together is an auction environment online that allows people to bid for and buy valuable objects with confidence. The core problem there has been authentication and guarantees of authentication, and one of the ways that we are going to solve this problem is with this extraordinary asset that Sotheby's brings to the table."
The sothebys.amazon.com site will launch with the sale of the Barry Halper baseball collection, a renowned collection of 19th and 20th century baseball memorabilia, which Sotheby's hopes will draw a wide variety of people to the site. That auction should set the tone for future auctions; Sotheby's plans to use the site to expand into new areas, primarily into the (comparatively) lower-end collectibles that it wouldn't sell at live auction.
"There are just so many million dollar paintings in the world," laughs Brooks, "but there are hundreds of thousands of wonderful things under $5,000 that we will be able to sell as a result of what we are doing."
Christie's also plans to launch a professional-to-person auction site later this year, the plans for which were rushed out in a press release after Sotheby's announced its project in January. Although the company has been slow to release any details (and failed to return repeated phone calls requesting an interview), industry reports suggest that Christie's project will follow the same pattern as Sotheby's: Thousands of partner/dealers will appraise, document and sell the objects through the Christie's site.
But is there a market for high-end sales online? A quick look through existing auction sites shows that the number of collectors trading in fine antiques and collectibles is paltry compared to those swapping tchotchkes; on one recent day the antiques area of eBay boasted 52,202 auctions -- compared to the 240,718 in "toys and beanies, plush."
It's a simple matter of economics: Luxury goods are just that -- objects that not everyone can afford. There's a bigger market for cheap oddities than expensive heirlooms; more people who are willing to fork out $20 for a remote controlled flying saucer than $250,000 for a colonial highboy.
Another reason for the disparity could be that collectors are wary about buying an expensive item that they can't touch. Guarantees of authentication from "experts" might alleviate some concerns. But Sotheby's also makes the valid point that over 25 percent of its live auction sales go to phone-in bidders who only glimpse their purchases in printed catalogues; the Net would, in fact, be an improvement over the expensive catalogues, enabling multiple pictures and deeper information about the items.
Steve Westly, eBay's vice president of marketing and business development, says that thousands of items costing over $1,000 are sold on eBay every day; hundreds of items over $10,000 are sold monthly. This is exactly why eBay is, in turn, about to launch its own high-end, professional-to-person auction area, complete with authentication and guarantees. "We didn't sit around and say 'They might want this, let's throw it out there,'" says Westly. "The users came to us by putting more and more expensive items on the site all the time."
EBay bought Butterfield & Butterfield, the world's fourth largest auction house, in April and is planning to launch its "upscale" auction area within weeks. The new "Great Collections" category will be housed on the eBay site and will be similar in scope to Sotheby's and Christie's: Using the Butterfield & Butterfield name as a draw, eBay is partnering with big-name galleries and dealers around the world to produce a professional-to-person auction, selling expensive and authenticated objects. Individuals who currently sell the more expensive items on eBay can continue to do so in the existing direct-sales categories, but to sell in the "Great Collections" area, they will have to go through an authentication expert and pay higher fees.
Initially, all three institutions will be targeting the same group of "expert" dealers and galleries -- and going after a market that, for now, is relatively small. For Sotheby's and Christie's in particular, this means competing with eBay, a brand that currently has much more online cachet.
"In the old world, Sotheby's and Christie's had the great brand, and because of the channels of distribution they could control the auction world," says Westly. "In the new world, where you don't have to go through one of those two or three auction houses, all of a sudden it gives the little guys the chance to work together with the company that works best for them."
Current eBay users like Jeff Hess are a perfect example of the type of person that Sotheby's, Christie's and eBay all hope to target. Hess is the author of a book on antique Rolex watches and is a dealer in fine jewelry and antiques with 20 years of experience under his belt. He currently moves nearly $1 million of merchandise a year on eBay, selling objects in the $2,000 to $10,000 price range every week. Hess is currently one of eBay's "Power Seller Gold," receiving special treatment for selling over $25,000 a month.
But Hess is about to abandon eBay, he says, because he's been invited by Sotheby's to be one of its 2,800 "Charter Master Dealers." (Sotheby's requires its partners to sign an exclusivity agreement, which forbids them to sell any item priced above $300 on competing auction sites.) Hess says he's "very excited" about working with Sotheby's, and is convinced that the reputable brand name will bring in more customers, particularly foreign collectors; despite his success on eBay, he believes that the site still scares off many people.
"EBay has dropped the ball because it's fostered this image of a flea market," says Hess. "It made a mistake by not fostering a more serious, higher-end image even though, obviously, it does have a lot of people that buy expensive, serious antiques."
But for Hess -- and other fine dealers in antiques -- these upscale professional-to-person auctions are not just the gateway to serious buyers, they could also drive the cost of selling antiques up and the audience size goes down.
While eBay currently charges a 1.25 percent commission on objects that sell for more than $1,000, Westly asserts that the new high-end endeavors will charge significantly more. Sotheby's will charge 10 percent to both the buyer and the seller. It's a more lucrative profit margin for the auction sites, but a risk for the middlemen like Hess. "Not only are you taking that gamble of moving to a less-trafficked site, but you're taking the gamble that sales will bring in 20 percent more," he explains. Still, he says he believes that the Sotheby's name will draw customers willing to fork out a little bit more.
But eBay pooh-poohs this argument, and is betting on its current market share to beat both Sotheby's and Christie's. Westly quotes a Media Metrix figure to say that 5.4 percent of all people on the Net visit eBay.com every day, while only .4 percent visit Amazon.com's auction service. Certainly, a quick visit to both sites shows eBay's current advantage: for example, Amazon.com's "Ancient World" antiques area has merely 387 listings, while eBay's boasts 1,844. If you're trying to find an obscure item or a willing buyer, Westly argues, you are still more likely to find it at eBay than Amazon.com.
"In terms of success at high-end auctions, it's completely driven by how many people will come," says Westly. "EBay is already doing hundreds and hundreds of these items; when we consciously bring in more merchandise from around the world with authentication, in concert with this huge audience, we'll do very well."
Of course, once Sotheby's launches its marketing campaign and draws on its international customer base, the balance could change.
One of the stranger aspects of these high-end auction areas on eBay and Amazon.com will be their competition with the direct sales taking place in the open areas of the sites. The launch of the upscale auctions could pillage the existing antiques area of eBay; however, the opposite could also be true.
Since many smaller sellers may not want to go through the hassle of taking their antique to an expert for an authentication and then paying the extra commissions -- slapping it straight up on eBay is cheaper and more time effective -- the unmonitored auction areas may continue to be richer hunting grounds for quirky items. They could also be more appealing for bargain-hunters.
And as Karen Ewart, an antiques dealer who sells 10 to 20 expensive items a day on eBay, explains, "Buyers may believe they will get a 'more fair' price for the item they are interested in with the 'small independent' vs. the 'large conglomerate.' We shall see."
But the main hope is that the market is simply going to grow in both directions, making room for both the chaotic open markets and the new dealer-sanctioned auctions. Hess is optimistic: with the brand names hitting the Web, he says, "the market is going to explode for upscale items."
Redden of Sotheby's, in turn, talks about the emergence of a materialistic American marketplace that has "a growing fascination with objects and antiques ... We know there's a strong marketplace for what we sell, but it's constrained by access. When we expand the access, it will grow like wildfire."
The question, ultimately, is whether the risk and chaos of person-to-person auctions is truly a drawback that needs to be eliminated -- or whether it's what lures people to sites like eBay in the first place. Do people want to buy expensive antiques from what is essentially a gallery or dealer working online -- even if they are competing with strangers for the price? Or is half the fun of online bidding the fact that your "find" is buried within a democratic frontier that lists $200,000 gemstones next to $5 leather fanny packs -- and that the seller could be a person just like you? Will the frivolous nature of throwing a few hapless dollars down on a whim -- the basis of eBay's success -- still keep things fun when you're dealing with heirlooms and artwork?
Of course, in the world of expensive antiquities, and wealthy collectors, the rules may change. "If you have some wherewithal," Redden puts it obliquely, as he talks about Sotheby's moneyed customers, "you can have fun. It's all relative."
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