Issue #206  9/5/2014
Sotheby's Partners (Again) with EBay

By Alex Novak

Sotheby's and eBay are trying once more to work together on building an online presence for Sotheby's. The partnership will attempt to stream the auction house's sales live on a new, dedicated section of the online marketplace. Sotheby's also plans to expand and add online-only themed and time-based sales in the future. The partnership will provide 145 million eBay customers with bidding access to Sotheby's sales in 18 categories, but it won't—at least yet—allow you to use PayPal to pay for your Sotheby's online purchases.

After a previous attempt at partnership between these two lumbering giants ended in huge hits to Sotheby's bottom line and very little to show for the efforts, Sotheby's called it quits in 2003 after reportedly losing over $100 million on its online efforts. "There are simply not as many people prepared to buy authenticated fine art online as we had hoped," Sotheby's Chief Executive William Ruprecht told the Wall Street Journal back then. Then in 2008 Ruprecht stated baldly, "Selling top art over the net doesn't work."

A real, as oppose to virtual, Sotheby's auction when there were some actual people in the auction room.
A real, as oppose to virtual, Sotheby's auction when there were some actual people in the auction room.

But Bill Ruprecht has had his "come-to-Jesus" moment about the impact of the Internet on the art market. On a conference call earlier this month that ostensibly was about Sotheby's first half results, Ruprecht said that having "the eBay customer coming into our traditional live business as a corollary audience" is going to teach Sotheby's "quite a lot about what are some of the steps and the other kinds of sales that we offer to that community." Some more smart-Alec observers might mention that a lot of those lessons are going to be about the problems with eBay buyers canceling sales and backing out of bids. Compared to Sotheby's sedate auction rooms, the Internet—especially eBay—is often the Wild West. I don't see anything so far about how clients will be prescreened for Sotheby's besides eBay's normal less-than-optimal process.

EBay's audience won't get to see the more glamorous and higher level evening sales, nor, according to several reports, "culturally sensitive" auctions--whatever that means. EBay has always had an issue with nudes. Perhaps this will be the beginning of censorship at Sotheby's or the end of it at eBay. Photography is one of the areas that the companies' joint press release says in which they expect their customers to "converge in the future".

EBay and Sotheby's will start by offering a number of live auctions that will take place at Sotheby's headquarters in New York. Reportedly, eBay in the near future will be launching a newly designed area on its site, tailored for collectors of upper level art and collectibles. Sotheby's will be the "anchor tenant" in this revamped marketplace, which will include a new live auction feature and real-time bidding from anywhere around the world.

As Yogi Berra once said, "It's déjà vu all over again." Interestingly, eBay closed their eBay Live Auctions in 2009 and they had serious issues with the live auction software they created for their Butterfield's auction fiasco. Back then, eBay said when shuttering this effort, "In the case of Live Auctions, maintaining and improving this platform falls outside our immediate focus, and will, therefore, be retired at the end of the year."

But in May of this year, it announced a new live-bidding platform on eBay.com in partnership with Invaluable, formerly called Artfact. According to that May announcement, the search on eBay for a collectible will bring up results for live auctions alongside listings for traditional auction and fixed-price listings. Adding Sotheby's (and Invaluable's) listings in this way could certainly help boost eBay's cache, especially with new competition from BidSquare (see other article below) and others. EBay's auctions have been falling off as of late, and there is more than a note of panic in some of eBay management's financial observations and "solutions". I expect the new alliances with Invaluable and Sotheby's is just one more way for eBay to stem the tide, even if its two partners are attempting a similar ploy.

There will definitely be a fight for the position of the online Super-Auction site that may even eventually supersede the old, established auction houses. EBay, Live Auction, Bid Square, Paddle8, Amazon and others are all in that battle. It will be an interesting few years to see if this is an appropriate and profitable way to sell art and photography at all price levels.

"The growth of the art market, new generation technology and our shared strengths make this the right time for this exciting new online opportunity," said Bruno Vinciguerra, Sotheby's Chief Operating Officer, optimistically. "We are joining with eBay to make our sales more accessible to the broadest possible audience around the world."

That global art market is currently estimated around $65 billion, with annual online sales far below averages for other luxury goods. Projections show online art sales could reach $13 billion by 2020, according to TEFAF's 2014 report on the art market. But how you reach this market and what parts of it you access may be more important. There has been considerable discussion in the press and online about Sotheby's diluting its brand utilizing eBay, but that may be more about how adept the company is in using the eBay platform and how well it keeps its own distinct and upscale image. If it does wind up associating more closely with eBay, it will certainly do the company damage, but I am not ready to believe that its management is that shortsighted—at least not yet.

On the other hand, Christie's is taking an entirely different approach, as is the BidSquare consortium of auction houses (see article below). Christie's is putting up a reported $50 million to create and build its own online presence. We will have to see if that pays off in the long run. We really don't know what Sotheby's is putting up—besides its reputation. It has been reported that Sotheby's will pay eBay a commission on each sale that takes place on eBay. But eBay has a way of ultimately extracting its pound of flesh, even if it does kill off the business of its sellers, such as Sotheby's in this case.

"I think it’s important to understand that we view the art collecting community holistically," said Ruprecht on his conference call. "This is not an online versus offline community. Most people use both channels. And our job is to be inclusive and to get the very best most exciting offering on both platforms that are reinforcing to one another." Nicely said, but awfully difficult to pull off well. We will have to see which, if any, of these players produce a winning online presence. With eBay sellers indicating extremely low online auction sell-through rates compared to the early years, it will be interesting if Sotheby's, Christie's, Bidsquare or any of the various other competitors can find a way to increase those percentages to make their auctions enticing enough to consignors. Not to mention getting prices that warrant all the fuss in the first place.