When works of art sell for staggering prices at auction, such as the record-breaking $450.3 million for Leonardo da Vinci's Salvator Mundi in 2017, the world's attention turns to international art. We move momentarily to the esoteric events of trading. But with the market depressed over the past two years, there have been few high-profile sales at Sotheby's and Christie's, the world's two oldest auction houses.
The exception is a major auction of modern and contemporary art held in New York in November, when global media, especially social media, covered the seemingly ridiculous story of a cryptocurrency investor spending $6.2 million on a duct-taped banana at Sotheby's. I was temporarily fascinated by the act. But there's a big difference between $6.2 million and $450.3 million.
Sotheby's and Christie's sales in 2024 have fallen for the second year in a row, according to preliminary figures released by both companies in December. As supply and demand for big-ticket art slump, auction houses are betting big on selling luxury items and niche experiences to fill the gap.
Sotheby's estimates that auctions and private sales are expected to generate about $6 billion in sales by the end of the year, a 24% decrease compared to 2023. Christie's announced a forecast for total sales of $5.7 billion, down 6% from a year ago. Back in 2022, Sotheby's and Christie's annual sales were $8 billion and $8.4 billion.
“Auction companies have a big problem,” said Christine Boulon, chief executive of Pi-eX, a London-based company that analyzes art sales results. “They need to really think about how they can reinvigorate the auction business. People who are interested in art want to experience it,” Boulon added. Like many supporters of the auction market, he feels that both Sotheby's and Christie's live and online sales are becoming increasingly predictable.
Sotheby's is owned by French-Israeli telecom giant Patrick Drahi, whose embattled Altice Group is $60 billion in debt. As Sotheby's performance deteriorated, the auction house sought a $1 billion cash bailout from Abu Dhabi sovereign wealth fund ADQ and laid off more than 100 employees in December. This led to several costly infrastructure decisions, including Sotheby's $100 million purchase of the Breuer Building on New York's Madison Avenue, the opening of a new headquarters in Paris, and the development of futuristic exhibition and retail space in Hong Kong. This is what followed.
The Sotheby's website currently offers a wide range of used luxury items, from real estate, classic cars and dinosaur fossils to smaller luxury collectibles such as designer handbags, jewelry and luxury items, just as if you were at auction or in-store. There are many opportunities to purchase “buy it now''. Things like wine and game-worn NBA jerseys.
Josh Pooran, Sotheby's global head of luxury, said the sale of such items could attract wealthy customers who may eventually start buying high-end art. “For us, the luxury category is an important entry point for new, often young, collectors,” he added.
Last year, luxury goods accounted for about 33% of sales at Sotheby's, compared to 16% at Christie's, according to communications teams at both companies. However, this category attracted more buyers than art.
Christie's Chief Executive Officer Guillaume Cerutti told reporters last month during a year-end media conference call. “There are advantages to luxury products in terms of model and price,” he said. “Luxury and art will merge with each other,” he added, hinting at future synergies in presentation and categorization.
Christie's is owned by luxury goods billionaire François-Henri Pinault, whose conglomerate Kering has also been hit by weak sales. After introducing handbag auctions in 2014, Christie's now has to catch up with Sotheby's in offering luxury goods and trophy collectibles such as dinosaur skeletons. Christie's announced in September that it had reached an agreement to acquire California-based classic car auction house Gooding & Co., which sold more than $887 million in classic car sales last year. Established a rivalry with operating company RM Sotheby's.
“The luxury resale market is an attractive opportunity for auction houses,” said Daniel Langer, professor of luxury strategy at Pepperdine University in Malibu, Calif. “Storytelling is a key success factor in the luxury industry.” said. Auction houses are great in this area. Let's take the recent banana auction as an example. ” he added. Sotheby's marketing, like that of luxury brands, revolves around the sensation created by Italian artist Maurizio Cattelan's banana sculpture when it was first exhibited at the 2019 Art Basel Miami Beach fair. was skillfully incorporated.
But Langer says this opportunity comes with “significant challenges.” He noted that unlike luxury brands, auction houses do not produce and price all of their inventory themselves. Profit margins on new luxury goods are often much higher than on resold equivalents. Also, unlike conglomerates such as LVMH and Kering, auction houses cannot expand their trade through a network of retailers. This disparity between retail and resale “could limit the overall financial impact of luxury goods for auction houses,” he said.
Changes in the spending patterns of the wealthy may also affect demand.
Global sales of luxury goods will be flat in 2024 for the first time since 2008 (excluding 2020 during the coronavirus pandemic), according to a recent report from management consultancy Bain & Company. The report's authors said consumers are prioritizing “experience over product” in these areas. Times are uncertain, and like the art market, the luxury goods market is suffering from buyer fatigue.
“Ultra-wealthy people in their 30s, 40s and 50s are spending money on luxury experiences,” said Doug Woodham, a former Christie's executive who is now an art finance advisor. “That's money not spent on Matisse paintings,” he added.
“When you have an ultra-luxury experience, your social cache is much higher,” said Woodham, who pioneered handbag sales at Christie's in 2014. “For $500,000, you can put 10 of your best friends on a luxury yacht. I can do that,” he said. They'll remember that more than they will remember me sitting in my house with a Rothko on my wall. ”
According to Business Research Company, the global luxury yacht charter market will grow to an all-time high of $16.3 billion in 2024, an increase of 6% from the previous year. The report said growth was driven by the popularity of “upscale and exotic travel destinations” and “the continued trend toward luxury experiences.”
In September, Sotheby's teamed up with the Marriott International hotel chain and fashion house Alexander McQueen to run a closed-bid auction in which bidders could not see rival offers. The winner will travel to one of the group's five-star properties in London as part of an experience that, according to Sotheby's website, “takes guests to the place where the teenage McQueen first learned the art of tailoring.” Given a 2 night stay. Also included is five-course fine dining for two, a bespoke tour of London with a private visit to the Victoria & Albert Museum, and a personalized photo session with McQueen's long-time collaborator Anne Ray. Ta. Sotheby's classified the auction as a private sale and declined to reveal how much the winning bidder paid for this unique luxury experience, but the pre-sale estimate was $12,000 to $18,000.
Could selling memories rather than art be the future of the auction business?
