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In-Depth
Auction’s Changing Buyer
Over the past two decades, the auction buyer has become more global than ever before.
By Ettagale Blauer
Follow the money — that’s the advice often given to those looking to solve mysteries. It’s also good advice for anyone looking for today’s auction clientele. Because auction houses cater to the whole world, sales follow the global rise, and fall, of fortunes. When one geographic market takes a hit, there is usually another one ready to bid on the shrinking pool of the finest gems and signed jewelry. The shift in fortunes — in industries, countries and regions — dramatically impacts who is bidding most aggressively in auction houses at any single time. The first distinct geographic wave of buying emanated from the oil-producing kingdom of Saudi Arabia and the tiny sultanate of Brunei in the 1980s and 1990s. As fortunes were made in Russia, Malaysia, Hong Kong and Mainland China, goods began to flow to the newly wealthy of those nations, particularly in the early 2000s and into the present decade. The billionaires club is growing globally at a pace to gladden the heart of any auctioneer. According to Forbes magazine, there are now 1,826 billionaires, with 290 names added to the magazine’s 2015 Billionaires List. The largest recent growth in newly minted billionaires is in the Far East.
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The shift in the geography of buyers from the Middle East to the Far East can be traced to the major role formerly played at auction by Saudi Arabia and Brunei. During the 1980s and early 1990s, New York and Geneva auctions were dominated by just two buyers, Ahmed Fitaihi, a Saudi Arabian retail jeweler, and Robert Mouawad, a member of a Lebanese family of jewelers. Fitaihi acted as a surrogate bidder for the king of Saudi Arabia and Mouawad for the sultan of Brunei and his brother, in auction after auction. The two bought more than 40 percent of the goods on offer — “way more,” according to Schuler. They purchased across the board but were known for lapping up gem-heavy suites across the gemstone spectrum. Among Fitaihi’s and Mouawad’s clients were several men with deep pockets, lots of wives and other relatives, an insatiable lust for gems and jewels and a cultural tradition of gifting wedding guests with elaborate jewels. Because Fitaihi and Mouawad were buying with the regularity and dependability of a Swiss watch, their purchases greatly influenced the goods taken in at auction at that time. Traditionally, auction houses have relied on securing goods from three dependable and repeating sources: death, divorce and debt. But as the appetite for jewelry outpaced the reservoir of goods coming in from the “three Ds” in the 1980s, auction houses began to take in newly made jewelry and diamonds from dealers to meet the demand.
John Block, the face of Sotheby’s jewelry department in New York at that time, and his European counterpart, David Bennett, developed a relationship with diamond cutters. They told the trade, “Let me take your diamonds to the ultimate consumer.” Auction houses began reaching out to private customers, publishing catalogs with far more detailed information than ever before. Descriptions of jewelry on offer now carried estimates of the worth of the lots along with full-color photographs. A whole new category of customers began making its way into the auction rooms. As Schuler says, “This was a big revolution. The allure for a private to outbid a dealer by one bid” was catnip, even to the wealthy. After dominating the jewelry auctions for years, Fitaihi and Mouawad suddenly and simply disappeared from the auction scene. The cause was a combination in the late 1990s of the crash in Asian financial markets, a collapse in oil prices and the scandalous losses of an investment group headed by the ruling family of Brunei. All those glitzy suites of jewels were left on the shelf when their intended customers failed to show.
At about the same time, buyers from the Far East were taking their first tentative steps into the auctions, mainly focusing on purchases of jadeite, a material they were familiar with and appreciated. As the auction house personnel worked to expand buyers’ understanding of Western-style jewelry, these markets matured. And with the astute tutelage of the Hong Kong jewelry department heads, Asian buyers developed a taste for the finest gems and jewels with recognizable, internationally known designer names. The demand for Van Cleef & Arpels and Cartier far outpaced the supply, leading to prodigious bidding wars. While that was one of the most dramatic examples of a shift in buying, more recent examples abound. In the beginning of the new millennium, Russian money began flowing into the auctions, thanks to petro-millionaires and the public and government officials who found a way to divert huge piles of the new riches to their personal accounts. But sanctions enacted to stem Russian President Vladimir Putin’s aggressive moves to reclaim former Soviet territory, coupled with the steep decline in oil prices, cooled that source of money and slowed buying at auction. These shifts in the fortunes of the Russian buyers could be felt at the supplier level as well. Eve Goldberg, daughter of the late world-renowned diamond dealer William Goldberg, quotes a customer at her father’s self-named New York City company as saying, of the slowdown in sales to Russians, that they just “turned off the phone.”
Still, Russians were strong buyers in the fall 2014 sales, according to Rahul Kadakia, international head of jewelry for Christie’s. “These shifts are temporary phenomenon we go through,” he says. “These are transitions. As long as people covet jewelry, there will be buyers. Mainland China, in spite of a recent slowing of its phenomenal growth, remains an important part of the sales boom.” Kadakia says Mainland China became a factor around 2005 or 2006 as its domestic production and consumption rates soared. With the increase in buying has come a shortage of materials, especially the very finest goods desired by these new millionaires. In the realm of jadeite, desire far outpaces supply. In this area, Kadakia says, the market is still young enough that the jadeite is not coming back onto the auction scene because the new owners plan to hold onto it. The same is true, he says, of Kazakhstan, where there are buyers but “they are not selling. They are in the collecting stage.” And then there are buyers who maintain a lower profile, such as Latin Americans. “They buy more discreetly,” Kadakia notes, “but yes, they are a big force.” “There are ten times more clients,” competing for the same lots than ten years ago, according to Kadakia, and prices have increased dramatically. He compares it to the rise in prices of fine art. “Twenty-million-dollar lots are not so uncommon any more.” Kadakia notes a telling statistic: Out of all the jewelry lots sold in 2014, at least ten sold for $14 million or more. That is a phenomenal increase, and one that can be traced to the growth in the number of millionaires and billionaires. While the home geographic base of the clients may continue to shift, newfound money will seek fine-quality merchandise. It’s not much of a stretch to envision even larger totals at auction — for individual lots and overall sales — in the coming years.Article from the Rapaport Magazine - April 2015. To subscribe click here.
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