Going once, going digital

   The business of auctions, steeped in old-world values and customs, is undergoing a transformation thanks to the internet, e-commerce and social media. Online bidding at live international auctions has become as commonplace as phone bidding, and the world’s largest and most prestigious auction houses are now holding online-only sales. New digital auction businesses are sprouting like sunflowers on a Van Gogh painting that may sell someday soon to the highest bidder online.
   Invaluable — an online marketplace that provides a platform for more than 4,000 auction houses, galleries and dealers — reports that its clients’ jewelry sales have been on a solid five-year growth curve. From 2013 to 2016, there was a 116% increase in total jewelry sales, and 2017’s figures will likely end up some 20% higher than the previous year’s, based on year-end projections. Watch sales from auction houses on Invaluable are experiencing a similar four-year growth trend, and are expected to increase by an even greater percentage by the end of this year.

A new landscape
   The one thing online auction businesses have in common is that there is no common business model. Operations large and small are inventing new ways to access bidders who are becoming increasingly comfortable buying anything online, including jewels and watches.
   “It’s a really fascinating time to be in this space right now,” says Allis Ghim, CEO of Bidsquare, an e-commerce auction platform for more than 100 auction houses and dealers. “Online is really changing the whole landscape of how people discover and engage with these items and bid for them.”
   Bidsquare is one of the newer players in this landscape. The business was founded two-and-a-half years ago by the heads of six traditional auction houses — Cowan’s Auctions, Rago, Leslie Hindman Auctioneers, Skinner, Pook & Pook, and Brunk Auctions. Its main function is to provide online bidding during live sales at auction houses.
   With a website that attracts two million page views per month, Bidsquare’s online platform provides selling opportunities for 15 categories — including the fine jewelry and watches segment, which ranks third in overall sales, Ghim says. Four jewels are among its all-time top 10 lots, each of them fetching more than $100,000.
   The increasing amount people are willing to spend online has Ghim excited about the future of the business. “I’ve been in e-commerce for over 10 years, and I can confidently say that people’s comfort with online bidding has increased with time, as evidenced by our top-selling items,” she says.

An internet epiphany
   At the major auction houses, bidding on the web has quickly become a normal part of live sales. More recently, Christie’s and Sotheby’s have added online-only auctions. Christie’s first saw the potential of such auctions in December 2011, when it hosted the landmark Elizabeth Taylor sale at its Rockefeller Center headquarters in New York. The sale had an online-only component that included jewelry, and it generated more than 57,000 bids, bringing in over $9.5 million.
   “It was tremendous,” says Angelina Chen, Christie’s senior vice president of e-commerce and jewelry. “That’s when we realized there was a great opportunity. The outcome and performance of that seminal sale really shocked us.”
   Christie’s introduced its web-only platform in 2013. In its financial report for the first half of 2017, the auction house said this platform was the most significant driver of new client activity. In the jewelry department, there are five online-only sales per year in the US and two in Hong Kong, Chen says. Christie’s online sales operate as timed auctions, or sales that run for only a defined period of time. For the jewelry auctions, that period is seven to 10 days.
   Signed pieces from iconic jewelry houses and designers are the most popular items, according to Chen. One of Christie’s most successful web-only sales was a set of Cartier items from the personal collection of Eric Nussbaum, the first director of the Cartier Collection.

Watches and the women who buy them
   John Reardon, international head of Christie’s watch department, says his division operates 10 online-only auctions per year and aims to add two more. “The vision and goal is to have a constant presence, [enabling] buyers to go online and bid year-round, and we are very close to that goal,” he says.
   One of the highest-priced items in Christie’s online-only auctions was a Patek Philippe Perpetual Calendar reference-2438/1 watch that sold for $211,500 in July. Like the traditional live auctions, the brands most in demand are Patek and Rolex, Reardon says. However, he has seen bidders get excited over watches from independent watchmakers. For example, a Deep Space Triple Axis Tourbillon by specialist watchmaker Vianney Halter received a great deal of bidding interest at a web-only auction before it sold for $125,000. “To see digital competition for this nuanced timepiece in an online auction is very exciting,” Reardon says.
   One trend he sees with online-only auctions is more women participating — and one of the things they are buying is vintage men’s watches that are small enough to fit a woman’s wrist. “At a live sale, very few women bid, but at an online sale, women are bidding and coming back,” he says. “It’s exciting to see them bidding in an auction setting.”

The more, the merrier
   Meanwhile, Sotheby’s online business is also experiencing strong growth in both its live auctions and online-only sales, according to Josh Pullan, its global head of e-commerce. The model for both types of sales is similar to Christie’s, with online bidding during live auctions (similar to phone bidding) and web-only timed sales.
   “We have seen tremendous growth from both sale formats, and our jewelry and watches categories are among some of the strongest,” he says. “Since 2014, the total percentages of jewelry and watch lots sold online have grown at a CAGR [compound annual growth rate] of 24% and 47% respectively.”
   During the first half of 2017, 43% of all Sotheby’s watches went to online buyers, and jewelry is the auction house’s second-largest category by total online value, Pullan notes. Some of the biggest sales at Sotheby’s live auctions are from internet bidders, while online-only auctions have a lower average price point than live auctions and have therefore attracted more newcomers, he adds.
   “We routinely see jewelry buyers at the very top end of the market choosing to buy online,” he says. For example, internet buyers were the high bidders for a pair of diamond earrings that fetched $6 million, and for a Harry Winston diamond ring that went for $1.2 million.
   “The average sold-lot value for online-only sales of jewels and watches so far in 2017 has been $6,600,” he states. “These sales are an excellent source of new clients. In our August online-only jewels sale, 35% of buyers were new to Sotheby’s.”

Under the E-hammer
These are the top 10 jewelry lots that have sold on Bidsquare:

1. A platinum and diamond ring, sold for $145,200 by Leslie Hindman Auctioneers on December 4, 2016, in its Important Jewelry auction.
2. An approximately 100-carat, mixed-cut diamond and platinum necklace, bracelet and earring suite (pictured, Page 39), sold for $110,250 by Kodner Galleries in its Holiday Estate Jewelry auction on December 14, 2016.
3. A diamond and sapphire ring, sold for $106,250 by Altermann Galleries and Auctioneers on August 11, 2017.
4. A platinum and diamond solitaire weighing 9.19 carats, sold for $106,250 by Grogan and Company on February 5, 2017.
5. An approximately 5.13-carat, emerald-cut diamond and 18-karat white gold engagement ring, sold for $44,100 by Kodner Galleries in its estate auction on October 17, 2015.
6. The fine 18-karat yellow gold, andesine and multicolored sapphire Phoenix necklace by Lorenz Baumer, French, sold for $38,102 by Leslie Hindman Auctioneers in its Fine Jewelry from the Estate of Gerald L. Cafesjian auction on April 8, 2014.
7. A fine platinum, sapphire and diamond link bracelet, Seaman Schepps, circa 1940, sold for $37,800 by Leslie Hindman Auctioneers in its Fine Jewelry auction on December 6, 2015.
8. A 3.50-carat marquise diamond and platinum ring, sold for $33,750 by Witherell’s on April 18, 2017, in its 20th Century Arts auction.
9. A 22-karat yellow gold cuff bracelet by Jean Mahie, sold for $30,240 by Leslie Hindman Auctioneers in its Important Jewelry auction on September 17, 2015.
10. A GIA-certified, 5.02-carat, cushion-cut diamond, sold for $29,520 by Cowan’s Auctions in its Magnificent Gemstones: Fine Jewelry and Timepieces auction on May 17, 2015.

Image: This mixed-cut diamond and platinum necklace, bracelet and earring suite from Kodner Galleries, totalling approximately 100 carats, sold for $110,250 on Bidsquare.

Article from the Rapaport Magazine - October 2017. To subscribe click here.