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NEWS FLASH August 4, 1999

Soon, You Can Buy Your Van Gogh on the Web
By the fall, there'll be a proliferation of upscale auction sites. Will $10,000 items sell, site unseen?

A few years ago, Hans Neuendorf was a respected art dealer in Frankfurt, Germany, whose gallery sold works by such artists as Georg Baselitz for up to $500,000 a pop. Today, Neuendorf is an Internet entrepreneur in New York City. His Artnet.com recently raised $25 million on Germany's Neueer Markt stock exchange, and he is pouring the cash into an effort to become a powerhouse in online art sales. At Artnet.com you can lay down thousands of dollars online -- even hundreds of thousands -- for paintings, prints, and photos by the likes of Andy Warhol, Marc Chagall, and Ansel Adams, secure in the knowledge that the works have been authenticated by reputable dealers and art experts.

If you're interested in art, antiques, and other costly collectibles, in other words, rejoice! In the past you could shop online for high-end art and collectibles -- items that go for $1,000 and up -- but not in large quantities. Most online auctioneers currently concentrate mainly on low-price items sold consumer-to-consumer. In fact, Forrester Research, based in Cambridge, Mass., figures that items priced above $500 only account for about 5% of total online auction sales.

That's about to change in a big way, however. Online auctioneers such as eBay have stayed downscale because cheap items are easiest to sell sight unseen. But James Corsellis, CEO of London-based Icollector, a British online auction service, figures the world auction market for goods worth $500 to $10,000 is a huge $40 billion (versus about $80 billion for cheap items). Starting this fall, a raft of new ventures will be launched to attract buyers of expensive items (see BW Online, 8/04/99, "Where to Buy Upscale Art and Collectibles Online"). Art and collectibles, the kind of stuff typically sold by tony galleries and auction houses, are expected to be most in demand.

MILLIONS OF CUSTOMERS? At the moment, just about every major U.S. and European auction house and gallery is signing up with online auction services -- and a few are launching services of their own. Heavyweight newcomers such as newswire giant Bloomberg are also jumping into the fray. One of the biggest splashes is likely to be made by Sotheby's, which plans to launch an upscale online auction service with Amazon.com in September. Sotheby's stock has shot up this year on investors' hopes of a boost to earnings from Web sales. And eBay is planning its own upscale service with Butterfield & Butterfield, a California auction house it acquired this spring for $260 million. That venture, dubbed Great Collections, will be easily available to America Online members as part of a $75 million deal between eBay and AOL.

 


Traditional auction houses may have to lower their commissions
 

There's plenty of activity overseas, too. Artnet.com may be based in New York but it's roots are in Europe, and it has tight ties with galleries and dealers there. Bloomberg's partner is Icollector, one of the biggest of the of the existing online auctioneers. Icollector has signed up 200 auction houses and dealers to use its site and claims an average selling price of about $900 -- about 25 times that of eBay's. Corsellis says that once Icollector's site is linked to Bloomberg's Web site and proprietary terminals this fall, his service will have access to about 250,000 mainly wealthy professionals who use Bloomberg. "I'll be the only guy hoping for quiet days on the stock market so they'll have more time to shop," he jokes.

The net result is likely to be a fundamental change in the way art, antiques, and other collectibles are sold. There's going to be heavy financial pressure on traditional auction houses and galleries, whose commissions typically range from 10 to 20% of an item's purchase price, with big-ticket items having the lower commissions. Online commissions have already fallen to about 5%, so the price of art and collectibles everywhere could well drop, too. "In the cyber world you're talking about 7%, maybe 10% commissions max with no buyer's premium," says Butterfield & Butterfield chief John Gallo. "There's no question that regional galleries are already under pressure."

Indeed, the expected boom in online auctioneering is likely to cause a shakeout among traditional galleries and auction houses. Some of the pioneer online auction outfits, who don't have the cash or partners to go upscale with eBay and Amazon, also could disappear. But for consumers, the move toward upscale online auctions should be a boon. "What this is all about is availability," says Gallo. "The top 10 auction houses together have about 500,000 clients worldwide. eBay has millions."

How much profit the online auctioneers will earn is open to question. While items in the $1,000 to $10,000 range are big revenue generators for auction houses, "most of the profits come from big, high-end auctions," says David Nash, a former Sotheby's honcho who is now a New York art dealer. And few experts think that high-margin, high-ticket van Goghs, Renoirs, and antiques will ever sell well on the Net. To make money, the online auctioneers are counting on cutting costs by eschewing expensive printed catalogs and on-site viewing sessions. They also hope that sales will boom as legions of new buyers gain access to their auctions. "There are millions of people who would like to buy from Christie's but who have been intimidated in the past," contends Andrew Schoelkopf, who heads Christie's new online venture.

TRUE COLORS. The big unanswered question is how many online buyers will plunk down $1,000 or more for something they've never seen. Gallo claims that happens a lot already: He says that more than half of Butterfield & Butterfield's traditional sales have been to collectors who buy sight unseen. But art dealer Nash is skeptical. Even though he has signed up with the new Sotheby's-Amazon online venture, he's not sure he will sell much art that way. "I don't think I've ever sold a painting to someone who had never looked at it," he says.

Still, new technology could help things along, notes Evie Black Dykema, an analyst with Forrester Research. New online graphics packages can give an exact idea of an object's true colors, she says. She also points to new online zoom features that allow prospective buyers to eye such details as brush strokes and antique finishes close up.

The key will be building consumer confidence. Christie's and Sotheby's think they have a leg up because their scores of experts will authenticate goods sold online, just as they now do for traditional auctions. The auctioneering heavyweights also hope their stellar reputations will allow them to command top prices, even online. "A watch worth $2,500 at Christie's might be worth a fraction of that elsewhere," argues Schoelkopf.

Another confidence builder for upscale customers is that most of the tony new online auctioneers plan to avoid the rough and tumble world of consumer sales. Instead, they're scrambling to sign up traditional dealers, galleries, and smaller auction houses to sell via their sites. Sotheby's says it has signed up 2,800 dealers already, Artnet claims 800, and Icollector 200. They hope that these experts will provide a steady flow of high quality, authentic goods. Icollector and Artnet, among others, also offer online price data bases so prospective buyers can do their own research.

A few online auctioneers, such as Livebid.com, even beam live auctions real-time out onto the Net, allowing online buyers to bid right along with collectors in the showroom. London's Theauctionchannel.com goes that one better by televising live auctions online and on British cable TV. It recently was acquired by California's Brilliant Entertainment, which hopes to expand the service worldwide.

Who will win this battle of upscale auctioneers? That's far from clear. But one thing is for sure: Art and antique lovers will have a lot more options for how to buy -- from the comfort of their own homes, if they want to.


By Thane Peterson

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