Auction Houses Attract Collectors with Private Sales for Three Key Reasons
Frank Stella’s Delaware Crossing and Picasso’s Femme assise sur une chaise from the collection of A. Alfred Taubman are displayed as part of the Frieze week exhibition at Sotheby’s on October 10, 2015 in London, England. Photo by Tristan Fewings/Getty Images for Sotheby’s.
Over the past few months, private sales at auction houses have surged—predominantly because in-person, public sales are no longer possible. While salesroom floors have remained empty, collectors have continued to purchase art from Sotheby’s, Christie’s, and Phillips, especially online.
According to Sotheby’s, the company has received over 150,000 page views from over 40,000 visitors to the private sale pages Sotheby’s has been building out since the pandemic began. David Schrader, the auction house’s worldwide head of private sales, noted there’s “more demand than supply.”
Since the crisis began, Christie’s has made a third of its private sales transactions in post-war and contemporary art (by volume, not value) via its website, as opposed to one-on-one connections between clients and specialists. Christie’s private sales in the first quarter of 2020 were up 120 percent from the same period last year.
Yet it’s not just COVID-19—over the past few years, auction houses have increasingly relied on private sales. According to the 2020 edition of Art Basel and UBS’s Art Market Report, written by art economist Clare McAndrew, private sales at Christie’s increased by 24 percent from 2018 to 2019, to $811 million (a full 15 percent of the company’s total sales, as public auction sales declined). At Sotheby’s, private sales reached $990 million, or 17 percent of the company’s total revenue, in 2019 (falling just slightly from $1 billion in 2018). Phillips raked in 19 percent of its total sales through private channels in 2019, achieving $172 million. As auction house executives explained, three primary benefits have been driving collectors toward private sales in recent years, and even more so in recent months: discretion, speed of transaction, and price control.
Collectors should note that “private sales” is an umbrella term for auction house transactions that don’t transpire on a salesroom floor. These can occur in three key ways, according to Schrader. Collectors can come to the auction house looking for a particular artwork—for example, said Shrader, “this specific Picasso, or Oehlen, or Matisse.” At other times, collectors will approach his team with a particular artwork (without officially consigning it) and ask if Sotheby’s can find a match. Finally, collectors can simply consign works for private sale.
It’s not just individuals, either, who take advantage of private sales. Institutions can engage auction houses to seek out works missing from their own collections. In 2019, Christie’s brokered 27 private sales to institutions.
At Christie’s, Phillips, and Sotheby’s, private sales have always existed. Since the auction houses’ earliest days, they’ve brokered private transactions. Adrien Meyer, global head of private sales at Christie’s, noted that in the 18th century, the auction house privately sold Catherine the Great’s jewelry in one go. He said such sales, though still private, have probably become more visible because auction houses have created “more of an official structure” around private sales over the past decade. Christie’s only named its first head of private sales, Marc Porter, within the past decade, and just overhauled its private sales department last year. In 2017, Sotheby’s and Phillips both hired their first-ever heads of private sales: Schrader and Miety Heiden, respectively.
Private sales are important to Christie’s, said Meyer, because they allow auction houses to answer clients’ needs in a different way. “Auctions are driven by sellers,” he said, adding that buyers generate 80 percent of his team’s private sales.
With their newly defined structures in place, auction houses can create actionable goals with specified leadership. While private sales activity represented “rarely above 10 percent of Christie’s turnover” before Meyer came onboard, his mission is to increase that number to somewhere between 20 and 30 percent in the next three to five years.
Schrader has a different take on how auction houses have learned to stop worrying and love the private sale. “It’s something we traditionally thought is cannibalistic, and is actually synergistic,” he said. “People looking privately and at auction are doing more business overall. Collectors want to buy the best objects, whatever the channel.”
Private sales also allow consignors to sell works “off-cycle,” or outside the traditional auction house calendar. Instead of selling during major spring or fall auction weeks, they can strike a deal whenever they want (if, of course, they find a buyer). This can be a strategic move for a consignor with a work related to a major auction lot.
“Say you had a great Joan Mitchell painting, and we have two and Christie’s has one,” Schrader offered as an example. “It doesn’t make sense to be the fourth in one week.” The auction house can counsel the seller, sharing when might be the most opportune time to sell. Schrader said that selling before the auction might “capture the moment” if the artwork is competitive and his team already has a good idea of who might be interested. On the other hand, consignors could wait to see how the Mitchells do at auction in order to gauge demand. If they sell well, and there are 10 underbidders, consignors can then offer up their Mitchell with a better idea of the interest it will generate and the price it will fetch.
An “off-cycle” sale can also be advantageous if a seller wants to make a quick sale. Schrader gave a few examples: Perhaps your kid is going to college, or you’re buying a house, or you simply no longer want a particular artwork in your home. In these cases, a swift assurance of liquid assets may be more interesting to you than seeing how the public spectacle of an auction sale plays out. Given these practical concerns, it’s perhaps no surprise that a significant portion of Sotheby’s 2019 private sales occurred at prices below $300,000 (though, as the auction house noted, “the most value was derived from sales in the $1 million to $5 million price band”).
Private sales also create price controls. Auctions, by definition, award art to the highest bidder, and can create happy surprises and disappointments the day of the sale. Private channels, on the other hand, can establish clear parameters for a work’s price. Prices won’t be driven up by protracted bidding contests and auction excitement, but sellers ensure their works achieve an approved value.
Finally, private sellers are immune to the potential embarrassments of auction. A work’s failure to sell at auction taints its reputation, making it more difficult to sell—publicly or privately—anytime soon. If a work doesn’t sell privately, it’s possible to keep that information quiet.
While private sales present clear benefits for sellers, from a larger industry standpoint, they could be seen as direct competition for dealers whose businesses rely in part or entirely on secondary market sales. “Private sales at auction houses essentially function as secondary market dealers,” said Heiden, the deputy chairwoman and head of private sales at Phillips.
Yet Heiden, Meyer, and Schrader disputed the idea that there’s an adversarial relationship between gallerists and auction house specialists. “Some of our best customers are dealers,” said Schrader. “We work quite well with many of them.”
Heiden noted that Phillips occasionally works directly with galleries. If a client is seeking work by a specific artist, the auction house can go straight to the artist’s gallery. Phillips has also coordinated private selling exhibitions with galleries. Heiden once organized a selling exhibition called “California Minimal” with Corcoran Griffin, a Los Angeles gallery that didn’t have a presence in New York. “Increasingly, boundaries between auction houses, dealer, and gallery are blurring, and we all do collaborate when it makes sense,” said Heiden.
Christie’s has also mounted curated online exhibitions similar to virtual gallery shows. On May 12th, its Hong Kong branch launched a viewing room that paired artworks by Joyce Pensato and Yuichi Inoue. At the moment, Meyer estimated that “sellers and buyers actually are comfortable transacting online up to $1 million.” Since the pandemic hit, he said, sellers have been consigning artworks to Christie’s only if the auction house can assure them they’ll be featured on the website. “The irony is that clients, a few months ago, would only consign with extraordinary confidentiality,” he said.
Sotheby’s “Gallery Network” is the most recent evidence of an olive branch extended by the auction house to gallery dealers. In late April, Sotheby’s announced partnerships with eight major galleries on a digital marketplace. The number has now grown to 11, with each gallery listing specific artworks for sale (and their prices) on Sotheby’s website. It remains to be seen how successful this strategy is at driving sales.
Despite all the advantages of private sales, up until the pandemic began, public auctions still accounted for the vast majority of auction house business. “The main difference between public auctions and private sales is that public auctions set benchmarks,” said Heiden. “The private market totally relies on the public market to set the benchmark.” Even with price transparency growing more prevalent across the industry—galleries are increasingly listing prices in online viewing rooms and at virtual fairs—specific prices are never more visible, or heard more clearly, than when an auctioneer is shouting them across a room filled with hundreds of spectators and showing them on a giant screen.