News reports indicate Sotheby’s long time CEO Bill Ruprecht will leave the company as soon as a replacement is found. Although it is reported to be by his own choice, his contentious relationship with board and major shareholders makes his ‘consensual’ departure appear not ulike the prescient maidens of the village who offer themselves to the advance guard in order to seek protection from the ravages of the invading horde.
Up to this point, and presumably at the prompting of activist board members, Sotheby’s has established once again an online partnership with eBay- despite the dismal failure of a similar partnership some years ago, established a bricks and mortar presence in China, and offering aggressive advances to would be consigners in an effort to attract the best consignments. This begs the question, to descend to the vernacular, how’s that working for you?
Not well, I have no doubt. As well as the experience with eBay, Sotheby’s nearly sunk itself not so many years ago by offering inordinate advances, only to find on sale day the consigned item fell well short of achieving a hammer price above what was advanced against it. Hard to explain this profound a misstep to the bank that provided the financing, hard on the operating statement of course, and, ultimately, hard to explain to shareholders.
We do trade with Sotheby’s from time to time, and as it happens attended a round of sales in New York just a couple of weeks ago. Although certainly not privy to any aspect of the saleroom that cannot be garnered by anyone else who reads their financial statements, I can tell you that the premises are crawling, absolutely crawling with staff. I would imagine that Sotheby’s does its best to mine the available cadre of interns from the art history departments of Columbia, CUNY, and as far afield as Princeton and Yale, but for the most part, staff are paid- not well, perhaps, but enough to earn their daily crust and exist without undue privation in one of the most expensive cities in the world. I know for a fact that the ax has fallen on the necks of a fair number of senior staffers over the last couple of years, but their departure has not made any noticeable dent in the legions of folk there earning a living.
I suppose what I mean to get at is, while profitability is achieved through a confluence of revenue and cost control- what we call pouring cash in at the top at a faster rate than it can leak out the bottom- the auction house business is an extraordinarily expensive business to be in. Moreover, it is an aspirational business- Sotheby’s is not a provisions market. It has never, nor have we for that matter, ever sold anything anyone actually had to have to get along in life. What they sell, and what we sell, are luxury goods offered as only one of a number of discretionary purchases by which the wealthy may indulge themselves.
A few years ago, and apropos of our tenth year in business, Keith and I spent some little while working up an economic and demographic profile of our client base. While I’ll coyly tell you that the precise components of our typical buyer are proprietary information, I can tell you that, based on our findings, we estimated that those individuals who fit it numbered around 50,000- in the world! To say that we, and Sotheby’s, and Christie’s, and Bonham’s, and every other member of the accredited art and antiques trade access a limited buyer pool is to make an extreme understatement. And do I have to say that this class of buyer is savvy? Believe me, they know what they want, what they want to pay, and where- anywhere in the world- it is available. I don’t think a local bricks and mortar outlet or dumbed down accessibility through eBay is necessary for the buyer who can travel anywhere in their Hawker 4000 and whose PA’s earn more than President Obama.
While of course any business wants to always appear to be in and ready for business, the efforts of Sotheby’s activist board and investors that ultimately resulted in the resignation of Bill Ruprecht will amaze me if they prove successful. In the short term, I suppose they have, however- Sotheby’s stock rose 7% the day Ruprecht’s departure was announced.