Barnebys report helps to understand what drives the online auction business.
The last years saw a big augmentation in online auctions, taking the very traditional art market up to speed with the Internet revolution. While some might argue that artworks must be seen before bought and some JPEG image files are not enough to make a decision, the younger generation is more comfortable with the process. Both Christie’s and Sotheby’s employ efforts to boost online sales. In the last earnings call, Sotheby’s CEO Tad Smith praised the growth of Sotheby’s Internet presence, coming at a very small cost for the company. In May, a pair of diamond earrings was sold for an online bidder at 6 million dollars, a new record for pieces acquired via online bidding. Also, the merge involving Auctionata and Paddle8 earlier this year showed the consolidation of the sector, claiming the attention of the art market as a whole.
The basic principle of a live auction is that the bidder must be at the place during the bidding of the particular lot he is interested in. Even if a high profile client is able to bid at the telephone, it’s still a very small timing window. Online bidding comes as the solution for people who can’t participate in live events because of timing or location. In a world where we can buy in the United States an Australian product to be delivered in France, items for auction should follow the same logic. The absence of actually seeing the object comes as negative aspect, but for some markets it is not so important. Back in a day, many people criticized when retailers started selling clothes online, arguing clients could not see or try it before buying. Today online sales are as important as physical sales to many brands.
In the steps of this renovation, Barnebys published a report on online auctions, offering a scoop inside the profile of online bidders and their preferences. It shows how the objects for sale changed over time, with a bigger concentration in not so expensive pieces. The company conducted an online survey with almost 1.500 respondents from United States, France, United Kingdom, Germany and Sweden. The results help to uncover some of the main reasons why people buy at online auctions.
The Participant’s Profile
An important takeaway, although a predictable one, is the massive presence of millenials; buyers between 18 and 34 years old. The generation who grew up amid the biggest technology developments is already used to online buying and live a life heavily based on mobility. The auction industry historically had problems to attract younger collections and the auction process itself is still very traditional and sluggish. Online presence is the key to attract those younger buyers. 66% of the surveyed millenials said to have taken part at online auctions while only 39% participated in live ones.
Another major point is the mobility aspect. The majority of the traffic in online auctions websites is already from mobiles (37%) and tablets (15%). For younger people the gap is even wider with 61% of all traffic generated only by this kind of devices. In the era when the Internet world becomes more mobile and 90% of daily Facebook users access it via cellphone instead of desktops, the change seems to be imminent. It also makes easier to track anywhere lots which buyers have an interest and even bid from a situation where there is no access to computers. The evolution of integrated payment systems contributed a lot, making easier and safer to virtually swipe a credit card.
The buyer’s age also has an effect on the biggest online markets for some objects. Fine wine and rugs are the least desirable live auction categories, clearly more connected to older people. The most popular items bought online are collectibles, objects that the rarity is more important than the physical aspect, therefore the absence of seeing the lot before the auction is not so relevant. Furniture and design items are also very popular online but the live auctions still dominate the market.
As for price ranges, the online results are very similar to live ones, with the largest amount being traded in few very expensive items and the biggest number of transactions seen in lots under 500 $. They represent 73% of the lots but only 1.2% of the total value. The fixed costs for live auctions are too high, making the Internet the best trade place for cheaper items. The presence of lower value items gave a boost on overall value but lowered the average hammer price, which went from a peak of 4.987 € in 2010 to 999 euros in 2015 in Barnebys website. It does not mean that the market became less interesting but that the profile of the seller has changed, finding a balance with more lower value transactions.
What buyers are looking for
The advantages of participating in online auctions compared to traditional ones are not restrained to accessibility. Buyers actually point at “better prices” as main attractive for this kind of sale, followed by the expected “unique items”. In an art market where the subject of investing in art comes often to discussion, for the items offered online it does no seem to be a factor with only 11% of buyers considering it a point of attraction.
As for features of auction websites considered to be important, an “easy bidding process” comes in first place to 62% of the surveyed, followed by “transparence and reliability” with 43% and “good shipping options” with 41%. It is interesting to see that while most part of the access is through mobile, the “ability to use a mobile site/app” was considered important to only 12% of the surveyed.
Barnebys report helps to clarify the picture of this growing online auction market, very relevant for the future of the auction business. Getting to know the profile of the costumers and the reasoning behind each transaction is as important as analyzing average prices and overall traded values. The report offers the blueprint to build a bigger and more organized digital auction world.