The New Auction Format, Private Treaty Dealers
June 22nd, 2009 by admin
The Sotheby’s/Christie’s duopoly has been devastated by the recent bust in the contemporary art market as well as just about all areas of fine and decorative arts collecting. However, in these difficult times, they have started to make some inroads into the potentially lucrative world of the dealer by trying to exploit what dealers do best, sell privately. Where the auction format fails, this old tried and true method is becoming the auctioneers next best alternative. For dealers, this should signal a warning as well as an opportunity.
I have always felt that the best approach to buying and selling art and antiques is to start with a disclosed asking price. Since the auctioneers method today totally depends on deception (secret reserve) and conflicts of interest (buyer’s premium and a seller’s commission, etc.) the private treaty method is becoming an alternative form of controlling the consigner and buyer. Private treaty sales allow their manipulation of the buyer and seller by still collecting commissions from both sides but in a private placement form of sale. However, now price can be negotiated. What is there in this type of transaction that a dealer shouldn’t or could provide?
At some point, the auction process will be under pressure to change its format. The secret reserve will always be a questionable practice and other forms of deception and fraud that they employ have created nothing but more lawsuits and public inquiry into their dealings. Perhaps Sotheby’s irrevocable bidding scheme tops the list of scams perpetrated on the public. I believe that this duopoly isn’t stupid and realizes that the private treaty format can be expanded as an integral and not a periphery revenue source, and dealers better prepare for this inevitability.
Unfortunately, dealer organizations have no concept or thoughts on how to even discuss let alone come up with a plan to neutralize the duopoly’s inroads into their part of the industry. The answer isn’t going to come from organizations that are too concerned with phony standards or exclusivity of membership. It can happen if dealers actually form alliances and work together to create a real market with shared inventory, disclosed pricing, and the ability to negotiate with the buyer. Letting dealers perform negotiations with the buyer is a skill auctioneers are desperate to replicate. It is critical for dealers to consolidate to meet this challenge and to offer a larger inventory for a prospective client to peruse.
If auctioneers see such a good future in the dealer/private treaty trade, then having available inventory (whether owned or consigned) will become the critical need for success. In this present period of many dealers as well as auctioneers disappearing from the scene, those that survive will find that the consolidation process can provide a basis for strength to go forward. In the end it is always going to be about who has what to sell. This method should give the advantage to the dealer, if they can seize this opportunity.
NewsGuy wrote on 06/24/09 at 8:10 pm :
Hi,
Great blog you have here. In regard to this particular post, in any industry big money always has an easier path to controlling the market and, IMO, dealers need to educate themselves with today’s technologies and availabilities of technologies to try to play on a more level paying field. Keep up the good blogging!!
English Classics wrote on 06/26/09 at 6:49 pm :
I agree with the sentiment that dealers need to catch up with the times. The antique industry is necessarily one with its eyes set on the past but it’s time for an upgrade. Too few dealers are online these days, and even those that are still haven’t got a clue as to how the online market works. The somewhat democratic market that the Internet provides in conjunction with the scattered nature of the antique business guarantee that small dealers will always have a shot (until corporates find a way to stop that, too).
vince jelenic wrote on 07/17/09 at 12:09 pm :
A very good point.
Years ago, before the technology was ripe, I was speaking with dealers about a dealer’s online network. In those days that meant fax, and phone, sheesh.
today, the technology would allow for a true dealers’s wholesale network. This could be the type of ‘grouping’ you make note of. Clear pricing, negotiable pricing and contacts, (or direct wholesale discount to the trade), and items purchasable ONLY by trade.
A concept that Michael vincent has picked up on in dealersmarketusa.com , as an example.
the concept is extremely simple — extend your inventory reach to other dealers and allow them to sell for you. The basics of TRUST, integrity, and a truly negotiable price platform would emerge quickly.
How to implement? that is the the thorny issue.
But I do believe such a dealer network could in fact knock the wind out of a lot of auctions and revive the trade somewhat.
The tactic of “negotiable and extensible inventory” is a key component in tomorrow’s antiques market.
Should someone set it up, let me know, i’m waiting to join.
If anyone wants to throw some money at this, let me know, perhaps we can set it up.
Cheers.
vince.
team@simonchorley.com wrote on 07/28/09 at 10:30 pm :
I should like to confirm that your blog is most intersting and provocative. May I suggest that “Vince”, who speaks of the dealers’ network, should have a look at www.antiques.co.uk . This website has just begun by those who have also created an online petition to the government on behalf of ALL THE ANTIQUES TRADE inclusive of the auction houses. This website will provide the “client centred” forum desired I think.
I would venture to suggest this is perhaps also the crux of the matter i.e. it is perhaps more important for us (all in the fine art & antiques trade) to pull together to highlight the importance of what we do in the bigger picture of retail and wholesale.
To refute any comments that the auction house “misleads” by definition would be a pleasure, but it is more important to point out that it is our part of the public’s disposable income, or collectors vision, that we all wish to secure. “Buy antiques, fine art, and collectibles in juxtaposition to new, factory made and commercial”; a message from auctioneer and dealer alike would perhaps be the best use of our efforts to the general public.
admin wrote on 08/1/09 at 8:31 am :
I must agree with you that as an industry we need to create a more conducive atmosphere for public confidence in the trade, for both dealers and auctioneers. We both have a symbiotic relationship that runs parallel to our mutual success.
I certainly applaud the English approach with programs like a National Antiques Week or “antiques are green” promotion. In the US unfortunately, we have a very fragmented trade infrastructure that such constructive concepts never get the opportunity to be discussed let alone implemented.
The industry in England is much more developed and creative than here in the US, which is unfortunate because it is much bigger and financially has more potential to grow.
Steve wrote on 04/9/10 at 10:35 pm :
Although I think your blog is excellent, I don’t believe that auction houses should be excluded from private treaty sales as an alternative selling method, provided it is allowable under auction license law/acts within a given state.
I encourage a national effort to further define the limitations and educational requirements of dealers and auction houses alike.
Within the wine industry, such private treaty sales are allowed by law within the State of Illinois, provided one is compliant with the Illinois Auction License Act and then holds the requisite Illinois Liquor Control Commission’s license which provides for such private treaty sales.
Proposing legislation to elected official is the right of every American. If we just used the system, and lobbyists if need be (fight fire with fire) I am sure we all, as reasonable people, can achieve the transparency, oversight, insight and market share we all desire for ourselves.
What do you all think?
admin wrote on 04/11/10 at 8:23 am :
Steve,
I really don’t have a problem with auctioneers performing private treaty sales however, they need disclosure and more importantly be required to operate as “second hand dealers”. In New York, this would include having a second hand dealer’s license, required by all antiques and art dealers. They can’t be dealers under the false pretense of operating under an auctioneers rules.
A private treaty transaction is not a auction format sale and should be recongnized as a direct sale. If I as a dealer sell an item I have taken from a client on consignment, the rules of the sale are no different than if I owned the item.
Finally, as a dealer I wouldn’t consider adding a buyer’s premium to any sale; why do these auctioneers impose one in their private treaty sales? It seems like they can make their own conflicts of interest in taking commissions from both buyer and seller work for this format too.