In 2020 the Covid-19 pandemic had a severe impact on the traditional auction market. All auction houses were forced to cancel numerous scheduled sales, and soon enough it became evident that in-person auctions would be virtually impossible to hold in the nearest future. That was a major setback for an industry that has always been rooted in physical sales. Despite the difficulties, the industry’s biggest players moved quickly to shift their operations almost entirely online.
Adapting to the Digital Age with Online Auctions
The coronavirus pandemic forced auction houses to cancel their live - and most lucrative - sales. But Sotheby’s, Christie’s and Phillips accelerated their focus on digital innovation and quickly pivoted online, with impressive results. The three top houses’ combined global online-only auction sales surged 524% year-over-year to $1.05 billion, breaking through the $1 billion mark for the first time[i].
Together, all three of them held 644 online-only auctions in 2020, tripling the number compared to 2019. Sotheby’s registered the strongest growth rate with an 824% increase in online-only sales, followed by Christie’s with a 266% increase and Phillips with a 184% increase. Sotheby’s accounted for 69.1% of the online-only sales, while Christie’s Phillips reported 29.6% and 1.3% respectively. Among all collectible categories, luxury watches witnessed strong online growth, increasing 363.1% year-over-year to $193.1 million[ii].
Sotheby's decided to focus on growing its small online business and held more than 400 online auctions in 2020. The work quickly paid off: Sotheby’s pulled over $5 billion in global sales in 2020, managing to increase their returns in the year of economically catastrophic lockdowns (in 2019 the auction house achieved $4.8 billion in total[iii]). The average lot value in online sales had more than doubled from under $10,000 to over $20,000 and auction house’s global reach online also increased, attracting buyers from over 100 countries.
The secret lies in a massive restructuring of auctions – while previously the auction house held only 30% online auctions, in 2020 already 70% of them took place online. Luckily, Sotheby’s online auctions have taken off in popularity, which allowed to attract a greatest influx of first-time buyers in 15 years.
And no wonder – Sotheby’s heavily invested in technology to make use of the very best digital tools in the marketplace – as a result, bidders could easily purchase lots without visiting the crowded live auctions.
In 2021Sotheby’s auctions reached new heights, with global totals exceeding $6 billion – 71% up on 2020[iv].
As the lockdowns lifted, the auction house welcomed thousands of clients back into its salerooms, but that didn’t stop Sotheby’s from further expanding its digital capabilities. With over 200,000 bids placed online in 2021 representing 92% of total bids, the auction house achieved a record $800 million in online sales.
But not all online sales are created equal.
There are two types of online auctions: live and online-only timed auctions. Both auction formats offer certain advantages and involve different bidding strategies.
Live auctions happen in real time. It means that an auctioneer hosts live auctions in front of an audience in a sale room, and the participants bid between one another. Newer technology has enhanced the live auction experience for collectors. Ineichen’s live audio and video feeds connect bidders to auctions around the world, allowing them to access the auction online and place bids in real time, while experiencing the atmosphere.
Live auctions create both a sense of excitement and a rush of adrenaline that often drives people to bid more. Bringing all buyers together at one time, live auctions produce a competitive environment and increased bidding.
Flexible and Convenient
Online-only timed auctions are automated, so they don’t involve an auctioneer calling out the bids as they come in. Auctioneers traditionally use the format to give unsold lots from a live auction a second chance under the hammer.
Online-only timed auctions run during a set period of time, typically for multiple consecutive days, providing additional time for buyers to make purchasing decisions. At the end of the set period, the bidder who has submitted the highest bid wins the lot. If a bid is placed on a lot within one hour of the lot closing at one of Ineichen’s timed auctions, that lot will go into extended bidding. When this happens, bidding on the lot is extended one more hour and will continue until bidding ceases. This grants buyers more time to make purchasing decisions.
And while live auctions offer a fast-paced and exciting environment to buyers, at online-only timed auctions collectors can bid at their own pace, with ample opportunity to increase their bid. This style of bidding can be less nerve racking for those new to auctions.
Will Live Auctions Be Superseded by Online-Only Format?
2020 proved the watch auction market was ready to fully embrace online bidding. Covid-19 and its impact on live auctions hasn’t diminished the enthusiasm of collectors interested in luxury investments or investments of passion. Today we’re witnessing that buyers are becoming more relaxed about bidding large sums of money on items they had not seen, even via apps on their smartphones, which means that online watch auction space will become even more competitive in the foreseeable future.
It’s obvious that the shift to online will remain. The top auction houses were planning to introduce more digital innovations before 2020, but the coronavirus pandemic accelerated the pace dramatically. So probably there will be less live auctions than before and half of auctions could go online-only in the nearest years. But does that mean that traditional live auctions have become a figment of the past? We don’t think so.
Online bidding had a democratizing and global effect by letting people follow and virtually join sales they could never have hoped to attend in person. But the sale room still matters, and will continue to matter, because every collector treasures the memory of attending an auction for the first time and enjoying the adrenaline rush of his initial auction win – whether raising a paddle or holding a smartphone. An incredible feeling that only the live auction can give.
And while the impressive US$1.35 billion made by the major auctioneers via online-only sales in 2021 signified a year-on-year revenue increase of 28.2%, it accounted only for 10.7% of total auction sales – just a fraction of what the top auction houses normally earn[v].
Live auctions are still the essence of what the top auctioneers do and they will return. So far nothing can replace the personal experience that comes with live streamed sales, and the future of auctions will probably be omnichannel. Auctioneers are going to create more channels and more ways for collectors to be able to engage in and buy things that they love.
[i] Global Online-Only Auction Sales Surpassed US$1 Billion in 2020 (2021, January 13). Retrieved from: https://www.barrons.com/articles/global-online-only-auction-sales-surpassed-us-1-billion-in-2020-01610580341
[ii] Global Online-Only Auction Sales Surpassed US$1 Billion in 2020 (2021, January 13). Retrieved from: https://www.barrons.com/articles/global-online-only-auction-sales-surpassed-us-1-billion-in-2020-01610580341
[iii] By Embracing Online Auctions, Sotheby’s Pulled Over $5 Billion in Sales in 2020 (2020, December 18). Retrieved from: https://observer.com/2020/12/sothebys-online-auctions-2020-5-billion/
[iv] 2021: Historic Year in Review (2020, December 16). Retrieved from: https://www.sothebys.com/en/press/2021-historic-year-in-review
[v] Auction Houses Smash Records in 2021 (2022, January 10). Retrieved from: https://www.igi.org/gemblog/auction-houses-smash-records-in-2021/