The Role of Art & Antique Dealers An Added Value 5.2 Dealers Versus Auction Houses
The competitive landscape of the art market has seen many changes in the last 50 years, as power has reshuffled geographically and between market players.
A recurrent theme that dealers have cited in recent years is the competitive challenge they face in dealing with increasing auction house power in the art market. Dealers have witnessed a change in auction houses over the last 20 years from being exclusively wholesalers to retailers and wholesalers, and now many compete with them head to head for clients and stock.
In many of the older art markets such as the US and UK, dealers saw a distinct shift in the competitive landscape in the late 1970s and 1980s. Although there was always a reported feeling of “us and them”, this was identified as the period when auction houses became much more organised and began “schmoozing buyers”, actively wooing dealer clients with “parties and champagne”. There was a public perception that auction houses could provide a cheaper option than dealers which, combined with powerful marketing, was highly successful in enticing wealthy buyers. Prior to this period, most art buyers tended to stick with dealers, and if they wanted something at auction would get their dealer to act as their agent. While dealers had ups and downs in the market, most agree that they had “a good ride” up to the 1990s, but then lost buyers, and now actively struggle to make money in a competitively challenging market place.
Many dealers felt that the business models of dealers and auction houses were fundamentally different: auction houses were viewed as in the “money business” which is why they were better at offering financial incentives such as guarantees, while dealers were in the “art business” and therefore focused on service and expertise.
Figure 5 shows a summary of the perceptions that dealers have of themselves versus their auction counterparts. Auction houses are commonly seen by dealers as impersonal corporate bodies, where buyers do not deal with the same person over time. Their financial model is based on commissions, which they take from both buyers and sellers and can amount to over 40% in some sales.13
non-specialised, or diversified into various categories of art and antiques and tend to have a lower focus on service and higher focus on sales. Many of the leading auction houses also have relatively high budgets for marketing, which they are seen as carrying out much more effectively than dealers. Dealers on the other hand were seen to be small personal businesses, which buyers could visit in the same location and deal with the same person for many years. As they had a more long-term view of client relationships, they tended to be more focused on services and more specialised.
13
The buyers, premium in the major houses of Sotheby’s and Christie’s for example starts at 25% for values up to $50,000, 20% for values between $50,000 and $1 million and around 12% thereafter. Sellers’ commissions are often negotiated or based on a sliding scale depending on the type of seller and their volume and value of transactions. Some houses charge flat rate commissions to sellers, for example Bonham’s charges 15% on sales up to £5,000 in the UK and 10% thereafter.
Historical & Future Perspectives 41
They are
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