LONDON — Twenty‌ ‌years‌ ‌ago, ‌Sotheby’s‌ ‌and‌ ‌Christie’s made money by auctioning‌ ‌art. ‌And‌ ‌that‌ ‌was‌ ‌about‌ ‌it. ‌Now, ‌in‌ ‌a‌ ‌process‌ ‌fast-forwarded‌ ‌by‌ ‌the‌ ‌coronavirus pandemic, ‌technology‌ ‌is‌ ‌transforming‌ ‌these‌ ‌venerable‌ ‌names‌ ‌into‌ ‌very‌ ‌different-looking‌ businesses. ‌Luxury‌ ‌is‌ ‌making that ‌difference. ‌ ‌

Sotheby’s, ‌under‌ ‌the‌ ‌tech-savvy‌ ‌ownership‌ ‌of‌ ‌the‌ ‌French-Israeli‌ ‌telecoms‌ ‌magnate‌ ‌‌Patrick‌ ‌Drahi‌, who‌ ‌who‌ ‌last‌ ‌year‌ ‌‌borrowed‌ ‌$1.1‌ ‌billion‌‌ ‌to‌ ‌finance‌ ‌the‌ ‌acquisition, ‌‌‌‌said‌ ‌in‌ ‌December‌ ‌that‌ ‌‌‌it would restructure itself‌‌ ‌into‌ ‌two‌ ‌“equally‌ ‌important”‌ ‌global‌ ‌divisions‌: one for ‌fine‌ ‌arts‌ ‌and another for‌ luxury, art‌ ‌and‌ objects. ‌Items‌ ‌such‌ ‌as‌ ‌watches‌ ‌and‌ ‌jewelry‌ ‌were‌ ‌identified‌ ‌as‌ ‌“key‌ ‌growth‌ ‌areas.”

Sotheby’s‌ ‌has‌ ‌had‌ ‌to‌ ‌catch‌ ‌up on ‌its‌ ‌rival‌ ‌Christie’s, ‌which has been playing at the luxury game since the early 2010s. Owned‌ ‌by‌ ‌the French‌ ‌billionaire‌ art ‌collector‌ ‌François‌ ‌Pinault, who also founded the ‌luxury‌ ‌goods‌ ‌group ‌Kering, ‌Christie’s introduced ‌online-only ‌sales‌ ‌of‌ ‌designer ‌handbags in 2012, and these particularly appealed to Asian buyers. Five ‌years‌ ‌later, ‌a‌ ‌white‌ ‌crocodile‌ ‌Hermès‌ ‌Birkin‌ ‌sold‌ ‌at‌ ‌a‌ ‌live‌ ‌auction‌ ‌in‌ ‌Hong‌ ‌Kong‌ ‌for‌ ‌a‌ ‌‌record $380,000‌.

When‌ the coronavirus pandemic‌ ‌shut‌ ‌down‌ ‌live‌ ‌auctions, ‌Sotheby’s‌ ‌swung‌ ‌into‌ ‌digital‌ ‌overdrive. ‌So‌ ‌far‌ ‌this‌ ‌year, ‌the‌ ‌company‌ ‌has‌ ‌held‌ ‌some‌ ‌320‌ ‌online ‌sales ‌of‌ ‌art‌ ‌and‌ ‌luxury items, ‌more‌ ‌than‌ three‌ ‌times‌ ‌the‌ ‌number‌ ‌held‌ ‌during‌ ‌the‌ ‌equivalent‌ ‌period‌ ‌in‌ ‌2019. ‌

These‌ ‌have‌ ‌raised‌ ‌$425‌ ‌million, ‌as‌ ‌against‌ ‌$60‌ ‌million‌ ‌for‌ ‌the‌ ‌same‌ ‌period‌ ‌last‌ ‌year, ‌according‌ ‌to‌ ‌Mitzi‌ ‌Mina, ‌the‌ ‌company’s‌ ‌London-based‌ ‌head‌ ‌of‌ ‌press. ‌‌In‌ ‌addition, ‌plush‌ ‌new‌ ‌retail‌ ‌spaces, where wealthy clients can buy high-end art and design straight from the showroom, ‌have‌ ‌been‌ ‌opened‌ ‌in‌ ‌London, ‌the‌ ‌Hamptons‌ ‌and‌ ‌Palm‌ ‌Beach. ‌‌

According‌ ‌to‌ ‌Wendy‌ ‌Cromwell, ‌a‌ ‌New‌ ‌York-based‌ ‌art‌ ‌adviser‌ and former ‌Sotheby’s‌ ‌employee who follows the company closely, ‌the‌ ‌auction‌ ‌house’s‌ ‌crucial‌ ‌gear shift‌ ‌into‌ ‌luxury‌ ‌was‌ ‌made‌ ‌by‌ ‌Tad‌ ‌Smith, its‌ ‌president‌ ‌and‌ ‌chief‌ ‌executive‌ ‌from‌ ‌2015‌ ‌to‌ ‌2019. Last‌ ‌year, ‌before ‌the‌ ‌pandemic, ‌Sotheby’s‌ ‌reported‌ ‌a‌ ‌$71.2‌ ‌million‌ ‌loss‌ (Christie’s, which is privately owned, does not publish equivalent annual profits or losses). ‌

‌“Margins‌ ‌were‌ ‌so‌ ‌eroded‌ ‌on‌ ‌the‌ ‌top‌ ‌lots‌ ‌that‌ ‌they‌ ‌weren’t‌ ‌making‌ ‌enough‌ ‌money,” ‌said‌ ‌Ms. ‌Cromwell. ‌“So‌ ‌Tad ‌decided‌ ‌to‌ ‌go‌ ‌into‌ ‌e-commerce. ‌It‌ ‌was‌ ‌a‌ ‌smart‌ ‌way‌ ‌to‌ ‌scale‌ ‌the‌ ‌business‌ ‌by‌ ‌offering‌ ‌luxury‌ ‌at‌ ‌all‌ ‌price‌ ‌points, ‌from‌ ‌watches, ‌to‌ ‌sneakers‌ ‌to‌ ‌fine‌ ‌art.”

In 2019, ‌worldwide‌ ‌auction‌ ‌sales‌ of art and antiques ‌raised ‌$17.9 ‌billion, ‌down‌ ‌7‌ ‌percent‌ ‌on‌ ‌the‌ ‌previous‌ ‌year, ‌according‌ ‌to‌ ‌data‌ ‌provided‌ ‌by‌ ‌Rachel‌ ‌Pownall, ‌a professor‌ ‌of‌ ‌art‌ ‌and‌ ‌finance‌ ‌at‌ ‌Maastricht‌ ‌University‌ ‌in‌ ‌the‌ ‌Netherlands. The‌ ‌global‌ ‌market‌ ‌for‌ ‌secondhand‌ ‌luxury‌ ‌goods‌ like ‌jewelry‌ ‌and‌ ‌watches‌ was‌ ‌valued‌ ‌at‌ ‌about‌ ‌21‌ ‌billion‌ ‌euros, ‌or‌ ‌about‌ ‌$23‌ ‌billion, ‌growing‌ ‌at‌ ‌8‌ ‌per‌ ‌cent‌ ‌a‌ ‌year, ‌according‌ ‌to‌ ‌‌a‌ ‌report‌‌ ‌published‌ ‌in‌ ‌September‌ ‌by‌ ‌Boston‌ ‌Consulting‌ ‌Group. ‌

So the auction‌ ‌houses’‌ ‌move‌ ‌into‌ ‌luxury‌ ‌appears‌ ‌to‌ ‌be‌ ‌a‌ ‌financial‌ ‌no-brainer. ‌But‌ ‌are‌ ‌sales‌ ‌of‌ ‌luxury‌ ‌goods‌ actually ‌increasing ‌revenues?

‌Detailed‌ ‌analysis‌ ‌of‌ ‌sales‌ ‌figures‌ ‌during‌ ‌this‌ ‌most‌ ‌challenging‌ ‌of‌ ‌years, ‌conducted‌ ‌by‌ ‌the‌ ‌London-based‌ ‌art‌ ‌market‌ ‌research‌ ‌company‌ ‌‌Pi-eX‌, ‌shows‌ ‌that‌ ‌as‌ ‌of‌ ‌Nov. ‌20, ‌Sotheby’s‌ ‌had‌ ‌held‌ ‌160‌ ‌specialist live and online auctions ‌of‌ ‌watches, ‌jewelry‌ ‌and‌ ‌handbags, ‌as against 48 ‌in‌ ‌the‌ ‌same‌ ‌period‌ ‌in‌ ‌2019. ‌Yet‌ ‌revenues‌ ‌of‌ ‌$339‌ ‌million‌ ‌were‌ ‌up‌ ‌just‌ ‌4‌ ‌percent. ‌Christie’s‌ ‌has so far held‌ ‌a‌ ‌less‌ ‌aggressively‌ ‌expanded‌ ‌roster‌ ‌of‌ ‌38‌ ‌equivalent sales, ‌which‌ ‌raised‌ ‌$251‌ ‌million, ‌down‌ ‌42‌ ‌percent from last year, ‌according‌ ‌to‌ ‌Pi-eX. ‌ ‌

‌“The‌ ‌auction‌ ‌houses‌ ‌are‌ ‌scaling‌ ‌in‌ ‌terms‌ ‌of‌ ‌the‌ ‌number‌ ‌of‌ ‌auctions, ‌but‌ ‌not‌ ‌yet‌ ‌money,” ‌said‌ ‌Christine‌ ‌Bourron, ‌Pi-eX’s chief executive.

Ms. Bourron pointed out that many of these proliferating luxury sales contained just a few lots. A record-breaking ‌$560,000‌ ‌pair‌ ‌of‌ ‌‌Michael‌ ‌Jordan‌‌ ‌sneakers‌, for instance, was the only item in a Sotheby’s online auction in May. By preserving luxury items’ aura of exclusivity and authenticity, the auction houses make it more difficult to increase revenues, Ms. Bourron said. “They’re‌ ‌unable‌ ‌to‌ ‌do‌ ‌it‌ ‌by‌ ‌increasing‌ ‌volume.” ‌

‌But there is another, more compelling reason that ‌luxury ‌has‌ ‌such‌ ‌a‌ ‌hold‌ ‌over‌ ‌auction‌ ‌house‌ ‌executives’‌ ‌thinking.

‌“Art‌ ‌and‌ ‌luxury‌ ‌can‌ ‌coexist‌ ‌and‌ ‌complement‌ ‌each‌ ‌other‌ ‌very‌ ‌nicely,”‌ ‌said‌ ‌Josh‌ ‌Pullan,‌ ‌the managing‌ ‌director‌ ‌of‌ ‌Sotheby’s‌ ‌global‌ ‌luxury‌ ‌division.‌ ‌“Luxury‌ ‌is‌ ‌a‌ ‌great‌ ‌entry‌ ‌point‌,” he added. Buyers were “opening ‌their‌ ‌minds‌ ‌to‌ ‌a‌ ‌broader‌ ‌range‌ ‌of‌ collecting ‌categories,” but the 276 year-old auction house was not about to become a luxury superstore. “Fine art is what Sotheby’s is best known for, and that’s not going to change,” he said.

Ms. Mina, Sotheby’s‌ London-based head of press, ‌said that‌ ‌so‌ ‌far‌ ‌42‌ ‌percent‌ ‌of‌ ‌the‌ ‌bidders‌ ‌at‌ ‌its‌ ‌2020‌ ‌luxury‌ ‌sales‌ ‌have‌ ‌been‌ ‌new. Fine art generates more than 85 percent of the auction house’s annual turnover. ‌

If‌ ‌a‌ ‌new‌ ‌client‌ ‌can‌ ‌afford‌ ‌to‌ ‌pay‌ ‌$10,000‌ ‌for‌ ‌a‌ ‌pre-owned‌ ‌luxury‌ ‌item such as a handbag, ‌they ‌might‌ ‌eventually‌ ‌gain‌ ‌the‌ ‌confidence‌ ‌to‌ ‌spend‌ ‌$100,000‌ ‌or‌ ‌even‌ ‌$1‌ ‌million‌ ‌at‌ ‌an‌ ‌art‌ ‌auction, ‌where‌ ‌these‌ centuries-old companies‌ ‌have always made ‌their‌ ‌biggest, brand-enhancing sales.

‌“Now‌ ‌is‌ ‌the‌ ‌best‌ ‌time‌ ‌for‌ ‌Sotheby’s‌ ‌to‌ ‌affirm‌ ‌its‌ ‌position‌ ‌as‌ ‌a‌ ‌luxury‌ ‌retailer,” said Kelly‌ ‌Meng‌ ‌Parnwell, ‌‌a lecturer in ‌luxury‌ ‌brand‌ ‌management‌ ‌at‌ ‌Goldsmiths, University of London. “Luxury‌ ‌resale‌ ‌has‌ ‌become‌ ‌a‌ ‌big‌ ‌trend‌ ‌in‌ ‌the‌ ‌market, ‌but‌ ‌I‌ ‌understand‌ ‌‌that‌‌ ‌Sotheby’s‌ ‌doesn’t‌ ‌want‌ ‌to‌ ‌lose‌ ‌any‌ ‌of‌ ‌its‌ ‌heritage,” she said. “‌They‌ ‌need‌ ‌to‌ ‌‌balance‌‌ ‌their‌ ‌heritage‌ ‌and‌ ‌luxury‌ ‌positions.”

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