Buyer’s Premium Redux, the 1sdibs Approach

No one is more thankful than me as to how 1stdibs single handily took on the industry’s challenge and hijacking by the Sotheby’s/Christie’s auction methods.  The duopoly’s goal was to take away the dealer market by imposing a profit gouging buyer’s premium.  Consumers could pay it as they weren’t concerned about a profit.  Well fast forward and see how successful that approach was for the health of the industry at large.  They got the sales but they killed the secondary market, which was totally dealer supported.  Yes, profits are important for dealers to survive.

Given the state of the antiques and decorative arts market, the auction side is equally decimated as the dealers, as a pronounced change in taste and style preference has left a fractured price and market structure.  In comes 1stdibs to re-balance the market and reignite the discovery of these items to a new and wider audience, beyond the scope of any single dealer or group of dealers, shows, or auctioneer.  With the dearth of large or even moderate sized dealers that have a brick-and-mortar establishment, the virtual option for every buyer or seller is a necessity.  

The parallel between a 1stdibs and the Sotheby’s/Christie’s duopoly is quite compelling and full of similarities.  All three are giants in the industry and have developed their own brand name and broad recognition.  They also play by the rules that they can make, alter, or rework.   How many times was the buyer’s premium altered and changed since it was instituted?  It seems like every 6 months (or was it Christie’s then Sotheby’s one upping each other). 1stdibs, because it lacks even a competitor can and is planning massive changes to its format that again has the brunt of the adjustments coming down on the dealers.

The question becomes what does a dealer or group of dealers do to leverage the effects of 1stdibs new way of doing business.  For all practical reason there is little or nothing they can do.  History has a way of repeating itself, as when dealer organizations blinked at the introduction of the buyer’s premium and watched as it metastasized.  The auctioneers did fine, thank you, at the dealers’ expense but all ships rise in a high tide, which is where the market for all the decorative art was going in the last quarter of the 20th Century.

Now the trade, or what’s left of it (being mostly 20th Century dealers) has a fork in the road.  Dealer’s paid that buyer’s premium until there were almost none left to pay it and the secondary market died.  Should they pay and play by the new 1stdibs rules?  It’s hard to fight the 800-pound gorilla in the room, but the market forces which coalesced around 1stdibs can and will evolve.  New competition will and is coming, or it could be a matter of a change in taste.

The new 1stdibs plan is both practical and necessary for them at this time.  Their present model is too labor and advertising intensive and requires a real need for rising sales and profitability to sustain growth.  Their new approach is an attempt to assert their competitive lock on how sales take place. Remember, they don’t want to own the merchandise, they just want to skim a profit off the sale, which isn’t on the face of it wrong.  However, it’s a different kind of profit and risk reward when you own the goods. Restraining trade through arbitrary methods of restricting access to buyers is a disconcerting development that goes beyond the conflict of interest created with the auctioneer’s buyer’s premium.

Antiques and the Decorative Arts, Still Trending Down

For the last 15 years the mantra of antiques dealers is that “the tide has turned” and antiques are coming back in fashion.  The reality has been a steady decline that seems to never stop trending down.  Yes there are exceptions, but the use of period furnishings in interior design and collectors in general have gone the way of the dodo bird, probably never to return.  Museums house these relics for the public to gawk at but actually living with these things presently has little or no possibility of a recovery.  

The fact that there are so few dealers of any consequence in the high end period space perhaps is the clearest indication that the long awaited revival will not happen.  If dealers aren’t around to promote their stock, who else will?  Their trade associations died with their membership and what remains is a skeleton of what use to be vital organizations.  Ultimately it is the loss of being able to communicate with a new type of buyer that is the death knell of the trade. This failure to reach out to the public at large is to some extent a public relations issue, as most TV shows that deal with the subject only look at it from a financial perspective, what’s it worth, and not how to live with and enjoy these items.

The window for survival outside the contemporary and 20th Century decorative styles is now quite complete.  One trick pony’s or dealers that specialize in period furnishing are hobbled by a market that is shrinking faster than the loss of competition among the dealers in those markets.  How many great English or French dealers are left now when compared to 10, 20 years ago? The major auctions don’t want to accommodate selling these items for fear of the high buy-in rates and a non-existent secondary market of dealers who use to vie for their goods.  The show format is tired and now accommodate these dealers for a diversity of participants. Unfortunately, for those of us still left, it requires being the bearer of bad news on current values to former clients and those who are looking to dispose of these once valuable items.

The future for period decorative arts can no longer be covered over with a false sense of optimism.  There are no positive trends or new horizons for the possibility of a rebound.  Knowledge of these items is critical for any contemplation of a leveling off of this trend and that one commodity is clearly drifting further and further from recovery.  Young decorators today don’t know or ever care about the difference between a Louis XV and Louis XVI chair.  And why should they, when their clients have lesser interest.  The simplicity of contemporary and modern design is now so compelling.  Understanding comfort and minimalism is effortless and doesn’t require a lot of money or appreciation.

Where the Decorative Art Rank

Christie’s, in a press release, announced their annualized report of their operations.  They outlined results of their “core categories” in their annual report.

Core categories

“The Impressionist and Modern Art category (including Modern British Art, American Paintings, and Latin American Paintings) grew by 57% to £1.3bn ($2bn, up 47%) compared with the same period for 2014, continuing the team’s market leadership. The Post-War & Contemporary department also continued to be market leaders with total sales of £1.5 billion, down 14% ($2.2 billion, down 20%). Sales of Asian Art increased 9% globally to £478.6 million ($734.2 million, up 2%), highlighted by the record-breaking Ellsworth sale of Asian Art. Sales in the 20th and 21st Century Culture category increased 9% to £93.7 million ($143.7 million, up 2%). Old Master Paintings, 19th Century and Russian Art sales totalled £154.9 million, down 37% ($237.6 million, down 41%). Luxury (including Jewellery, Watches and Wine) sales totalled £493.4 million, down 13% ($756.9 million, down 19%). This category also proved to be the most successful entry point, attracting 21% of all new buyers, and maintaining its position as market leaders.”

In makes for interesting reading as to the state of the industry.  But for those of us in the decorative arts world, we are officially not recognized as a meaningful part of their operations.  Well, if you read a little deeper, Christie’s does have sales of 20th and 21st Century Culture, so I guess we get a little respect even if it is by far the smallest segment. So how come this original, core market has fallen off the screen.  We still have predictable antiques shows (abet more mixed with art and contemporary).  Is 17, 18, and 19th Century furniture, decorative, and fine arts so out of fashion and relevance?

The short answer is YES.  Yes, they may look cool and have a wow affect, but is it something you want to live with?  It can be quite intimidating to own something you just don’t understand and frankly don’t have the effort to focus on for pleasure.  Taste today is defined by edginess and simplicity along with functionality and aesthetics.  Today, antiques in a quantity of one is more than enough for the affect.  

As a sage of the industry, I remember a famous PR comment by Sotheby’s back in the 1980s, when the Japanese pulled the rug out from the Impressionist Art market. They said something to the affect that the Decorative Arts markets was holding up quite nicely as a traditional core of their operations (and the buyer’s premium was racking in the profits).  Cycles in taste will always be evolving.  Neo-classic design has morphed for 2 millennia.  I think the decorative art will hang in there for the next millennium.

The Auction Duopoly, Dubious Dealers in Disguise

The headlines after the Sotheby’s $½ billion Taubman auction guarantee disaster was their new acquisition of the Art Agency, Partners (AAP).  The firm is lead by a group of high powered art advisors who claim a leadership role in the high end of the fine arts market.  Sotheby’s, is doubling downing on this segment of the market for their future growth.  Of course there must not be any possibility of a bust in this inflated world.

What this new step by the new CEO, Tad Smith indicates to me is that their reliance on controlling their traditional auction methods is coming under undue pressure for profits and playing the dealer role is now the only viable option to growth.  The crap shoot of guarantees and other manipulative methods is becoming more challenging to profits and the public’s perception of their integrity.  

However, the ambiguous nature of these firms is highlighted by a comment by Mr. Smith that the acquisition gives them “new growth opportunities in advisory services and reinforcing the client-first culture in all what we do.”  So who is their client and who are they working for, a buyer or seller; you can’t work for both without a conflict of interest, and an auctioneer by definition should be working for a seller.  How do you reconcile this?  Would the new AAP division advise a purchase at Christie’s, or possibly from a private dealer that stocks a certain artist that a collector is looking to acquire?  Is that a client-first thought; I find that hard to believe.

Art Advising is fraught with conflict of interest and the professionals who work in this field are savvy, aggressive, and recognize opportunities as they arise.  How they can operate within the auction process is dubious by any measure.   Independent and unbiased perspectives of any consultant will always better serve the private individual seeking such services.  Advising under the control of Sotheby’s is like asking a financial consultant who works for Chase Bank to recommend an investment fund outside one of its own financial products.  Good luck!

However, like their successful track record shows, they do have the PR and image game down pat.  You can always trust Sotheby’s or Christie’s because they are who they are, corporate, experienced, and nobody else can complete with them.  So now we see that the future of companies like Sotheby’s is morphing into a consulting business and not the traditional role that auctioneers played as passive market makers.  Stay tune for future conflicts of interest, deceptions, and of course fraud in the operations of this industry.

The Duopoly, Peaking or Will They Just Fade Away

I’m never bashful about my disdain for the Sotheby’s/Christie’s methods of deception and fraud, as they seem to be doing it quite successfully in spite of my rants against them. But as all things must adapt and change with the evolution of a dynamic environment, the world of the auctioneer and their methods is not going to be the same.  Control via the economic power of a duopoly can cause the two parties complacency and rigidity in how they operate.  That can lead to an inability to recognize that old methods can inhibit growth and creativity.  

The evidence of this phenomenon is how this duopoly in the art and antiques industry has in a calculated way, jettisoned the decorative arts and many other niche markets where they fail to dominate or have successfully destroyed the vitality of the secondary market.  Their unabashed push into the contemporary and 20th Century fine art market illustrates how single minded and reliant they have become on this lucrative and dominant market.  Stamps, period furniture, collectibles, and so many other fields that they use to participate in are no longer on their radar.  For them it is now a big bet or no bet at all, and contemporary/20th Century is where they want to be for that purpose.

The notion that markets only rise is a recipe for a disaster.  The duopoly should know and remember what happened in the 1980s, with Impressionists Art and the Japanese buying bubble.  However, the present environment presents a different challenge to their dominance and their vulnerability to market vagaries. Their sole method of success now relays on conflict of interest and deception to a retail clientele. Rich hedge fund billionaires and sovereign wealth funded individuals now dominate the upper strata of their marketing and promotion.  Can the demand of that small but elite group keep up with a shrinking supply of high quality inventory; will this demand for contemporary perhaps move to other areas as valuations become unsustainable with limited product availability?

It seems to me that the Duopoly has painted itself into a corner.  While they use to have a diverse portfolio of products their profitability is now more reliant on fewer.  The lip service Sotheby’s is giving to alliances with the like of eBay make for a dilution of their brand and at minimal profitability.  In addition, they both are clearly losing their top talent in those areas of the highest profitability and risk.  Many of their former employees in the contemporary and 20th Century fine art departments have departed, realizing they can make more money as consultants with flexibility to operate outside the duopoly, than working for them.  

The dramatic changes in the industry over the last 10-15 years will only accelerate.  Sure, they will continue to promote themselves as the only go-to resource for the best of the best, but things are changing and nimble individuals and dealers will continue to make inroads as viable alternatives to their methods that center on having control of both buyer and seller.  Within the time frame of the next decade, growth for this duopoly will only continue to be constrained by new competitive forces going after a limited supply of product.  That product will find options that can compete with the constraints of how the Duopoly presently works.

The End of an Era on 53rd Street, Newel 1969-2015

Today is a seminal day in the history of Newel, a 4th generation family business.  We have officially planned to not operate out of that location today, the first time since my first summer job working at Newel in 1969.  With our original store in 1939 on 47th Street and Second Avenue, additional 49th Street locations, the 53rd Street building has had an incredible run for our success and survival; and how has the industry changed in the last 46 years?

My personal perspective on this special day is both saddened by the memories, but buoyed by the prospects and opportunities that now abound.  Somehow the location was never really optimal for either selling or renting our stock.  Packed in on 6 floors and in a Mid-town East “Siberia”, rarely did anyone ever “walk” to Newel? It was just out of the way and Sutton Place wasn’t exactly Times Square for a taste of New York City.  Yes, it was residential, totally.

Of course when we first moved there it was a different time and place; the fine and decorative arts industry was dominated by dealers.  When we took our first space in this location the New York Antiques Center, on the 1st floor was the largest in the City.  It had entrances on 53rd Street and 54th, a city block long with a motley collection of dealers and activity.  Unbeknown to most of those dealers and the buyers who frequented the Center, my grandfather warehoused his vast inventory on the 2nd floor, directly above it.  I remember the expression of Peter Wilson, the esteemed English gentleman who positioned Sotheby’s to where it is today; how had this collection stayed under the radar?

It did because Newel focused on renting period pieces to the entertainment industry, simulating on the stage and in the movies and TV, sets that needed authenticity and not to those who bought for their own decorating or collecting purposes.  That one specific purpose allowed the Company to never quite be a part of the antiques trade, and the dealers whose welfare was measured by buying and selling only.  Oddly, about the time Newel consolidated it various warehouses into the 53rd Street location, the “hey-day” of the rental business had passed even though having a single location under one roof was finally achieved.  It would take perhaps 30+ years for that part of the business to accelerate.  Selling would need to supplement growth in revenue.

The 1980s and 1990s must be considered the “go-go” years for antiques and the decorative arts.  Everything and everyone who participated in the market enjoyed an unfettered strong demand, across the board. Housewives could open a store with their first European buying trip, paying anything and selling for double and more.  Mistakes were hard to make.  We rode the wave too, but it all came crashing down after 9/11.  The Millennium of the 21st Century changed what and how people want to buy, and it isn’t anything and everything that you offer, unless of course it was Mid-20th Century.

With that said, we had to hunker down to survive and had the good fortune of a rising TV and motion picture industry in New York City.  Today we are enjoying the robust strength of the entertainment industry and the need for “content” in the many new mediums of entertainment and business.  Also, as a design influence, Mid-Century isn’t what is use to be although it is now part of contemporary design that is starting to engage period pieces as distinctive and unique objects.  This latest observation has brought Newel to a crossroads.  We want to both sell and rent, but to do so successfully requires attention to both business models.

Today we set up shop to sell our items in a newly renovated showroom at 306 East 61st Street, joining other dealers to showcase and display what Newel is and has always been. Our Long Island City location houses the entire collection and is rental ready. We can supply period interiors for the fantasy of your own living room or simulating the White House for the TV show Madam Secretary.  Now, with 2 dedicated locations, we can service both of our business sides.  

Survival By Consolidation

One thing you can say about the dealer network, it is incredibly fragmented, to the point of total specialization and independent operation.  While I like to think Newel is the antithesis of that domain, there are no Christie’s or Sotheby’s among them, except perhaps in specific, isolated fields.  They did it by consolidating numerous specialty departments across a broad range of decorative and fine arts, along with jewelry and real estate. Their model is flawed by deception, fraud, and all the other manipulative techniques they employ but they got it all under one roof and they sold it to the public. 

I like to think that the decorative and fine arts industry always had a pure form of economic functionality, with lots of buyers and sellers.  A free and open market, as Adam Smith describes, creates a natural level of pricing, but that’s not how the real world work.  Listening to Bloomberg radio in my car, it sounds like a broken record that consolidation is taking place in every industry. Oil producers and banks have been doing it for years, and your neighborhood store is now a franchise of a 7-Eleven or Wawa (I’m originally from the Philadelphia area).  There really isn’t any industry that has not experienced some form of merging, alliance, or relationship that has permitted a few to dominate. 

Why didn’t the decorative and fine arts evolve through consolidation like most industries have experienced.  Chocolate companies, automobile manufacturer, and certainly technology companies all have a genesis of starting small and learned to growing. Sometimes it is internally done, but once a business reaches a critical size, they must move forward to protect their future and learn to control their industry.  Whether a monopoly, duopoly, or several companies, having political clout becomes a necessary option.  We know that has been the critical reason for the success of the felons, Sotheby’s and Christie’s; their boards can’t have enough of those types.  But all they have done is take a lesson from any successful company who employ lobbyists and influence.

So why has my industry been the only one that operates by the (flawed) auction method and not by a free open market?  After all Exxon can’t make oil sell for $100 a gallon when the market has it at $55, but they still dominate.  The free market does work when micro-chips are considered a commodity and priced that way.  The big difference is that in theory, the auction business doesn’t have ownership of the inventory.  Now you irrevocable bidders may disagree, but that’s another story of fraud and deception in the auction business. Every other industry strives for efficiencies of scale.  In my industry, it would a, should a, could a, but it never happened.

The dealer model presently does not have any significant impact on pricing at the auction level. The flow of inventory is too slow to use the auction format as a resupply source, as was the case decades ago.  The decimation of the secondary market is reflected in the dearth of dealers who use to participate to support it. Only efficiencies created by economies of scale will dealers of any consequence survive and even thrive.

This week, we are taking over another established dealer and again are expanding our inventory’s scope.  We see the hand writing on the wall with the idea that larger is better and only the strongest can endure changes in the market.  The last 15 years has seen a seminal alteration in dealer survivability; we’ve survived by getting bigger and the opportunities to grow are becoming more apparent.

Experience The Collection @ Newel

At Newel, we work in a most unique environment and perhaps we even take it for granted. For sure, there is nothing like it in the world and the opportunities to share it make it more intriguing.  We know our merchandise that is The Collection covers a broad swath of styles, periods, and mediums.  We want to offer extraordinary possibilities for the public to enjoy the experience of who and what we are.  We don’t pretend to be a museum, art fairs are so predictable, and we certainly don’t endorse the auction format as it presently operates. But first we need to invite you to our show, and hope you enjoy the experience!

The meat and potatoes of Newel is the inventory, and there is no place on earth that can compare to our Long Island City Collection location of decorative and fine arts.  Here is where it starts.  The massive floor to ceiling quantity is quite staggering, even for me after all these years. On one floor, the sheer quantity is only forgotten when your eye catches sight of an incredible something!  While it is still a work in progress, as we moved into the space less than a year ago, it shows the visitor that there is more here than any discerning eye can capture.  This location environment is what Newel came from and can never give up.  We’ve make it all possible with technology and sweat.  But as we prepare for the ideas and energy of a 4th generation, we need to understand the changes in our business environment.

We are a bifurcated company, having our start as a prop house for Broadway and now catering to the proposition of selling these items.  Selling and renting decorative and fine art pieces is like comparing apples and oranges.  Yes, we make money from both ventures, but they are entirely different ways of operating.  While the Long Island City Collection works great for our rental operations, selling in that space can be daunting and doesn’t allow a real opportunity to show the pieces as they should or could be.  Being in a visual business, the need to properly display an item is critical to better enhance its salability and appreciation.  Mediums like a staged set for a movie or one’s own living room require a personal meaning and interpretation.  Why not in a Curated Collection? Our newest venture at 306 East 61st Street will take the concept of our present 1st floor showroom from our East 53rd Street location and create a dedicated space to show the variety and depth of what we offer, with the clarity of presentation.  The Curated Collection will always be a work in progress that has to be seen and enjoyed on any occasion. Newel will never run out of surprises!

With these two exciting locations, the third place that offers the greatest audience to Experience the Collection, is online and other multi-media options.  We have the bones for that too, having an incomparable database for deployment.  With technology moving at light speed, and a completely new and savvy audience of people under 35, the potential to attract and interact with this now and every growing market of consumers could never be opportune.  Bringing The Virtual Collection to more people through ne………………w age interaction offered by social media as well as having an established online presence make our inventory more accessible and more exposed in its various uses.  The Virtual Collection completes and complements how we tell our story and why to Experience The Collection @ Newel is so special and compelling.

A New Path for Newel

With a foundation that was totally different than any other decorative arts dealer, Newel is about to experience a new and auspicious future. The present state of the industry is dicey at best, but as my grandfather who founded Newel would say, success is when “opportunity meets preparation.” Newel is now officially unshackled from its location at 425 East 53rd Street for the first time since 1969. It was a phenomenal run for four generations of the family (it all started on 2nd Ave. and 47th Street in 1939) but now is the time for a new chapter. A massive Long Island City warehouse and new showroom on East 61st Street will pivot us in a different direction.

The location of our building in New York City, a commercially zoned warehouse in a highly residential neighborhood, was difficult to attract clients to visit. It didn’t hurt the rental business, however selling has become a very difficult proposition in the world of decorative arts. If you think it is cheap now, think oil glut. Fine arts, they are the rage. How does it look; edgy? Its better if it goes on the wall, where mirrors, consoles, and wall sconces use to roam. Chairs, tables, and accessories now require a minimalism in a deference to the presentation of art.

If the present trend is any indication, taste is “less”. It’s less because the present state of exposure to the decorative arts has never been more marginalized. The Sotheby’s/Christie’s duopoly relegate it to a side show; what more do you have to understand? We need to educate the world what we do, what we sell, and why it is so much fun. Rich or poor, the knowledge and appreciation of quality and design is priceless. We love it at Newel and we desperately want to share it with anyone who cares to partake. We need to be a serious advocate for the decorative arts because so few are.

At Newel, we seem to have our hands in many areas where the decorative and fine arts live harmoniously. Selling to interior designers who have the temperament to deal with clients that seem to know more than they do, is a daunting position for everyone. Having a set decorator put together a room for a TV show in a matter of hours is even more impressive. While watching a motion picture production, the set is so seamless to the action; it’s brilliant! Why not for your home, apartment, or office? It can and should change as easily as you want it too, (if you can afford it).

Newel is all about change and being part of how residential and visual design should evolve. We understand the past and appreciate the foundation and evolution of cultures and the value they placed in creating decorative and functional objects. We have an obligation to show our items anywhere that they will be noticed and create a sense of “wow”. It’s not really that hard when there are so many who have never had any appreciation of what it is. For Newel and the decorative arts industry to flourish, we need to be not only educators, but be more approachable to a new, young generation that has no idea we exist.

Let Me Entertain You!

The theater runs through Newel; we started as a service to Broadway, and it runs through our veins.  For us, it is about “The Show”; where in the decorative arts do you want to go?  But part of the fun is that we can now better entertain you, with our own unpredictable displays, in Newel’s new warehouse in Long Island City (LIC).

There is no denying my passion for the visual image and how decorative arts are so critical to enhance a stage. The stage is anyone’s opportunity to show how you live your daily life, anytime and anywhere.  What is now possible are more dramatic and unexpected presentations at different locations in the warehouse; it can make our new showroom look boring!

Part of the fun for me is to actually move the stuff and play around with the space available.  It could be a vitrine or it could be a corner wall or intersection of aisles.  You never know where the next location needs some attention and “creativity”.  However you can go so far.  With the products at hand you have to be judicious in selecting complementing pieces.  But in real life or imaginary, no two interiors are decorated the same in every detail, unless you are a theater stage or a TV production.

In a strange way it really doesn’t matter how you show the goods, there is so much of it available to anyone with an “eye” for style or quality.  However, the price is another matter and it is always negotiable for the independent buyer (except when dealing with auctioneers like the Sotheby’s/Christie’s duopoly and their disturbing buyer’s premiums.)  While money can buy happiness, it doesn’t necessarily include the visual sense of style and a discernment for a special piece.

Newel is now planning the next chapter in our long and distinguished 76 years associated in the entertainment and the fine and decorative arts industries.  We are pulling up stakes from our traditional location since 1977 (our original location was on 47th Street and Second Avenue) to having an additional new showroom location at 306 61st Street.  It is just over the bridge from the new “warehouse” and allows us more flexibility.  There is still a reluctance to making the LIC trip, but a lot of new residences have been build there and it seems so accessible. Certainly the abundance of museums and major TV and motion picture production facilities is a positive factor.

New York has a long history of being considered an entertainment and art world hub.  I love the decorative arts and antiques and as we use them for display or physically stuffed in our warehouse, they were somewhere else before ending up with Newel and possibly being rented out to a TV show or movie.  Every item has a story and most of the time it’s a secret!

Our business has years of experience in dealing with sets for “The Godfather”, “My Fair Lady” on Broadway, or Bergdorf Goodman window display; the list goes on and on.  We have sold to the White House and interior designers with incredible understanding of decorating for important clients. We have pretty high expectations for people who rent or buy our inventory.  But to me, nothing is more exciting than our incredible diversification which offer so many surprises.  So,

Let me entertain you
Let me make you smile

Let me do a few tricks
Some old and then some new tricks
I’m very versatile

And if you’re real good
I’ll make you feel good
I want your spirits too climb

So let me entertain you
And we’ll have a real good time, yes sir
We’ll have a real good time (1)

  1. From the 1959 Broadway show, Gypsy; music by Jule Styne, lyrics by Stephen Sondheim