Lewis Baer: Newel Blog

Well, finally after more than 75 years in business, Newel has been honored as a member of the inaugural class of “2016 1stdibs Recognized Dealers”.  Honestly now, do you really want to bestow such an honor on a prop house? A dealer’s inventory trades in a market by different ways and means.  I’m sure Sotheby’s and Christie’s have their favored clients that get preferential treatment in pricing and information.  We now get exclusive benefits from 1stdibs.

1stdibs is in this industry for keeps.  They have endeavored to elevate their branding and image by the smoke and mirrors of upscale promotion.  Tiffany’s maybe, but Tiffany blue is too iconic.  With all the sophistication of PR and branding, 1stdibs has a clear template on how it gets done, whether it’s the auction duopoly coddling or perhaps an American Express Platinum Card comes to mind.  In the maturing age of cyberspace and the cloud, 1stdibs was required to change its financial model to a more aggressive posture, as they can and must.

The list of “Recognized Dealers” is quite impressive.  If any form of dealer association could join around this group, it could offer the opportunity for a powerful and productive trade organization.  It could even include the future classes of “1stdibs Recognized Dealers”.  However, this singular move by 1stdibs to create an arbitrary basis of like-minded international dealers, seems a bit like getting an offer to do shows like The Winter Antiques Show or Maastricht.  With this invitation it sounds like it is too good to be true but lets not discuss that commission and method of how 1stdibs wants you to do business.  

The more time 1stdibs has to roll out their proposed changes the more it will cherry coat their ability to break the dealer/decorator bonds, and take a commission.  A fascinating similarity happened with the advent or the buyer’s premium, where the auctions thought they could siphon away collectors and decorators from dealers.  Forced change and disruption by technology is coming to our industry again, and who knows who will be the winners and or losers. Three years into the future is an eternity.

Finally, I must bow my head in remembrance to all the incredible and talented dealer who have gone out of business in the last 20 years, with limited or no replacements.  What would this “Recognized” group have looked like, even 10 years ago?  So thank you 1stdibs for the acknowledgment; this is the first time Newel has ever been associated with other dealers in this or any such manner.  1stdibs will present opportunities but I prefer membership in an organization that will always have the dealer’s back.

The term “antiques dealer” has an archaic ring, and the image, what image?  Unsavory or crotchety, independent and self-sustaining, passionate but a bit irreverent, this breed of an economic misfit is singular to the art dealer, real estate player, or financial investor.  Owning and controlling a physical inventory, whether in a virtual or brick and mortar location requires a certain knowledge and trading capacity.  Individually, you are being set up for limited possibilities; collectively, has better prospects.

The incredible decimation in the base of antiques dealers over the last 2 decades has been staggering in its toll and a rapidity of its results.  When the good times rolled prior to that period, dealer success was an afterthought; anyone could make it; just show up at a Pier Show in Manhattan and you could be part of the fun.  Yet, there never was any form of association between the dealer trade, short of the few who gained entry into a fraternity of some elitist dealer organization.  Excuse me, but give me the masses of dealers and not the chosen few who represent no one in the industry.

The time is now for dealers to define who they are and what they stand for and against.  Issues like internet platforms, auction reform, ivory trade, education, image branding, and self-esteem in the profession are central to any possibility of success for an antiques dealer association.  The process is now starting with a consensus of many far flung dealers who have a relationship with 1stdib. The issues with 1stdibs are now secondary to the opportunity for dealers to coalesce around each other for the benefit of a potential organized membership. No one individual dealer has as much to gain as the larger group of participants who are the trade.   

The diminishing status of the decorative and fine arts industry has been quite consistent.  Decades of industry scandals and government actions have defamed the reputation of both dealer and auctioneer participants.  The need to re-imagine how a dealer can function is at a point of evolving or perish.  The cross hairs of digital vs. reality have now collided.

While I can’t say I prefer having a showroom over a warehouse setting, the physical possession offers the ability to touch, and see texture, color, and form.  It’s something that a virtual presentation can’t quite duplicate even in a 3 dimensional view.  Of course there is the option of consigning and shipping “on approval”, but this isn’t a pair of shoes.  1stdibs is planning to impose rules that put that burden on me with the obligation to do the financial transaction through their system, which imposes a potentially 13% monetary charge off the eventual selling price.  

Pricing is only part of the issue.   Now, long established clients, and those who want to do business with my firm, are excluded to purchase through my company when there is a correspondence through or indirectly by inquiry of a posting on 1stdibs.  Quite honestly, I hate telling my clients that they cannot buy that item from me directly.  Am I supposed to lose many of my clients that could have seen the identical piece on my web site or in the showroom listed at the same price, but with a different and possibly lower negotiated price?  Pricing is an issue, but client contact is something I’m not prepared to loose.  My problem with 1stdibs is this isn’t what I signed up for when I first became a 1stdibs member.

I can’t deny that 1st dibs shouldn’t get some form of remuneration for assistance in selling an item, but it can’t be on a commission basis. It should just be a transaction fee of maybe 2%, with payment directly to the dealer or a 3% credit card charge.  If 1stdibs wants sales volume, keep the costs low; think Amazon.  I can only offer 1stdibs my thoughts, but David Rosenblatt the 1stdibs CEO, and his management team have venture capital and hedge funds calling the shots.

This is a conundrum.  How do I stare down a (presently) financially strong company without any organized group of dealers that could inflict some economic pressure to their operations?  On the one hand, both the dealers and 1stdibs are experiencing a contraction in the market, and 1stdibs isn’t the elixir that is makes itself out to be.  The tattered image of the industry is beyond a disgrace.  The Antiques Roadshow isn’t exactly leading the industry on a growth path.  

The best part of this crisis for dealers and their customers is the opportunity to re-image and remake how the decorative and fine arts are sold and valued.  How and why you own these objects must always be a part of the value.  1stdibs with their new amended terms, offers a new-fangled method as to how the industry should evolve.  I can’t say that it works for me, as they might not have anticipated for most dealers; but I know I can adapt with and to 1stdibs, hopefully for everyone’s benefit.  I adapted to the auctioneer’s buyer’s premium and somehow Newel is still standing abet with a good parallel rental business. The evolutionary dynamics in the last two decades of this industry have been extraordinary.  But through it all, a dealer focused association has never been able to coalesce around some form of shared common values and image.

Whether it’s going the 1stdibs route or an alternative virtual medium, this is all about the survival of dealers as we know them.  The shrinking dealer population over the last 2 decades can and will continue unless there is some unified direction to the benefit of those who aspire to be in the trade. We are caretakers and educators who survive within the economic principles of supply and demand.  Only openness and transparency of the market will help to rebuild its potential. What alternative is there to 1stdib?  The short answer is none, but it doesn’t take a rocket scientist to image that something else might evolve, just like eBay did before 1st dibs, or Sotheby’s $60 million internet disaster, or Circline, etc. etc. etc. The market and industry exist in a dynamic environment.

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.

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.

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 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.

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.

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.  

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.