Christie’s released its sales figures for the first half of 2018 today. The company sold £3bn in sterling terms, up 26% over the previous year; in dollar terms the gain was higher, a 35% increase to $4bn.
Those headline figures were positively affected by the presence of the $835m Rockefeller estate, which sold every lot, in the beginning of the year. The nearly 2000 items selling also added to the company’s overall rise in its sell-through rate from a very strong 81% last year to 84% this year. Increasing the sell-through rate across the company has been a corporate strategic goal under Guillaume Cerutti.
“Once we set that the sell-through rate was a priority and was the best way to invest in the future because you build confidence with your clients,” Cerutti said in a phone conversation yesterday, “I tried to deploy this priority in every category and in every format.’
For many, the first thought upon hearing that the sell-through rate is a strategic goal will be that guarantees are somehow the tool being deployed. Cerutti differs, “It is not a reflection of the guarantee activity. The guarantee activity is in total in terms of number of lots is only a handful. I don’t think the explanation lies in this factor. It is more in the way that we curate our sales, the way that we estimate, in the way that we build our online sales.” Christie’s adds that only 1% of the lots sold are guaranteed. Cerutti also added that decision to shutter Christie’s South Kensington sale rooms was part of this strategy to move toward higher sell-through rates.
The final significant number, somewhat underplayed in Christie’s release is that private sales climbed 135% to £287m (or 151% to $390.3m in dollar terms) putting the firm back on pace with its crosstown rival which posted $750m in private sales last year.
Christie’s suffered in 2017 from the effects of a 2016 change in incentive structure for private sales. But Cerutti also pointed to the rise in auction sales benefitting private sales especially within the context of a substantial number of new buyers entering the market.
“When you have so many new buyers, 27% of clients were new at Christie’s in the first half, you also multiply potential opportunities to transact privately,” the CEO said. “Meaning that, if in a sale a client is an underbidder and wants a painting or piece by one artist, it is good for private sale. Because very often we are able to propose an object, not a similar one because we are dealing with unique objects only, but another piece that could please him. In a way, strong auction sales and new buyers help to drive better private sales. It goes together.”
These top line numbers were supported with a variety of other statistics meant to bolster Christie’s market position. Sotheby’s, which is publicly listed company, is required to publish its earnings. That will happen on August 6th. Recently, Christie’s has taken to selectively releasing its own operating figures in an effort to counteract its rival’s PR advantage. Christie’s release is selective because they do not reveal any operating numbers that might allow the public to get a better sense of the firm’s profitability.
There is a common view in the art market, repeated here in some of our previous analysis, that says Christie’s is managed to produce market share, not profits. Christie’s management, not just Cerutti but his predecessor Edward Dolman, insist this isn’t true. Although the company is privately held, they say, there is an emphasis from their shareholder and focus on generating profits. Taking them at their word, we’re left with the conclusion that Christie’s shareholder is simply more comfortable with and encouraging of the firm taking on risk that might not be as welcome in a publicly traded company.
In this particular season where the Rockefeller estate was acquired for a price above $700m, that appetite for risk has paid off handsomely. Even while sweating through the details on covering that gargantuan risk, Christie’s pressed ahead with a number of other deals that added to May’s risk profile. In many cases those bets paid off leaving Christie’s in a remarkably strong position.
According to the release, Christie’s “sold 80% of the highest selling lots in the first half of 2018.” Although Christie’s didn’t explain where it considered the cut-off level for “highest selling.” The company sold 55 works at prices above $10m, a 20% increase over the previous year. Again, Rockefeller obviously played an important role in reaching those figures.
The Rockefeller sale may or may not have contributed to the continuing in-rush of new buyers. This first semester, that figure was at 27%. A slightly higher percentage, 29%, were attracted to the luxury category. Online sales brought in the highest portion of new buyers at 40% even if those are relatively low value events.
Total online sales were £88m or $119m with a substantial portion of that figure, £60m or $82m, coming from Christie’s LIVE platform which allows bidders to participate in live auctions from their computer, phone or tablet screen. It’s worth pausing here to point out that the vast bulk of the company’s revenue comes from traditional auction or private sales conducted by specialists with the slight added leverage of allowing more bidders to have access to the room via the internet. Only £28m or $38m was spent in the 47 online only sales the company conducted.
Christie’s tells us the value of these sales comes not in the commissions but in the client development. The online only sales increased by 40% year over year matching the 40% new buyers figure online mentioned above. In addition, the sell-through rates were significantly higher online at 87% with the average lot price coming in at $8,500.
Of the 27% of the buyers in the first half who were new to Christie’s, 43% were from the Americas, 35% from Europe, the Middle East and India, and 22% from Asia. Asian bidders were under-represented in the Rockefeller sale, much to everyone’s surprise. This had a broader effect on the market share that went to Asian clients. As the chart at the top of the post shows, only 24% of the value sold at Christie’s in the first half of the year, a decline from last year went to Asian clients. That’s primarily because of the Rockefeller sale.
Only 12% of the sales volume took place in Asia, that’s partly because there was only one sales cycle in Hong Kong in the first semester against two in London and one in New York plus Rockefeller. But the differential between the 12% sold in the region and buyers from the region accounting for 24% of the sales value is a measure of Asian buying in London and New York.
Simply put, Asian buyers are the swing money in Western art, especially in the Impressionist and Modern category. “In certain categories like Impressionist and Modern, the level and regularity of activity of the Asian buyers has been absolutely key to confirm the strength of these categories,” Cerutti said. “And without the Asian spend, we would not have the same success and the same confidence in these categories. There is absolutely no doubt. Of course, for us one of the main priorities is to extend this outside the Impressionist and Modern category to as many categories as possible.”
Christie’s says their Asian buyers spent 60% of their money, the majority of their buying, on non-Asian art. This remains a key feature of today’s art market where bidding on a day sale lot of a small late Phillip Guston work can soar when Chinese buyers show up.