Physical possession of a fine or decorative arts item includes an added premium of control. Auctioneers like Sotheby’s and Christie’s have been using this advantage more than anyone in the industry. Their warehouses can be unbelievable experiences to walk through and see such quantity, quality, and diversity (sounds like Newel). But control of the next stop for these objects is really no different than what happens when I as a dealer sell something.
Stocking such quantities of inventory are amazing things to see and the antiques show format is a good try. These shows really do pale a walk-through of any of the duopoly’s warehouses which are spread out all over the world. As an acknowledgement of this need to control inventory, Christie’s is preparing a large, new, state of the art storage facility in New York City. They understand that warehousing offers total control of the movement of the merchandise; for selling or otherwise.
The investment in warehouse space as it presently exists includes public storage facilities used by many dealers to store inventory not on display in a showroom or needs restoration. As a rule they are a very popular small scale dealer approach, but the largest dealers essentially keep their merchandise in no more than 2 or 3 locations that are basically off limits to public access. Outside of Mallett of England, I can’t think of a dealer with an international presents or warehousing capability.
The auctioneer model is set up for holding inventory. Once the space is occupied with inventory, the turnover becomes a mute point. Keeping it filled with product is the challenge and the profits that come from a turnover stocked with a non-negotiable, seller agreed buyer’s premium. For dealers, it is a challenge to buy and hold capital in the form of inventory. While there are profits to be had, profits are less reliable, especially in today’s present economic slowdown.
Christie’s warehouse venture in New York City is quite industry specific. While it is not in an accessible location in Manhattan, the size of the space for the plans to store inventory would stagger one’s imagination of art and antiques value. Museum storage facilities would be comparable. While receiving a storage fee from someone, Christie’s can gain specific knowledge of what is there and who controls it too. That is also part of how they can operate with inside information on merchandise availability to not only sell at auction, but a bigger opportunity for private treaty sales. Call it what you want, the private treaty format (negotiated pricing) defines a dealer’s way of doing business.
The individual dealer model has to change in order to challenge the size, scope, and profits of today’s auctioneering method. The duopoly and Christie’s in particular have taken advantage of what dealers fear, storing inventory. But storing your own or consigned inventory shouldn’t make a difference when you can control the price and movement of the goods.
The opportunity to challenge the auction method of selling requires not just capital, but a new form of dealer organization that is based on a different financial and managerial configuration. It requires the skill of a modern corporation, like a Sotheby’s or Christie’s. Consolidation of dealer operations is the opportunity and challenge for creating such an entity along with their industry knowledge and skills. Most significantly, the internet makes that controlled inventory accessible.