Transcript Sotheby - HEC Paris

Sotheby’s
Van Gogh $ 80,000,000
Renoir $ 75,000,000
France
Best in France
HEC Paris
April 2004
Rubens $ 75,000,000
Presentation Overview
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Sotheby’s history
France’s benefits
Sotheby’s key values
Constraints in France
Adaptation to France
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In the strategy
In the management
In the recruitment
In the operating policy
Future outlooks and France attractiveness
Sotheby’s history
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1744: Samuel Baker founded Sotheby’s in London
1955: Opening of the New York office
1967: Opening of the Paris office
1974: The first French auction held in Monaco by Peter
Wilson (an immediate success).
Early 1990s: A strategic shift with the will to sell in
France given the potentiality of the French art market.
1993: a mini “New Bond street” built in Paris, the
ambitious Galerie Charpentier.
2001: Reform of the status of art auction dealers.
Sotheby’s business in France
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Traditionally France has been an art export
center.
But there was a deep crisis in the nineties…
… As a consequence, Sotheby’s needs to be
able to sell in France directly.
The bill reforming the status of French
auctioneers is eventually passed in 2001.
France’s benefits
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Paris is one of the top market places worldwide
for art.
Sotheby’s has an image of luxury and
expertise.
The company’s culture is close to the French
culture (excellence, refinement, taste,...)
There are many collectors in France (potential
buyers and sellers).
Sotheby's customers
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There are two types of clients :
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The sellers
The buyers
Sotheby’s leaders care very much for reputation
and trust to reach the top market products they
are looking for.
Trustworthy to organize the auction of major
collections and important heritages. (e.g. the
paintings shown on the first slide have all hit
records and were sold by Sotheby’s)
Sotheby’s key values
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The company can rely on trust, expertise, a
unique Brand name, knowledge.
Unlike many competitors, there is no
outsourcing.
These values are essential in the art market,
Sotheby’s has a worldwide reputation and
traveling clients.
Main corporate value: ‘local roots and global
reach’ ( “une PME internationale”).
The French art market
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The French market represents in 2004 10%
of the world market (7,5% in 2001) 223 M€ in
2003.
Constraints in France
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The legal constraint (the worse constraint)
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Before the 2001 reform, Sotheby’s was not
allowed to hold auctions.
After 2001, Sotheby’s can hold auctions but is
not allowed to buy and sell for its own.
The establishment (corporatism).
Skepticism towards this foreign newcomer.
The art market, another ground of the
‘exeption culturelle française’.
Adaptations in the strategy
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Sotheby’s had a worldwide monopolistic
strategy when it arrived in France.
However, there is a huge competition on the
French soil and too many competitors.
Sotheby’s realized that fighting now would be
costly and quite ineffective.
Thus they preferred to wait for more maturity
and opportunities to impose a leader in years
to come.
Specific workforce adaptations
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English speaking experts are needed
(always in touch with the US headquarters).
No expatriates (it would be too expensive),
but only French “internationalized
workforce”.
Furthermore, there are some internationally
renowned French experts.
The recruitment is based on reputation and
not on a diploma (unlike the US branch).
Adaptations in the management
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Given the corporatism in this industry and in
France, there are no “professional
managers”.
The experts themselves are the managers
(e.g. Mr. de Proyart, vice president and book
expert).
There are no managers, only art experts that
have to deal with management issues.
Adaptations in the operating policy
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In the US , you can guaranty the sale because
the auctioneer itself will buy the item at a
minimum price if it has not found an acquirer.
In France, you can only guaranty a minimum
price; thus if the item does not reach this set
price, it is not sold at all.
Therefore, Sotheby’s is just a broker in France
and had to rethink its business plan
specifically for this country.
Key Constraint Costs
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The French branch is not self-funded, it relies
heavily on the US headquarters.
Networking throughout France (to find new
pieces), expensive but long term investment.
Due to French regulation, they cannot build
potential client databases (they do in USA or UK)
The auctions can only be seasonal and therefore
there are irregular cash inflows (need to borrow).
Communication with headquarters is essential
but expensive. (IT= $ 25,000,000 worldwide)
Key Benefit Numbers
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Revenues in France (2002):
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€ 50,000,000 with 17 sales for Sotheby’s
€ 57,000,000 with 30 sales for Christie’s
With a strong Euro, there will be more and
more auctions on the French soil.
France must catch this opportunity to get
even more attractive.
Essential problems
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The French legal structure is a very heavy
constraint: work law, art market regulation
(e.g. French custom services visit Sotheby’s
five times per year).
The French tax structure.
This results in the flee of national artistic
treasures (especially the Impressionists),
being sold in London or New York: reforms
should be taken now before it is too late.
Hope lies in tomorrow
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The art market was one of the first truly global
markets, and has profitable outlooks.
Paris is very competitive, dynamic and innovative
market place (in London or New York, Christie’s
and Sotheby’s have the monopoly).
We are going towards the democratization of art.
Yet, it is needed to rethink management
procedures and more flexibility. Sotheby’s will
need true managers as the company grows.
We Thank
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Jeremy Durack,
Managing Director,
[email protected]
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Jean-Baptiste de Proyart,
Vice-president,
[email protected]
Bibliography
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Art and its object, Richard Wollheim
Le mot peint, Tom Wolfe
L’artiste et les commissaires, Yves Michaud
Le marché de l’art contemporain en France,
Bernard Rouget
Our Team
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Raphaël Encaoua,
[email protected]
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Blaise Guerrand Hermès,
[email protected]
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Yannick Samson,
[email protected]
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Yann Vincent-Genod,
[email protected]