So last century: a Sotheby’s auction in London in 1958. At that time, the major auction houses’ sales resembled something between a drawing room and a theatre, with almost entirely white, wealthy people gathering to bid in person on art and furniture UPPA/Photoshot
While 2022 might have been a year in which many had to cut back on their spending, the wealthiest few splashed out billions on art and luxury goods at the world’s biggest auction houses.
Christie’s racked up a company record of $8.4bn of public and private sales, “the highest annual sales total in art market history”, it claims, followed by Sotheby’s with $6.8bn (excluding associated real estate and RM Auctions car sales), its second highest annual total. Phillips, too, had a record year, selling $1.3bn of Modern and contemporary art and luxury collectables. Bonhams were also on the up, for the first time achieving $1bn of turnover, boosted by the acquisition of five additional auction companies. All being privately owned, the companies are under no obligation to reveal if they made a profit or loss.
“Despite a challenging macro-environment, Christie’s has achieved our highest ever global sales,” said Guillaume Cerutti, the chief executive of the French-owned auction house, alluding to China’s zero-Covid policy and Russia’s invasion of Ukraine, which triggered the inflation that destabilised so many economies in 2022. Commenting during a press conference at the end of last year, Cerutti added that the “resilience of the art and luxury markets” and the “remarkable success of several major collections”, notably the $1.6bn Paul G. Allen Collection, helped explain his company’s record-breaking performance. Without the Allen auction, Christie’s and Sotheby’s turnover would have been much the same.
Remarkably, these bumper results were achieved in a year when the S&P 500 index of stocks lost almost 20% of its value after a 20-month bull run.
So, what is going on? How and why have the auction markets for art and luxury become so “resilient”?
Development charity Oxfam points out in a report last month that the richest 1% has accumulated almost two-thirds of the $42trn of new wealth created since 2020. This is almost double the growth of wealth of the remaining 99% of the world’s population. Moreover, for the first time since the 1990s, extremes of wealth and poverty have accelerated simultaneously, according to Oxfam.
Though buyers are cloaked in anonymity, the international art market is nonetheless one of the most blatant barometers of global income inequality.
The economist Thomas Piketty believes the gap between rich and poor in the US is probably bigger “than in any other society at any time in the past, anywhere in the world”. Americans were the dominant buyers at auctions in 2022. They generated 40% of the sales total at the market leader Christie’s, up from 35% the previous year.
“There are some people in the US who made a lot of money during Covid,” says Philip Hoffman, the founder and chief executive of The Fine Art Group, a London-based art advisory. “They were prepared to take huge potential risks in private equity, venture capital and tech, and these have paid off, though some of them are in trouble now,” Hoffman adds. “If you sell a business for a billion, $50m for a work of art is a drop in the ocean.”
The rich getting richer, particularly in America, is an obvious explanation for last year’s increase in auction sales. Another is the efficiency with which the international houses now choreograph their sales of big-ticket art. With as many as 40% of the works in a Sotheby’s or Christie’s evening auction certain to find a buyer, courtesy of third-party guarantors, high-value unsold lots have almost been eradicated. The failure in November of Willem de Kooning’s late 1970s Untitled III, guaranteed by Christie’s to sell for at least $35m at a New York evening auctions, felt like a raven leaving the Tower of London.
But when it comes to this market’s so-called “resilience”, the biggest game-changer has, of course, been digital technology, accelerated by the pandemic. Media attention might be focused on Christie’s and Sotheby’s marquee evening sales, where specialists take bids on telephones, just as they did in the 1980s, but it is the ability of buyers to view and bid online from anywhere in the world that has truly transformed this business, particularly lower down the price chain. Sotheby’s says that last year 91% of its auction bids were placed online, while Bonhams says 91% of its items were “sold through online channels”. In other words, internet bidding has become the dominant purchasing medium.
“All sales are global now,” says Bruno Vinciguerra, the chief executive of Bonhams, who says that during the pandemic the number of its clients bidding “an ocean away” increased to 75%.
Bonhams’s owner Epiris made a big call in 2022 by making an international investment in the middle market. Bukowskis (based in Sweden), Bruun Rasmussen (Denmark), Skinner (US), Cornette de Saint Cyr (France) and the specialist car auctioneers The Market (UK) were all added to the Bonhams portfolio. The auction house did not reveal how much the combined turnover of these new acquisitions had increased its overall sales figures.
But Vinciguerra says Bonhams is making a profit. “We can have profitable sales of $1m or less. We have sellers who pay vendors’ commission,” he adds, referring to how Sotheby’s, Christie’s and Phillips almost invariably waive sellers’ fees for trophy consignments.
Christie’s, Sotheby’s, Phillips and Bonhams were all founded in London in the 18th century. Auctioneers still wield hammers on rostrums, but their business models have changed out of all recognition. For three centuries they mainly acted as wholesalers of old art and furnishings to the London trade. They are now primarily global retailers of contemporary art and pretty well anything that qualifies as a luxury item to the international rich. Last month, Sotheby’s presented The One, a self-described “new auction concept showing an unprecedented selection of the finest products of human achievement in history”. The eclectic lots included LeBron James’s 2013 NBA finals jersey (est $3m-$5m), a ball dress worn by Princess Diana in 1989 (est $80,000-$120,000) and a 13th-century head of an apostle (est $400,000-$600,000).
No sweat: a top worn by NBA star LeBron James was on the block at Sotheby’s last month with an estimate of $3m-$5m Courtesy of Sotheby’s
In December, meanwhile, in a patchily performing online-only handbags sale, Christie’s sold a two-year-old Hermès Kelly 25 for $18,900, contributing to the $779m proceeds of its 2022 global luxury auctions, the main entry point for new clients at Christie’s.
For 99% of the world’s population, struggling to maintain living standards, $18,900 is an absurd amount to pay for a handbag. For the ever-enriched 1%, it is just everyday online shopping.
There is plenty of talk about the “froth” being skimmed off the top end of the auction market, particularly for recent paintings by young contemporary artists. How much longer can telephone bidders pay seven-figure prices for works by “hot” names like Flora Yukhnovich, Anna Weyant and Christina Quarles that a couple of years previously were selling in galleries for five figures?
“Paying $2 million for an artist in his or her 20s is, for me, a kind of Russian Roulette. I much prefer chess,” says Kim Heirston, a New York-based art adviser. Though auctions of works by artists aged under 45 generate oceans of publicity, a recent report by ArtTactic showed that overall they were worth about $350m at Christie’s, Sotheby’s and Phillips in 2022. That is a lot less than luxury.
But have we reached a point where the wealthiest 1% have become so rich they do not care if they overpay for a Yukhnovich or a Hermès Kelly, just so long as they own it? “The answer is a resounding no,” says Heirston. “I don’t attract that type of buyer.”
Nevertheless, auction house numbers suggest that there are more and more of them out there. The world’s richest 1% appear to have become impervious to economic downturns, leaving the 99% to struggle with those. Wealthy clients bankroll the success of trophy art auctions; online bidding ensures the success of the luxurious rest. Is this the overpaid shape of auction house results to come?