The future of Auctions, Online Bidding, and the Great Wealth Transfer

Radical change in the auction industry

Over the last five years, following a relatively stable two centuries, radical change has begun to impact auction houses worldwide. Perhaps this sounds a little hyperbolic, but lets look at the auction landscape and the challenges auction houses have faced since 2019:

The worldwide Covid pandemic
A massive expansion of online bidding
Revolutionary improvements in capacity and capability of online systems
The great wealth transfer from Baby Boomers to Gen-X and Millennials
The accelerating expansion of alternative investments
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These drivers are in addition to the ongoing business need to contract consignments and motivate bidders to participate, and they are already changing:

How auctions are conducted
How customers bid
Who those customers are
Why they are bidding
What they are looking to buy

Let’s look at each of these drivers of change;

‍How auctions are conducted

For most of their existence, auctions have been primarily and deliberately a theatrical in-person experience. Phone bidding started in the 1960’s, but always with a person in the room talking to the bidder, and online bidding started on a very small scale (for Christie’s and Sotheby's) in 2011. Covid changed everything. Christie’s, Sotheby's and Phillips’ revenue in April 2020 was down 92% from the prior year, and all sales had moved online. These two things alone required structural changes within the businesses, and dramatically changed buyer communication needs.

‍How Customers Bid

In 2019 online bidding in high value auctions was minimal. In lower value auctions millennials had started transitioning to online with 30-35% of bids being received from that channel. A critical constraint was bidders being comfortable with bidding large amounts (say over $500,000) online. Auction houses have, to a large degree, met this challenge head on; in 2023 Christie’s disclosed that 85% of all bids, including many very high value bids, were made online.

Who those customers are

Per Sotheby's 2023 First Half Bidder Analysis report, for the first time, the most important demographic in the $1m+ market is Gen-X, which comprises 42.2% of bidders, just overtaking the Baby Boomers with 39.5%. Gen-X and Millennials together account for over 53% of bids, with much higher numbers for emerging artists (e.g. Banksy and KAWS.). The tech savvy generations are taking over.

Why are they bidding

The two main drivers for buyers in the art market are the desire to collect and the desire to invest. In an ideal world bidders would see an opportunity for both. While a collector may choose to display their art, the vast majority of $1m+ art is in storage, which infers that the investment component is crucial.

Per Bank of America’s Private Banking group, those 57 and older still have 72% of wealth in the US, while Gen-X and Millennials have 28%. The great wealth transfer of $84Trillion has started and the younger generations are less conservative investors. Affluent Baby Boomers on average only allocate 5% to riskier alternative assets, whereas Millennials allocate 17%, a more than 3 fold increase.

‍What are they looking to buy

As younger investors start to tiptoe into the art market as an investment, they are focusing heavily on high end contemporary and ultra-modern art. Many will find the best pieces still beyond their reach, and they may look to fractional ownership as an entry point.

Until recently the only way auction houses could engage this fractional market was through selling to or auctioning for alternative investment managers, rather than directly. The aShareX platform facilitates this younger, tech savvy and growing collector group to participate directly in auctions.

‍To distill this phenomenon

The auction market has irrevocably changed; the great wealth transfer has started; and art is an alternative investment, with the potential to be attractive on a larger scale to the tech savvy recipients of this wealth – those who are happy to bid online and are open to fractional ownership.

Is it time to talk to us at aShareX, the first and only patented fractional bidding system?

Please drop me an e-mail (kevin@asharex.com) if you have any questions, or for a demo of our fractional bidding system.

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