April 28, 2020

Sotheby’s is losing millions because online auctions just aren’t that exciting

There’s less adrenaline when you bid online. That may be why big auction houses are taking a big hit.

Photo by Michael Bowles/Getty Images for Sotheby’s

Ultra-wealthy auction buyers going virtual — but that’s bidder news for big-name houses like Sotheby’s and Christie’s.

With in-person events canceled, the number of online auctions jumped by 63% over the past month. And last week, Sotheby’s set a new online record, roping in a $6.4m sales haul from one event.

The downside: That pales in comparison to its in-person auction record of $110.7m. Those shortfalls forced Sotheby’s to furlough 12% of its staff.

Do I hear frugal spending? 

The average sales price in March clocked in at ~$6.9k — well below the $40k+ average throughout 2019.

This isn’t a story of rich people getting stingy because they blew all their money escaping to secret disaster bunkers. The real reason may have to do with the blandness of the virtual bid.

Online auctions are a little too rational

The culprit is a phenomenon called “auction fever” — the adrenaline spike that pushes people to spend more than they ever intended to in the heat of a bidding war. 

Auction fever gets amplified when you’re in person. 

Packed into a room, surrounded by colleagues, listening to the auctioneer shout out dollar figures, bidders go bananas. 

It’s such a problem that wealthy bidders sometimes send out minions to bid for them — in part to ensure they don’t spend above their max price. 

Typing a bid into your computer from your living room just doesn’t have the same thrill.

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