Amazon join Sotheby’s in 10-year web alliance

The aim is to combine Amazon’s 10 million client base, customer service skills and technical ability with Sotheby’s worldwide reputation and expertise in the art world. They will be running three separate but linked auction sites, between them covering the whole range of on-line selling from cheap collectables to Old Masters.

The public unveiling of this 10-year partnership in Web auction development comes after seven weeks of discussions to establish mutual needs. The deal involves Amazon taking a 1.7 per cent stake in Sotheby’s, by investing a total of £45m in Sotheby’s shares and future share options.

Competition to control this burgeoning, but as yet undeveloped market, has been intense since Sotheby’s shock move in January when they announced a $25m investment in Net business and offered favourable terms to bind top dealers into exclusive on-line selling deals.

They now have agreements with 2800 dealers around the world and seem best placed to take on-line auctions up-market. Jeffrey P. Bezos, Amazon’s chief executive, agreed that it was the relationship Sotheby’s had developed with these dealers which made the deal so attractive to him.

Amazon, who are best known for on-line book sales but who are aiming to become the ultimate on-line department store, moved into web auctions in April with amazon.com/auction, a competitor for eBay’s successful low-value collectables site, but they lacked the expertise to move into higher-value objects. “Our early investigations revealed that the problem was how to authenticate valuable objects being offered on-line,” Jeffrey Bezos told the Antiques Trade Gazette.

The most prominent result of the alliance will be a new joint site – sothebys amazon.com – which will offer only items owned either by Sotheby’s themselves or professional dealers who have signed agreements with Sotheby’s.

This will run on Amazon software and be promoted as a place to buy collectables, general art, antiques, jewellery and books with a full guarantee of authenticity and condition. For non-Sotheby’s goods the guarantee will come from the seller. “All our sellers are screened and vetted,” said Sotheby’s chief executive, Diana D. Brooks. “We see the dealers as our partners in this venture. If for whatever reason a dealer does not stand behind his guarantee, a vetting committee mechanism will be there to deal with any problems which may arise.”

It is hoped that such a committee would be drawn from participating dealers, but Ms. Brooks emphasised that Sotheby’s would not walk away from any problems. After the sale buyers and sellers will be put into direct contact.

The first sothebys.amazon.com sale will be of items from the Halper Collection of baseball memorabilia, an event originally chosen for the launch of Sotheby’s own web auction site, sothebys.com.

sothebys.com will now run alongside the joint site as the place for dealers to offer traditional saleroom categories such as pictures or applied art. Items will be fully guaranteed and auctions will be run by Sotheby’s on the software they have developed for their own web venture. At the other end of the market amazon.com/auctionswill be open to all sellers and guarantees limited to $250 a lot.

On the face of it this new alliance holds out no prospects of reducing the high costs of running an e-commerce business. Sotheby’s will continue to develop their own software, albeit with the assistance of Amazon and will still require the 60+ staff envisaged for their own site. In fact even higher staffing levels are predicted, with new experts around the world required for authentification, as well as engineers and customer service staff at headquarters.

Though Amazon’s turnover has risen dramatically, their losses continue to pile up, so the prospect of accessing higher value items for sale is obviously attractive.

Diana D. Brooks explained that Sotheby’s had already invested so much in their own auction system that they could not afford to waste it. She added that such was Sotheby’s commitment to Internet business and to dealer clients they had already signed up that they were duty-bound to retain an independent capability, however much they they welcomed and trusted their new-found partners.

This could be a wise decision if the last year is anything to go by. Few e-commerce companies have ended up following their original business model as they have adapted to the changing environment.

Sotheby’s now appear to have covered every eventuality and will be competing with eBay, whose recent purchase of California auctioneers Butterfield & Butterfield gives them access to greater up-market expertise.

Among the non-traditional firms Artnet and Icollector are both gearing up for more on-line sales. Only Christie’s have yet to announce a long term Internet strategy.