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Bonhams raise the stakes over client services

FROM January 1, Bonhams will cut the paying out time for UK clients from 35 days to 21. Chairman Robert Brooks aims to cut the payment time further to 14 days and eventually to extend the policy worldwide.

The move comes as Mr Brooks announced that his company had doubled sales turnover in the past two years, from $200m at the end of 2002 to $400m now.

Bonhams will also fall in line with Christie’s with regards to buyer’s premiums although both now differ from Sotheby’s who have just announced another change. As reported below, Sotheby’s will now charge buyers 20 per cent up to £100,000 and 12 per cent thereafter. Bonhams and Christie’s will charge 20 per cent up to £70,000 and 12 per cent thereafter.

Tighter credit control is the key to Bonhams’ more favourable payment terms and will mean that buyers at auction will have to pay on time too. Mr Brooks believes Bonhams is taking a lead in policing the industry rather than than directly challenging their competitors.

As the only major international auction house to operate separate client accounts, he believes paying out money owed post sale as quickly as possible sends out the right message.

“I still feel very strongly about the way we operate. We need to look to our industry and keep our houses in order. The auction industry hasn’t had a smooth ride over the last five years… we can’t just take for granted that legislation isn’t going to catch up with it.”

Despite this, he does not think that Sotheby’s and Christie’s, who are still much larger operations, should be forced into making the same move. “It’s a tough thing to do and takes time, but with the right effort they can get there.”

There’s no denying that introducing significantly better payments terms for clients should be good for business. Although clients at the top end have always been able to negotiate special deals, those doing business with auction houses at the lower level have not enjoyed such advantages. Now the more favourable terms will apply across the board.

The policy, being developed by finance director Hugh Watchorn, reflects in part Bonhams’ greatly improving financial position.

The birth of the rebranded Bonhams in the Brooks era was never going to be an easy task: the bringing together of two large auction houses, Phillips and Bonhams; the resulting duplication of roles; the financial and emotional cost of ensuing widespread redundancies; a major investment programme and all at a difficult time for the market.

With more than £6m spent in IT and computer equipment alone in 2002, costs and investment left Bonhams with a net loss just short of £6.5m. A year later, with much of the investment complete, staff numbers at a more realistic level, and sales up $100m to $300m, there was a 38 per cent improvement in the bottom line.

Importantly, negligible cash reserves at the end of 2002 had transformed into a healthy multi-million pound balance by the end of 2003. And it is this liquidity which Mr Brooks is keen to highlight. Not only is it allowing him to develop client services, such as the payment terms policy, but it has also contributed to the refurbishment of their two major London rooms, at Bond Street and Knightsbridge, as well as their San Francisco headquarters.

“Financially we’re very healthy, we have very happy shareholders, but we must continue to build reserves.”

It is interesting to note that French billionaire Bernard Arnault, whose acquisition of Phillips proved less than happy, has kept the 49 per cent stake in Bonhams he negotiated when Brooks took over. However, he is not involved in the running of the company.

Much of Bonhams’ success in the past year has come through its American operation, headed up by group managing director Malcolm Barber. Acquired from eBay following the online giant’s less than successful attempt to assimilate bricks and mortar into its dot-com operation, with a history dating back to the 1860s, Butterfields was the sort of well-established brand that Mr Brooks wanted to help bring Bonhams to the West Coast market.

The strategy has been repeated in Australia, first with Goodmans in Sydney, with whom Mr Brooks already had an ongoing understanding, and now with James Bruce, the Adelaide-based general auctioneer who previously represented Christie’s.
But it is to the United States where we can expect most attention to turn in 2005. Bonhams anticipate more New York sales as well as further good news following the “spectacular” year enjoyed by Bonhams and Butterfields in 2004.

Not a fan of live online bidding – “no saleroom buzz” – Brooks does, however, see a big future in TV live auctions. How far this applies to Bonhams (and Butterfields) is not clear.

The UK in 2005

But what of the rest of the world and, of course, the UK?
Robert Brooks says he has no immediate plans to open major salerooms, but he is keeping a close eye on the markets. Bonhams are very interested in the mainland Chinese market – developing Asian art sales has been one of the company’s successes under the guidance of newly-promoted deputy chairman Colin Sheaf. Another has been jewellery under the equally promoted Matthew Girling – “we’re now a sneak behind Christie’s in the UK, with Sotheby’s at number three”. Pictures and furniture are also likely to be key areas for the company to focus on in the coming period.

In London, the administrative centre, collectors and furniture departments, as well as other ancillary services, have outgrown the Bayswater premises where Bonhams own the freehold. They have now moved to a large warehouse near the BBC at White City. This means that the Bayswater building is no longer paying its way, but no decision has been taken with regards to its future.

There are also no solid plans to alter the regional structure of rooms and offices, although another consignment office for the South East is a possibility. However, Mr Brooks says he is looking at new offices and new locations at the moment.

He does not share some outsiders’ uncertainty about Bonhams’ regional consignment policy, which sees most premium goods sent to the London rooms and others to specialist provincial sales. “It works fine. The specialists in the regions and London work incredibly well together. It’s all about presenting the goods together in the right place.”

Scotland has a new managing director in the shape of Mark Richards, and Robert Brooks is clear that they will be stepping up the competition with Lyon & Turnbull for market share.

Looking back to the vision for Bonhams he set out in an ATG interview in March 2002, Robert Brooks believes little has changed.

Then he said success lay in traditional saleroom business built on expertise, improved client services, investment in IT and increasing brand awareness. “The future is not about reinventing the wheel,” he concluded.

Now he points to the continuity of his management team, many of whom have spent there entire working lives in the auction business, starting as porters and working their way up.

It’s been a long haul – particularly in terms of the staffing issues – in a depressed market, but one that Mr Brooks and his team anticipated and dealt with.

But if the vision is still on track, Robert Brooks is not a man to sit back and go with the flow. “Everything needs building. There’s not a single area of our business that can’t improve.”