Everyone is in awe of the price of $400m commanded by Leonardo’s masterpiece Salvador Mundi. However, the more interesting debate is whether it’s just down to Leonardo genius or the brilliance of Christie’s? If this is just down to the auction method where competition got the best price, my question is whether running an auction on Ebay, which also happens to be a technology partner of Christie’s, would have given results anywhere close to this? Most people will agree that it won’t have gone too far. If we just consider that Christie’s was able to get this price because they were able to conduct the auction in front of some very wealthy art collectors who can pay this kind of amount, most trade experts estimated a price tag of somewhere between $120 to 150m for this type of painting. Therefore, delivering a $400m price tag for this masterpiece, I give big credit to how Christie’s organized the auction and the entire sale process. However, being a procurement professional and having run numerous auctions and taken part in various debates around how to use auctions to deliver best value, I couldn’t help but draw some interesting learnings from the auction conducted by Christie’s.
Marketing the opportunity (Pre-conditioning of Suppliers)
Christie’s toured the painting around the world for over a year with estimated 20,000 people who visited the painting. Not only many potential buyers and their agents saw the painting first hand, they also made sure every art magazine and media house covered the painting and built the hype around the ‘once-in-a-lifetime’ opportunity to own the masterpiece. The important part is how you market your business so that suppliers really want to work with you rather than just saying “let’s run some e-auctions year on year”. It’s about selling the lifetime opportunity to the supplier. Lot of businesses trialing auctions think it’s just about using a procurement tool, but like any other negotiation, it’s about proper planning. If you just create a robot and expect it will work … forget it! The important part is doing the ground work and meeting the right suppliers and presenting an attractive opportunity.
Maximizing the number of bidders (Sourcing activity)
Christie’s took the painting to right places, in the right moment and to large audiences. Rather than keeping it in a master’s collection, they auctioned it in the contemporary and modern post war category where there are many more buyers and people are willing to pay much more. It is widely expected that the final competition was between old masters and a new buyer in the market. Similarly, if you just keep going to the same suppliers and not exploring different sources or people who are more interested in such business, you are missing the trick. Sometimes it could be interesting auctioning to a Far East supplier with a completely different source.
Preparation for the auction (Contracting, registering, referencing)
Making sure there are enough players in the room going for the minimum bid is the most important. There is no point in running an auction where people don’t understand the event format or not willing to pay the money set for the event.
Christie’s use of right tools, referencing and creating the excitement by live streaming of auctions is really ground breaking. Rather than just allowing a bid via a phone or in person, it allows people from all over the world to participate, but still be fully involved or excited in the event. Same goes for supplier events, where having the right tools goes very far in running the event.
Finally, making sure that the event is organised in a transparent manner and building the reputation that you will deliver the opportunity to highest bidder as per the criteria defined. Christie’s has gained reputation not just for delivering the right value for such paintings to the sellers, but also promise to the buyers that painting is genuine and will be delivered to the successful bidder. Similarly, it is most important that full due diligence is done about the suppliers and product or services they are offering as well as the opportunity you are auctioning is genuine and it will be awarded to the successful bidder from the auction. Too many times, I hear about auction being conducted just to obtain a low price with the intent of conducting negotiation with a preferred supplier. It may work in the short term to deliver the savings, however, for auctions to be a sustainable procurement strategy, building a reputation for running auctions on genuine opportunities in transparent manner is most important.