Auction houses hammer out new strategies to tap mainland market

2014-08-10 00:00:00


CHINA'S spring auction season is off to a promising start, as auction houses plan additional sales throughout the year, offer a wider range of items and appeal to a broader range of buyers.

Online auctions are likely to expand and, looking ahead, Christie's will hold it's first mainland auction in October in Shanghai.

Some Chinese auction houses also plan to build their own galleries, holding exhibitions and lectures to cultivate more buyers. The move would minimize the market role of galleries.

In its spring auction held May 7 in Beijing, China Guardian Auction House reported sales of 2.57 billion yuan (US$419 million) in art, antiques and jewelry, an increase over the 2.14 billion yuan in sales in spring 2012.

Guardian holds the first auction of the year, to be followed by Beijing Poly Auction and others.

"As the country's first spring auction this year, our result undoubtedly encouraged market confidence," says Wang Yannan, Guardian's president.

Last October, Guardian held its first Hong Kong auction. Turnover totaled HK$455 million (US$72.2 million), 2 1/2 times above pre-sale estimates.

"The success of the debut auction in Hong Kong will shore up our confidence in expanding our overseas market," Wang says.

Despite the good beginning and overall positive prospects, however, China's auction market took a hit in 2012. Sales totaled 60 billion yuan, almost 40 billion yuan less than in 2011 due to the global economic slowdown.

Liquor, coins and lanterns

Auction houses are selling less sky-high-priced contemporary art and more traditional ink-wash and other art. They have branched into wines and Moutai liquor, coins and even festival lanterns from Tian'anmen Square.

In addition to the traditional spring and autumn auctions, Chinese auction houses have been enriching their business with diverse auctions throughout the year.

"The increased number of auctions is a strategy for auction houses to 'consume' more items in different price ranges for more buyers," says Shanghai art critic Zhan Hao. "After all, auction houses reap profits through commissions. Why not? The more, the better. The regular spring and autumn auctions can't meet the demands of buyers and sellers."

For example, Guardian holds smaller Four Seasons Auctions in spring, summer, autumn and winter. The total number of auctions is 10, including two in Hong Kong.

As early as 1995, Guardian first considered multiple auctions around the year to attract more buyers, says Deng Jing, from the marketing department. "We didn't want to create the image of inaccessibility, high in the sky for ordinary people. We wanted another approach that could be more flexible and popular to attract more ordinary buyers."

It went on to sell items such as red holiday lanterns from Tian'anmen Square, priced at around 10,000 yuan each. Lanterns are still sold, though prices are higher and the quantity greater. They are still affordable.

Rongbaozhai, one of China's oldest art dealers and auction houses, also targets art lovers who can't afford big-ticket items. In March it held an auction in Shanghai titled "For the Ordinary Buyers," a first. Nearly 1,000 items were sold, including traditional ink-wash, calligraphy, jade and other antique, modern and contemporary items. Many did not have a floor price, to encourage bidding.

Besides the increase in the number of auctions of different sizes and price ranges, auction houses are beginning to sell through e-commerce.

Zhao Yong Online Auction, established in 2000, is China's earliest online auction house, according to Geng Jing, operating manager at Hosane Auction House, which owns Zhao Yong. At first the online seller focused on stamps and coins, but this year it introduced documents and related materials.

Online auction

At first collectors were wary.

"I used to buy at auctions that had previews," says local stamp collector Lin Seng. "I wasn't so sure about the authenticity of the online items."

Purchasing habits changed dramatically, however, with the rise of e-commerce and electronic commercial enterprises in China.

"Now I frequently surf Zhao Yong Online where I find what I want and watch market trends," Lin says. "When everything can be bought on Taobao or T-mall, why not try something else?"

In 2012, the trade volume on Zhao Yong Online was nearly 600 million yuan, for the first time exceeding the total of 400 million from both of its regular spring and autumn auctions.

One reason for success is the authenticity of items, which is guaranteed by Hosane Auction and certified by experts. Hosane also authenticates in other auctions.

Online sales are suitable for small items, but paintings and ceramics require closer inspection.

That's why Guardian has no plans for online auctions in the near future.

"Each auction house uses different strategies to win buyers," says Deng from Guardian.

Some houses, including Poly and Guardian, plan to open galleries and hold exhibitions and lectures to educate buyers and, thus, increase sales. Guardian plans a multi-functional new building in Beijing.

"Auction houses are gradually establishing a monopoly of the art market, and the role of galleries in the market is weakened," says Deng. "Houses mainly focus on established artists with market, while galleries discover and market new talent."

But for some Chinese collectors, galleries are just for the bourgeoisie.

"I don't buy big items at galleries," says a local collector who declines to be identified. "I am not interested in buying those Picassos-to-be. I want the art already tested by the market. Galleries really have so little influence on the big market. This is different from the West, but China is China."

Christie's, one of the global Big Two, announced last month that it would be the first international auction house to operate without a local partner on the mainland, one of the world's biggest art markets. The company won a license to hold auctions in Shanghai beginning this fall.

Christie's has been reaping big profits from twice-yearly sales in Hong Kong, a special administrative region. Wealthy mainland collectors are a regular fixture at those sales and their purchases have helped turn the city into one of the world's biggest auction centers.

Foreign auction houses are eager to break into the mainland market so they can better target buyers.

Christie's announcement outdoes its rival Sotheby's, which last year set up a Chinese joint venture with a local state-owned company Beijing Gehua Art Co.

"This autumn auction in Shanghai is quite competitive," sayas local art critic Zhan. "I am waiting to see the strategy of one of the Big Two in the city and its outcome."