Viewing the Online Landscape with AuctionWatch.com's Jeff Smith

Jeff Smith.

By Lisa W. Romano

From his post as vice president of auction services at AuctionWatch.com, Jeff Smith has an enviable view of the online auction landscape. And from this view he has observed the aftereffects of a volcanic explosion. As Mount St. Helens demonstrated, changes like this can come with little warning. But in this case, wholesale devastation - in the "old" auction world - did not have to occur to spur new growth in sellers, buyers and revenue.

"Two years ago, many auction houses didn't have Web sites," Smith points out. Now, "if auction houses aren't hosting their catalogs online, they will be. It creates accessibility to the sale and accessibility to the items."

He joined AuctionWatch.com as its 25th employee a year ago to help auctioneers make the technological transition.

"We set out to build a bridge between the online and traditional auction worlds," Smith says. "We provide the information that people in the traditional auction world need to understand the online auction world."

Such help is needed, AuctionWatch.com believes, because the effects of the Internet have been so widespread in the industry.

"If you're talking about the hammer prices or a broader buying or selling audience, it's had a multiple effect," Smith says. "Online auctions can cut down on costs, expand an auction house's buying base and streamline operations."

They can also push prices up.

"There's been a natural increase in price. Now, you've got a much larger buying population," Smith says. "I think what all traditional auction houses faced was bringing a competitiveness to the auction room. You have a much more competitive environment ... and the demand will increase prices."

At the old-line houses, he says - referring to Christie's, Sotheby's, Butterfields and Phillips of London - "there has been a substantial increase in their buying base.

When there is competition, he explains, "Things can become very hot online, and the prices can rise dramatically. Particularly in the collectibles area, you're finding that the demand for people who collect things like pottery is such that the prices that are getting realized online are very, very good."

And the online traffic has not cut into their traditional buying base, Smith reports. There seems to be enough online business for everyone, given the success of strictly online auction sites such as icollector.com, invaluable (in the UK) and artnet.com.

"Sothebys.com [has] sold $25 million in the first six months of operation already," since January 2000, says Smith. "Traditional auctions during that time were comparable to last year, so they were not affected at all. There's been no impact in terms of lost revenue for the brick and mortar."

Wolf's of Cleveland, which switched entirely to online auctions as ewolfs.com, did $10 million hammer the first half of this year, Smith says.

Although that site "has been doing very well at cultivating their traditional buying base," he notes, "they draw people because they know they aren't bidding against a house reserve. For their very first auction they announced that was what they were going to do, and it shocked the industry."

More buyers are also drawn by an increase in the number of lower-priced items offered.

"The online venues have a lower price point that they accept," Smith says, because auction houses don't have to store them. Items auctioned online are typically shipped directly from one owner to the next without ever seeing the inside of a warehouse.

In their brick-and-mortar auction house, Smith notes, "If Sotheby's had accepted every property ever offered to them, they would need warehouses the length of Long Island."

The economics of online auctions may also draw more sellers, at least to sites such as eBay.com, Yahoo!.com and amazon.com that allow direct seller-to-buyer transactions where fees are only two to five percent.

"Because of the lower fees, the sellers are netting far better than they ever have," Smith says.

So, buyers may be drawn to online auctions with the possibility of getting a bargain, aided by the lower overhead costs for auction houses, but the increased number of bidders also brings the possibility of more competition to drive up prices on coveted items.

Smith hasn't seen a change in bidder behavior in anticipating an increased supply of desirable works up for auction, thereby driving prices down.

"It was the game even before you played online: 'Do I pay this price now or wait two months and see if another one comes along?' It's a desire issue," he says.

Related to the general upward trend in prices is a shift in the business of appraisals for auctions.

"Appraisals are changing," says Smith who was a general appraiser at Butterfields and oversees AuctionWatch.com's appraisal area. "An appraiser now has to be well-versed on what you can get in an online venue as well as in a traditional auction house."

Aside from prices, other factors impact buyers' experiences online, such as the ease in locating additions to their collections.

"People who collect collectibles spend a lot of time trying to find them," Smith says. "You have to go from trade show to trade show looking for things. Now you can go online and search. It's amazing what people have done with their collections."

In addition, it's easier for buyers interested in any item - collectibles, fine art or anything between - to get information about their purchases. They can see catalogs online, and e-mail questions to the auction house, which is much easier than trying to get an in-house expert to answer questions over the phone, Smith says.

For auction organizers, putting an auction together has also changed dramatically.

"It makes it a little easier to do a theme auction now," Smith says as one example. And for any auction, "if you know where your resources are, it can all be done by e-mail."

Lisa Romano will continue her conversation with Jeff Smith next week.