MARKETING STRATEGIES by Komal Sandhu

“The Investment of Passion” in

2048

LXFM 730 | Winter 2018 PROFESSOR ALESSANDRO CANNATA BY: ABBEY DAHL SASHA NORONHA MADISON OTTENBACHER KOMAL SANDHU

Table of Contents

Company Overview

Introduction

If one had millions of dollars to spend at a Sotheby’s auction house, what would they bid on with their iconic blue paddle? In the mid 1700s that individual would have leaned towards books, or land in the 1800s. The tables turned however when art took center stage as the most desirable investment in the early 1900s, and has remained the star seller for auction houses like Sotheby’s. Now we have entered the 21st century, and although art remains a substantial component of Sotheby’s auction house we are witnessing UHNWI (ultra high networth individuals) invest heavily in other segments of Sotheby’s as well. Today, the world’s elite are developing new interests like statement properties, yachts, and ephemeral experiences. We have seen art flourish as Sotheby’s “investment of passion” from the 1900s to the present, but will it continue to reign supreme throughout this century with this shift in bidding and purchasing? Sotheby’s has 70 departments including wine, jewelry and watches, American furniture, etc. Our group has been given the task to research and find out if art will remain the “investment of passion”, or will it transform into something new that incorporates more technologies like AI and VI, invaluable land, or even bidding on large sports teams. Sotheby’s Auction House has consistently been two-steps ahead of auction trends, and the following pages reflect the company’s history, market overview, target consumer as well as our findings regarding Sotheby’s future in 2048.

Company History

Samuel Baker established Sotheby’s Auction House in London during the turn of the century in 1744. Baker was known for his affable personality, plum-colored coats, and his beloved bookshop located amongst the hustle and bustle of downtown London. It was Baker’s bookshop that gave rise to the beginnings of Sotheby’s. He partnered with George Leigh, a legendary auctioneer, whose ivory hammer remains on display in Sotheby’s gallery to this day. These two men worked together to lay the foundation of Sotheby’s as a pioneer auction house. When Baker passed away, he left the company to Leigh and John Sotheby, Baker’s nephew. The company was ran by the Sotheby family until 1861 when the last Sotheby sadly passed away. Although the traditional family ownership changed, the name of the company, Sotheby’s, prevailed, and in 1955 the company decided to move its headquarters across the pond in New York City where it still stands today. Sotheby’s went public in 1977, then joined the New York Stock exchange in 1988 making it the oldest publicly traded company on the NYSE. Sotheby’s has constantly evolved since its establishment 274 years ago in order to remain relevant and meet their customer where they are. The auction house has invested in several digital platforms, which puts them ahead of the game with their competitors, and have reaped the benefits of consistently being innovative. Today Sotheby’s is a global auction house with 80 locations in 40 countries, and private sales galleries in London, Hong Kong, as well as in New York. In order to stay ahead of their competitors Sotheby’s must look ahead to the future, and begin preparing for what their target consumer will be craving as an investment in 30 years. As long as Sotheby’s continues to practice the same values that have allowed them to become a leading international auction house they will thrive and rise above any obstacle that they may face.

PEST

The Industrial Revolution reshaped Europe’s economy in the late 18th century. This revolution pushed Europe’s transformation from being solely dependant on agriculture and trade to its most significant economic development in mass production and manufacturing. Sotheby’s not only witnessed the benefits but bore the fruit of greater wealth distribution within the growth of the middle class. However, this revolution also brought about negative impacts such as pollution and urban poverty that we still witness today. Two crucial factors that triggered Sotheby’s establishment in London were wealth and labor. The surplus in wealth distribution within the economy was initiated by the increase in agricultural productivity. The economy required a large labor supply to meet the new demands of the economy which led to urbanization towards London. The economic transformation enabled Samuel Baker to fulfill his literary passion and what followed was Sotheby’s maturing into a market leader as one of the key auction houses of the 18th century. The Industrial Revolution was the advent to free economic markets within labor, capital and trade that were not subjected to much government regulation. At the time, England conformed the least barriers to trade, enhancing free exchange of goods and services. The result was greater wealth distribution within the economy. In London the political landscape was in the midst of a radical transition during the 1700s. Although the country was ruled by George II of the House of Hanover, a constitutional monarchy, London dawned the introduction of the two-party system. The two parties included: The Tories and The Whigs. This gave the public the opportunity to openly support a party they believed in, instead of being forced to put their faith in the monarchy. This shift of lighter control from the monarchy percolated in the auction house scene, which allowed this up-and-coming trade form to flourish in urbanized London. In the past the Office of the Outroper, which was initiated in 1564 had full control of auctions. Any auctions at this time in history held by anyone other that the person holding the outroper’s position violated that officer’s legal monopoly on all public sales, and could be fined or punished. The opinions and influence of the outroper position fluctuated over the years it remained prevalent in London, and at last in the 1700s it was deemed an uncredible. This gave rise to private auction houses like Sotheby’s, and this was the beginning of an incredible legacy.

Sotheby’s solid position as market leader was boosted by the emerging middle class as industrialization moved the labor force to high productivity urban jobs. More jobs led to an increase in disposable income that was spent on enriching one’s quality of life. Education was a key component in urbanization that aided Sotheby’s to thrive and to build a community within the local coffee houses of London where the upper middle class gathered to debate philosophy, literature and politics.

PEST

It was the upper middle class social context of London in the 1700s that drove the success of blossoming auction house market. When these elite London citizens weren’t hunting, experiencing theater, visiting spas, or watching public executions they spent their higher disposable incomes at private auctions at local coffee houses bidding on books, manuscripts, and coins. Unfortunately, the lower class did not enjoy this lavish lifestyle. Instead, they were too busy working long hours in deplorable working conditions, while living in cramped, dirty apartment buildings in the heart of the city. There were even issues arising in the rural areas of London. The introduction of the Enclosure Acts meant that the government drew border lines in communal land that had been amongst small farmers for generations. The small farmers could not sustain themselves or their families with such a stark reduction of land, so they were forced to move to the city and find jobs during the Industrial Revolution. The lower class may not have been the high bidders in the cafes, but they were becoming increasingly literate, which was traditionally a luxury for soley upper class. The coffee houses were open to the public, so all were welcome regardless of class and income, which led to a lively communal meeting space, where private auctions houses, like Sotheby’s, experienced their early beginnings.

The Agricultural Revolution and Enclosure Acts of 1700s in London created a favorable climate for industrialization. More factories being set up led to a drop in food prices as surplus goods was now easily available, leading to less spending and more saving. This disposable income was spent on buying manufactured goods at cheaper prices. Industrial advancements gave birth to a variety of jobs and farmers migrated from rural to urban areas in search of wage- labour and a better standard of living. The increased wealth of businessmen helped them in providing funding for investors, who were able to come up with new, beneficial innovations including auction houses. New clientele was created through migration and with this move people settled in their own houses. Sotheby’s benefited by the rise of educational advancements and budding art collectors. Combined, these changes had a positive effect, with people now spending on coveted pieces at Sotheby’s.

Art & Literature

The art and literature scene was brought to life by Charles I in the mid 17th century. He was known in London to be the first art collector of the area, and when he was executed the government realized there was not a proper way of selling off his extensive collection to the public, giving a reason for auction houses like Sotheby’s to exist. Moving on to the 18th century when the Enlightenment encouraged Europe’s population to think philosophically, and read more. More reading meant more books circulating in London, which allowed Samuel Baker to collect libraries of famous aristocracy and nobles then auction them off in the cafes. These libraries that the elite collected were a reflection of status because literacy was such a crucial sign of one’s intellect. Samuel Baker was known to have auctioned off libraries from Napoleon, Dukes of Devonshire, York, and Buckingham. Sotheby’s focused on auctioning books and manuscripts during the 1700s, but this changed in the 1900s when art suddenly stole the spotlight, and has been a core auction product of Sotheby’s since that time. Art is a subjective and opaque medium that has ample intrinsic value as well as symbolic value to buyers/collectors. When an UHNWI (ultra high networth individual) spends millions on a sculpture, photograph, print, or impressionist painting this purchase has the potential to reflect that individuals taste, aesthetic, or style. Art also has an invaluable quality that is timeless. In comparison to other purchases that may decrease in value over time, fine art tends to almost always increase in value. Whether it is a Matisse, DaVinci, or Whistler to have any or all of these works of art displayed in one’s home is a statement of status, wealth, and personal values.

Current Status

Sotheby’s has come a long way since its inception in 1744. Sotheby’s became a public company in 1977 and is currently valued at $805 million in terms of revenues as per their annual report 2016. It recently acquired AI company “Thread Genius” in 2018 which speaks to the fact of Sotheby’s commitment to its key strategic points and how it’s concentrated on achieving those objectives.

Mission Statement

“I intend to focus on expanding the 271 year old auction house’s brand and formulating a five-year plan to boost growth and opportunity.” – Tad Smith, CEO Sotheby’s 2015

This statement was made by the CEO Tad Smith, on being elected the president of the company in 2015. Sotheby’s doesn’t have a mission statement per se, but this particular statement highlights the five year vision for the company. Sotheby’s annual report highlights these strategic key points that the company believes and operates by. 1. The development and implementation of a compelling growth strategy 2. Embracing technology more effectively, both internally and through their client-facing products 3. The effective allocation of capital 4. The attraction, retention and development of talent

SWOT

Strengths • RM Auctions partnership with Sotheby’s in 2017 to become RM Sotheby’s and hold title to be #1 auction house for investment - quality automobiles • Growing working capital surplus and adequate cash reserves aides Sotheby’s short term business operations and facilitates capital expenditures

Opportunities

• Building brand equity that speaks to 360° customer lifestyle with unparalleled service

• Booming consumer spending patterns in China especially in art and collectibles

• Internationally renowned and titled # 2 auction house since 18th century

• Global economy stability expected to grow by 3.1% in 2020 • USA currently 29.5% of Sotheby’s market share by eliminating estate tax enhances liquidity in the art market

• Sotheby’s 300 worldwide specialists unmatched understanding of their fields and the global current market

• Global auction sales of contemporary art grew by 14% in 2017 after two years of contraction

• Domenico De Sole appointed chairman and Tad Smith appointed president and CEO in 2015. Restructuring resulted in 15% increase in auction and brokerage sales

• Overcome competition by diversifying brand expertise in growing trends of automobiles (RM Sotheby’s), jewelry (Sotheby’s Diamonds) and fine wine (Sotheby’s Wine)

• Sotheby’s welcomed the digital age. Bought Thread Genius (AI start up) and collaborated with ARTMYN (interactive 5D)

Weaknesses • Sotheby’s reported a 16% decline in operational performance in 2016, reducing its overall profitability • Increasing debt burden impacted operational performance as earnings were diverted to debt obligations • Sotheby’s raise buyer’s premium for the third year in a row to 17% in 2016

• Increased clientele introduced by Art Agency, Partners

Threats • Exposed to global foreign exchange uncertainty operating internationally • Lack of global trade regulations leads to lack of transparency to public eye • Political unrest in respective operating countries

• Stock price fluctuations,dropping by 13% in Q4 causing stakeholders to get restless

• Christie’s out performed Sotheby’s to become the first international auction house granted a license to operate independently in China

• Second attempt partnering with eBay raising questions on elite market positioning

• Arbitrary change in consumer passions towards art and collectibles

• President and CEO Tad Smith not known to be an art or auction connoisseur

• Consumer reluctance to buy art and collectibles online as they appreciate the tangible experience

Kapferer’s Prism

Aaker’s Matrix – Brand Identity Model

Sotheby’s as a Product

Sotheby’s as an Organization

Sotheby’s as a Person Cultured Exquisite Taste Collector Emotional Sophisticated

Sotheby’s as a Symbol

Physical

Personality

Art Antique Auction House Historical Architecture Sophisticated Logo Blue Paddles Wooden Podium and Gavel

Intelligent Extrovert Affable Competitive Confident

Relationship

Culture

Trustworthy Committed Symbiotic Respectful Intimate

Cosmopolitan Prestigious Excellence Innovation CRM

Reflection

Self-Projection

Market Leader Unique Reliable Ingenious

Original Wealthy Assured Sentimental

Internalization

Specialist Connoisseur Global Honorable Transparent Timeless

Externalization

Kellerâ&#x20AC;&#x2122;s Pyramid

Resonance

Sense of community, loyalty, engagement, emotional attachment and powerful brand equity

Judgements

Prestige, credibility, supreme quality, trustworthy, market leader, unique and invaluable investment

RESONANCE

Feelings

Powerful, successful, superiority, invincible, sense of achievement, enhanced social status and sentimental value

Performance

JUDGEMENTS

FEELINGS

One of a kind, antique pieces, leading market auctioneers, prominent reputation, unparalleled and innovative customer service, specialist dealers and connoisseurs of art

Imagery

Pioneers, elite, loyal, outstanding, 300 years of heritage, unique pieces, a world of desire and wealth

PERFORMANCE

Salience

Luxury auction house with 300 years of expertise and excellence. The exclusive middleman between elite buyers and sellers of art and collectibles.

SALIENCE

IMAGERY

Analysing the Brand Strategy

What is the unique revelation?

“Expertise”

Samuel Baker’s expertise began with auctioning books. Back in the 1700s London, literacy was a way for people to engage in community and books were considered a luxury as they were hard to come by. Sotheby’s unique revelation has always been staying two steps ahead of the game than everyone else. This expertise was admired and continuously pursued by the successors of the company. It upgraded to selling coins and stamps in the mid 1900s. When Sotheby’s shifted from Wellington Street, London to New Bond Street New York, it embraced selling antique art pieces, being the center of the art world and also what Christie’s was selling. It has carried on that legacy and today has embraced online selling as a major part of their customer experience and selling. Sotheby’s is always looking towards the future, and that has definitely paid off in the last three centuries. Based off on the research and future trends and Sotheby’s drive to be the first in the game, we’ve discovered our next investment of passion in the luxury auction and brokerage market.

What is the belief system?

Iconic Symbol: Ever since its inception, Sotheby’s has believed in holding

upto certain standards of selling only the best and iconic pieces of arts, antiques and collectibles. They’re the pioneers at the hub of the auction world, dealing with luxury art pieces since the 18th century, which speaks to the long-standing heritage of the brand having delivered only the best.

Masterpieces:

Sotheby’s is considered a status symbol for selling luxury antiques and real estate. Experts in selling the best and one-of-a-kind masterpieces, they’ve earned the trust and reputation of even new buyers in the market. Sotheby’s is transparent in terms of pricing and the legitimacy of the pieces they sell, earning the trust of their consumers.

Customer Service:

Customer service has always been core to Sotheby’s. They have evolved over time and made it more accessible for their consumers to interact with them. Being an auction house which majorly sells art, possessing a greater ephemeral value than functional, their customer service is exceptional de facto. They previously had catalogues and through their continuous evolvement, they’ve invested in making it an experience for their clients be it bidding online through BIDnow or collaborating with Sotheby’s Mei Moses to authenticate the art pieces. Moreover, their talents are extremely knowledgeable and experienced connoisseurs who speak the language of art.

Prestigious Provenance: Considered one of the most coveted auction

houses selling elite and luxurious collectibles, Sotheby’s came into being through selling antique books and have been accepting of newer trends- they’ve evolved with their consumer and market demands, selling stamps and coins mid 19th century, art and collectibles currently. At a time when other auction houses were closed down, even Christie’s refused to accept changes, Sotheby’s continued delivering its best, building on that goodwill and prestigious reputation and continues to do so.

Innovative and Evolution: Sotheby’s name has always been synonymous

with innovation and they constantly believe in evolving. Even back in the day when most auction houses refused to accept and evolve with constant changes, Sotheby’s never lagged behind. Christie’s, Sotheby’s major competitor, was slow as well but Sotheby’s has always been a game changer. To this date, they believe in incorporating new changes like the launch of online initiatives such as Sotheby’s Museum Network and a growing series of online-only sales.

Unique Experiences: For Sotheby’s, it’s not only about selling art, but

providing a unique platform for experiences revolving around arts and antiques. Samuel Baker himself was an avid believer in connocting enticing advertising campaigns and authoritative catalogues. A series of recently celebrated auctions has secured the company’s reputation for staging groundbreaking events. Sotheby’s currently hosted arts and collectibles by David Bowie’s personal collection and an exhibition in collaboration with Drake.

What are the brand rituals?

Catalogue & Magazine

Sotheby’s has built its compelling brand equity of exclusivity in elite art and collectibles by enticing the customer prior a public house auction with a published print and online edition of a catalogue. The catalogue itself is a piece of art, composed of grand illustrations and scholarly research that makes it an invaluable addition to one’s collection. The catalogue highlights factual information regarding lots offered for sale, listing the name of the artist or maker, a thorough description of the art or object, the year it originated, history of its ownership, exhibitions in which it has appeared and publications in which it has been documented. In addition to the catalogue, Sotheby’s holds title to being a key influencer to reach a uniquely powerful group of the world’s wealthiest individuals. It publishes a monthly magazine capturing an exclusive world of beauty and the cultural sophistication that transcends the everyday norm for the world’s elite. The magazine’s reach extends across continents circulating 50,000 copies in 111 countries worldwide. Sotheby’s magazine also gives luxury marketeers a platform to connect with the world’s most affluent and acquisitive customer in the established capital cities.

A ‘Life of Luxury’ Event

Sotheby’s HQ in New York has curated an extraordinary week of auctions and events celebrating jewelry, watches, cars and fashion. The event is co-sponsored by Sotheby’s International Realty and known to be an imperative event to tag on the HNWI’s calendar. The recent event in December 2017 was co-hosted by Oscar de la Renta’s creative directors for their talent and taste to elevate and bring to life the vision of Sotheby’s Luxury and Lifestyle Division.

White Glove Sale

A white glove sale indicates a rare occasion in the auction world when every single lot sells for a 100% sell through rate. To celebrate the recherché event, Sotheby’s uncorks a flood of champagne at the auction. In 2016 alone, prestigious private sales surpassed expectations to include three 100% sold auctions.

What is the distinctive lexicon? Sotheby’s is an icon in the world or art and collectibles. It is known for its fine art auctions and private sales, both setting auction records and representing legendary sales such as David Bowie’s personal art collection. Sotheby’s with its honorable pool of 300 specialists assigns a dedicated valuation manager and an expert specialist to evaluate the collection. For this they first prepare a proposal for each potential item for sale. Each unique proposal outlines the collection using marketing collateral, catalogs and photography to showcase the pieces for sale. The collateral is presented in a proposal box designed to each client or consignor. The standard proposal case is 9 ⅞” x 12 ¼” hinged box, designed to encompass all printed materials and sometimes an iPad if digital material is application to the collection inside. The Sotheby’s design team incorporated the proposal box in 2007. The proposal box designed to personify the elegance and discreet exclusivity of Sotheby’s with its crisp clean facade.

“The Proposal Box”

Market Analysis

Agency Commission & Fees = $671 Million

Auction = $607 Million Private Sales = $52 Million Other Agencies = $11 Million

Market Overview

Sotheby’s operations are primarily segregated into three main segments- auction, dealer and finance. As per their annual report, Sotheby’s generated total revenues of $805 million in 2016. This significant revenue number is indicative of Sotheby’s considerable market domination. Out of their overall revenues, the agency commissions and fees sector generates the highest percentage of sales which amounted to $671 million. Their services range from corporate art services to private sales. This division is further broken down into the auction, private sales and agencies sector. Auction sales are best way to establish an authentic value of rare and unique items. It is also Sotheby’s most popular revenue generator and in the year 2016 saw sales of $607 million. Revenues from private sales sector contributed towards $52 million followed by the agencies sector which generated $11 million. Recently, the private sales sector has seen a considerable rise of 3% in revenues as compared to public auctions. A major factor for this was the rise in online auction sales. Inventory sales are properties which are guaranteed to sell at an auction but fail to meet the bid price lower than the reserve price of the antiques, which are then acquired by the Sotheby’s Financial Services (SFS) through opportunistic acquisitions. This division accounted for $62 million in 2016. The other section sales only accounted for $17 million of revenues.

Inventory Sales = $62 Million

Financing = $52 Million

Other = $17 Million

Sotheby’s Revenues for 2016 Total Revenues = $805 Million

Retail Businesses

Sotheby’s is considered the global art market leader. Its three main retail businesses comprise of Sotheby’s Art Market, Sotheby’s Wine and Sotheby’s Diamonds. In terms of the distribution of the market share geographically, the U.S. holds the top position with 29.5% of the market share. The UK is ranked second at 24%, followed closely by China at 18% of the market share. This statistic has remained constant over the past decade and highlights the strong combined domination in the global auction market. Sotheby’s Wines sales has seen their biggest consumer market in New York with $34 million revenues. This is succeeded by the consumer market in Hong Kong with revenues of $22 million. London is ranked third generating revenues of $17 million. Sotheby’s Diamonds generated the highest revenues for jewelry auctions accounting for $551 million. According to Forbes, Sotheby’s Diamonds were slightly behind Christie’s in sales, but led the jewelry market by selling the highest priced gemstone, a CTF Pink Star, at the Sotheby’s Hong Kong auction house for $71 million.

Online Sales

Being a leading auction house, Sotheby’s is constantly looking to elevate themselves in all aspects. Today, modern innovations like broadcasting sales over the internet and accepting bids online in real time has made participation in auctions easier. Sotheby’s and Christie’s in 2016 hosted a series of “online-only” sales as a way to attract new consumers worldwide. Sotheby’s generated $155.5 million of revenues from their 16 online- only sales in 2016. An interesting feature is that 45% of these online buyers were first-time buyers at Sotheby’s and an average of $10,000 lots were sold online. Lots are single pieces or an individual group of items sold as one unique item. Approximately, 20% of these online buyers then subsequently proceeded to participate in Sotheby’s live auctions. This statistic highlights the changing consumer mindset and their willingness to experience online purchases. For making the online bidding and buying process easier for consumers, Sotheby’s recently removed the Buyer’s Premium price, which is a price above the final bidding price to acquire the piece. This price typically went to the auction house and not the seller. Introduction of technology at a deeper level for Sotheby’s will help streamline and add efficiency to the art auction and buying process; it will also add transparency and ease of access to it’s clients. According to the Art Basel Report 2017, online art sales are estimated to increase to $9.18 billion by 2021 and this speaks to Sotheby’s and Christie’s decision to increase the online-only sales to provide a platform for new buyers, especially the future generators of art collectors and antiques. As per the current scenario, online only sales dominate the market for products but is believed to exponentially rise in the subsequent years.

Market Analysis

Size of the Market

Sotheby’s and Christie’s together hold a market duopoly and dominate the global auction sales business, As per the Art Tactic Report, the total global auction sales increased by 25% to $11.21 billion in 2017 (excluding online sales). This highlights the increasing market domination for growing auction market sales. Christie’s, Sotheby’s and Phillips have been the core long- standing players in the market. Such is their power that any antique or collectible sold through them holds the highest legitimacy value. Christie’s saw a revenue growth of 34% from 2016 to $5.89 million in 2017, followed by Sotheby’s at 13.1% growth to $4.69 million. Phillips saw a the highest percentage of growth rate at 28% although the revenues generated was only $624.4 million. Arts and antiques are primarily sold through private sales (including dealers and other agents) which account for 53% of the total market sales and the public auctions which accounted for 47% of the market share (as per the Art Basel Report 2017). In the recent years, dealer sales have risen by three percent. This is due to ease of access to acquire these pieces and transparency, especially for the first time buyers. Galleries remain the most popular channel in sales by dealers followed by art fairs.

Market Analysis Potential Opportunities, Growth & Future Trends

The worldwide wealth in 2016 was estimated to be at $256 trillion, a growth of 30% from 2010. This is expected to rise by 30% by 2021 (Credit Suisse’s Global Wealth Report). This aggressive expansion is being driven by the upper class in up-andcoming areas who are willing to invest in these precious arts and antiques. This has had a significant increased investment especially in the jewelry and art market in Sotheby’s auction house. This group has been predisposed to hold more of their wealth in assets like jewelry and fine art, which is where Sotheby’s is really winning. This speaks to the fact that the pleasure that these investments provides to these UHNWI’s is the main reason that they invest in these beautiful and coveted pieces. Even though the most epicurean collectors would prefer their treasures to grow in value over the period of time. This is something that the future consumer would like to build towards. The advent of these new players in the market has pushed Sotheby’s into new markets outside the traditional auction markets of New York, London and Hong Kong. Sotheby’s now holds auctions with regularity in other upcoming areas like Dubai, Doha and Beijing. The dynamics of the market will feed off of itself, as broader acceptance of artwork can be seen as a long term investment. This in turn leads to greater price transparency for buyers and liquidity terms, that propels sales. Sotheby’s acquired ThreadGenius to legitimise the brand sales which speaks volumes to the new lot of future consumers who’re tech-savvy and buy online. The coexistence of traditional auction houses with their online counterparts is the way forward. Due to digital age, the market for auction environment might become less stringent and auction commissions might weaken. As a consequence, sales by private dealers would grow further. The rising demand for these luxurious items of ephemeral value and the number of lots will be bound to increase in the future. Digitalization will have a major role going forward in the art and auction market. Client information and relationship management systems are antiquated and implementing better client contact points and getting proverbial paper-intensive auction house to better standards will set up Sotheby’s for success. Modifications in the marketing, registrations and contracts and building a credible approach to handle both online bidding pooland live auction sales,will definitely lighten the cost structure at the physical venue. The presence of this firm within the market can’t be paralleled by most local auction houses and carry forward that goodwill. This brand goodwill would keep on building in the future.

Competitive Analysis

COMPETITIVE LANDSCAPE FOR AUCTION HOUSES

The auction house and brokerage markets competitive analysis chiefly differs from other industries like fashion and service because it functions as a duopoly. A duopoly occurs when two companies dominate a particular market. In the case of auction houses the two companies that control the market are Sotheby’s and Christie’s. These two auction houses even function differently from traditional duolopolys like Coke and Pepsi who typically race to cut prices to appeal to their target consumer. Contrarily, Christie’s and Sotheby’s compete in raising their guarantees to obtain those blue chip paintings. For those who are unaware guarantees are the definitive price that the seller receives regardless of how the lot does on the floor. The auction houses will steeply rise the guarantee if it means their auction will make headlines with that particular piece under their roof. Another term to clarify is a “blue chip painting”. When a painting is given this title it means that it’s value will only grow in time regardless of the economic climate. Examples of blue chip artists are Matisse, Picasso, or Monet. The duopoly can be further reaffirmed by Christie’s and Sotheby’s 2016 fine art revenues in comparison to other international auction houses. Christie’s came out on top earning 3.05 billion in fine art revenues and Sotheby’s earned 2.89 billion. The next revenue under those two auction houses was Poly International coming in at .99 million. Sotheby’s and Christie’s combined control one third of the auction market, which just goes to show how much their current and potential customers trust their businesses. Their heritage plays a substantial role in their continuing success. Now there are other traditional auction houses like Phillips and Bonhams both have been around since the 1700s, but neither are of the same caliber of Sotheby’s and Christie’s. Other than traditional auction houses the online auction market must be evaluated as well. Artsy, Artnet as 1stDibs ranked second, third, and fourth under Christie’s and Sotheby’s for the most successful online auction platforms in the 2017 Hiscox Online Art Trade Report. What is interesting to point out for in this context is that although Christie’s and Sotheby’s did not originate in the online realm, they have quickly adapted to the social status-quo, and have established themselves as leaders in what used to be unfamiliar territory. It will be interesting to see which online art platforms with merge together to be more powerful, and how Sotheby’s will keep innovating to remain in a top position in this sector. Sotheby’s is known to always rise to a challenge, and even though it may be a market leader, Sotheby’s never slows down but continues to innovate to trump their competitors.

Competitive Analysis

vs. DIRECT COMPETITORS

INDIRECT COMPETITORS

Core Competencies

1. Heritage (oldest auction house & oldest U.S. company on New York Stock Exchange)

5. Strategic Thinking (understands strengths and weaknesses in comparison to competitors)

2. Unparalleled access to capital & to world’s richest HNWI

4. “Fire” -Innovative -Exceed customer expectations

3. Strong brand equity allows them to cater to their customer through a diverse brand portfolio

Since 1744, Sotheby’s has established itself as the oldest and most prestigious auction house in the world. The company has the reputation of being two steps ahead of the game, we this exemplified as they are the first and only auction house to go public back in 1975. This makes Sotheby’s the oldest auction house on the New York Stock Exchange as NYSE:BID. The 300 years of foundation has given Sotheby’s the competitive advantage to unparalleled access to not only capital for company growth, but have also developed an expansive dossier of the worlds UHNWI’s. Once Sotheby’s developed their core customer base they strategically competed against Christie’s by catering to the complete lifestyle of their consumer, as well as built their credibility through the connoisseur. With heritage, a loyal customer base, and connoisseur credibility this international auction house ensures that they are constantly innovating to solely benefit the customer as well as their experience within Sotheby’s. Given the duopoly market condition against Christie’s, Sotheby’s goes the extra mile to be fully transparent with their consumers, be it the CTF PINK STAR or Picasso’s masterpiece of Femme Assise.

Key Success Factors in the Auction House Market

1.Expertise

Valuation Experts: Sotheby’s prides itself with their 300 elite group of specialists who are experts in their respective fields. They are often scholars with distinguished careers. In addition, Sotheby’s offers a premium education devoted to the study of art as a brand extension of their expertise. Their university gives the opportunity to those who aspire to represent the Sotheby’s name. These core components of its business model only further highlight Sotheby’s mastery in the customer’s perception.

Art Valuation: Each collection that is received by Sotheby’s is appointed a dedicated valuation manager and specialist team to undertake the extensive process of evaluating the collection. With this they also guarantee the honorable level of service with the strictest policy of confidentiality. This discrete luxury service is accepted around the world by government agencies including Her Majesty’s Revenue and Customs in the United Kingdom and the Internal Revenue Service in the United.

2. Credibility

Unequaled Brand Association: There are ample international auction houses, but to this day Sotheby’s holds its market leader position by catering to its customer in over 70 categories. Sotheby’s has developed its powerful brand awareness by venturing into numerous industries obtaining it’s strong brand equity. This culminates to Sotheby’s brand association as their true customer perceives them to symbolize the epitome of meta-luxury.

Diverse Brand Portfolio: Sotheby’s encompasses financial services, collection advisory services, private sales opportunities in 70 categories, and in two retail businesses within diamonds and wine. Their most recent strategic partnership with RM Auctions now makes them the world’s largest auction house for investment quality automobiles. Sotheby’s now has a global network of 80 offices in 40 countries catering to customers in 111 countries. This diverse brand portfolio caters to every investment of passion desired by the UHNWI’s lifestyle.

3. Heritage

EXPERTISE Valuation Expert Art Valuation

CREDIBILITY Unequaled Brand Association Diverse Brand Portfolio

HERITAGE Market Leader Position Luxurious Auction Environment

Market Leader Position: The duopoly between Sotheby’s and Christie’s accounts for one third of the entire auction market. In spite of Sotheby’s varied rank since the 1700s they have established a sense of confidence and leadership with their customer. They are known, not only for their expertise in every sector but being market leaders in playing mediator for blue chip pieces such as the Edvard Munch, Girls on the Bridge, 1902 and the De Beers Millennium Jewel 4. Luxurious Auction Environment: The hustle and bustle of an auction can seem overwhelming as it is open to the public and the passionate connoisseur. However, Sotheby’s ensures that each step from the initial bid to the final hammer price is given the utmost attention to detail that speaks to the customers prestigious lifestyle.

Future Trends

“For those who say the online market has had its day–it hasn’t even had its morning yet, it’s still waking up.” - Robert Read, Head of Art and Private Clients, Hiscox 2017 Online Fine Art Report

Future Competitive Landscape

The 2048 competitive landscape for Sotheby’s will remain consistent with the traditional auction houses like Phillips, Christie’s, and Bonhams. In 30 years the key success factors (heritage, expertise, and credibility) that make these auction houses market leaders in this industry will only strengthen in time. It will be interesting to witness how the online auction market will influence the traditional auction business model. Currently, in terms of online presence and revenues Christie’s and Sotheby’s take first and second place according to the Hiscox 2017 Online Fine Art Report, but strictly online platforms like Artsy, ArtNet, and 1stDibs fall right behind the duopoly. Competition is strong with new players like Paddle8 and SaatchiArt, but in the future we see how all these brands consolidating to potentially form an online duopoly auction realm.The online auction market is growing exponentially with each year. However, research highlights online purchases focuses on small ticket items in comparison to the public auction house setting. This reinforces the consumer spending behaviour that when bidding millions, be it on a art piece or collectable the consumer is still in the mindset of demanding a tactile experience in person that legitimizes their purchasing decision. Sotheby’s has recently acquired ThreadGenius, an Artificial Intelligence Startup that practices recommendation technologies, as well as image recognition. They aim to weave the ThreadGenius technologies within their online platform, so the service will recommend pieces of art to the buyers based on their personal taste. This acquisition speaks to Sotheby’s commitment to innovation and meeting their consumer where they are in order to remain relevant in the auction world. The traditional and online auction market is evolving, and we are in the midst of witnessing this shift in purchasing behavior. As long as Sotheby’s explores and invests in different technologies to enhance their online platform, they will remain a market leader for traditional houses, and we foresee them excelling through the online channel.

Future Trends

Future Core Competencies

In 2048, Sotheby’s core competencies (heritage, unparalleled access to capital and the world’s richest HNWI, strong brand equity, innovation, and transparency) will prevail the same as they are today, but each competency will gain in value much like their competitive analysis. The core competency that we see the most investment and growth in will be innovation. The omnichannel experience will be expected by year 2048, and Sotheby’s omnichannel must stand out from all the online clutter. An example of a fascinating technology highlights Sotheby’s beginning steps to an omnichannel presence is BidNow. The BidNow technology allows customers to bid in RealTime while watching an auction online blending the traditional and online experience. Virtual reality will be the next step to fulfill the omnichannel and in 2048 will be a fundamental part of the auction business. Sotheby’s has consistently been innovative since their establishment, and as long as they carry out this core competency in the future they will keep their top tier auction house status.

Future Key Success Factors

1. Expertise: Sotheby’s competitive advantage in valuation will not only comprise of their strong brand equity of credibility, but they will overcome their weakness of market regulations by establishing substantial relationships with international governments to comply with trade regulations. This will ensure Sotheby’s successful growth to all international markets and give focus to both their primary and secondary consumers. 2. Credibility: Sotheby’s policy of dedicating each piece a valuation manager and specialist will in the future be cross trained to ensure their scholarly market knowledge is applied not only to the traditional auction houses, but also giving equal focus and integrity to the online auction platform.

3. Heritage: To clearly maintain the distinction and exclusivity of their extensive clientele dossier we foresee Sotheby’s prioritizing their attention to detail to the private sales segment. Today we are witnessing this library of consumer characteristics as a key success factor to always remaining two steps ahead of the consumer’s trends within their investments of passion. In order to maintain their competitive edge, Sotheby’s will excel in the private sales segment that will speak to every intangible ephemeral service desired by the collector and the connoisseur in 2048.

Future Trends

Future Trends in the Auction Market

Sotheby’s auction house has a long-running reputation of accurately foreshadowing what the investments of passion will be within the next ten, twenty, or in our case thirty years. As of 2018, there is a shift towards ephemeral purchases by the target consumers. Ephemeral purchases indicate a product or service that lasts for a small amount of time like wine or vacations. In the past Sotheby’s customers bidded more on material objects like a Birkin bag or a Cartier ring, but we are witnessing a shift in consumer behavior, in that they crave intangible experiences over tangible goods. Of course, they still want the prestigious status symbols of art, furniture, and jewelry, but the market trend is racing towards purchases that act as either a literal ephemeral product or a product that can lead to an ephemeral experience, like a jet or yacht. We divided the investments of passion for 2048 into two categories: the ephemeral investments and the lasting investments. For the ephemeral category we have included wine, vacations, and experiences through AI or VR. The 2017 Wealth X Report highlighted the lasting investments that we predict to be statement properties, sports teams, yachts, jets, art, and jewelry & watches to be the 2048 investments of passion. The products and services will either be ephemeral or avenues that will lead to an ephemeral experience.

Sotheby’s “Investments of Passion” in 2048

Ephemeral

Semi-Durable

Durable

Wine Luxury Travel Virtual Artistic Explorations

Yachts Jets

Art Statement Properties Sports Teams Jewelry & Watches

Target Market

Target Market Overview

Sotheby’s key success factors of expertise, credibility and heritage speak to a wide audience as they excel in art and collectibles. In order to analyze Sotheby’s primary and secondary archetypes, we first highlighted their key market characteristics of geographic, demographic, psychographic and behavioural traits to derive four key profiles. These profiles will ensure to streamline Sotheby’s future marketing strategies to enhance their brand equity.

Primary Target Market

The primary target customer for Sotheby’s blends between two key segments between the UHNWI and the HNWI. The UHNWI are customers with investable assets of at least $30 million, where as HNWI are profiled with investable assets of $1 million and above. This purchasing power excludes personal assets and property such as a primary residence, collectibles and consumer durables. In Sotheby’s 300 years of market expertise they have built an indestructible relationship with their primary customer. The target market comprises of the collector and connoisseur and we see Sotheby’s catering to their tastes through their diverse brand portfolio. Due to the dynamic nature of their psychographic and behavioural traits it is extremely important for Sotheby’s to always be two steps ahead to foresee the investment of passion.

Secondary Target Market

Sotheby’s secondary target customer forms the aspirational collector and connoisseur. The key segmentation of the archetypes is between the UHNWI introduced into the market by new wealth accumulation and the growing millennial demographic. The new wealthy customer falls in the same geographic and demographic traits as the primary customer but differs in psychographic and behavioural traits. In comparison the millenials of the 21st century today have a higher disposable income than past generations and we see this number increasing as they gain buying power within the auction market. Research on their spending behaviour indicates in 30 years they will be part of Sotheby’s primary market and hence moving forward this segmentation is important to sustain their strong brand equity.

Primary Tarket Market

Billionaire Overview

Ivy League Alumni, Jonathan 58

The Wealth X Billionaire Census Report 2017 highlights the current and prospective profiling characteristics of the 1% ultra wealthy customer who mirrors Sotheby’s primary customer profile. The UHNWI’s makeup only 0.02% of the 1% global adult population made up of 2,397 billionaires, who have a total net worth of $7.4 trillion.

Geographic

The market is dominated by three key players; Europe 32%, North America 27% and Asia 25% accounting for 84% of the market share. The primary contributing countries within these continents are only growing in population and wealth in the U.S. In terms of the highest populations cities in the world, leading is New York with 102 billionaires, Hong Kong 72, Moscow 71, London 61 and San Francisco 60.

Demographic

Gender: Male: 89% // Female: 11% Average Age: Male 59 // Female: 57 Education: Ivy League Alumni Average Net Worth: $2 billion Income Segments: Self-made 55% // Inherited 13% // Mix of both 32% Industry Professions: Finance / Industry Conglomerate / Real Estate / Manufacturing / Technology

Psychographic: Top 5 Interests

Male: Business / Sports / Philanthropy / Finance / Outdoors Female: Philanthropy / Business / Art / Sports / Family

Behavioural

Spending Habits: Cars / Wine / Coins / Jewelry / Art Top 5 Objects of Desire: Motor Yacht / Sailing Yacht / Private Jet / Race Horse / Sports Team Media Usage: Facebook 71% / Google+ 37% / LinkedIn 31% / Twitter 16%

*Knight Frank The Wealth Report 2017

*The Wealth X Institute UHNW Interests, Passions And Hobbies Study 2017

• Net worth $4.7 billion • Self-made / comes from money • Married with 3 kids • Lives in New York, NY • MBA, Harvard Business School • Managing director at Goldman Sachs • Homeowner to 3 properties (NY, Dubai & Monaco) • Children study at boarding school, Le Rosey in Switzerland • Passionate collector of art, watches & cars • Spiritual but not religious • Donates $500,000 to charities every year • Highest used technology medium - mobile & laptop • Connected to peers through LinkedIn & Twitter • Buys collector items for aesthetic & symbolic value • Part of exclusive clubs - Soho House & CORE:club • Takes family vacations through the four seasons charter

INCOME

Money Machine WEALTH

Financially Free TIME

78 Balanced

LEVEL OF KNOWLEDGE

Luxury Native PERSONAL PREFERENCES Superstar

Millionaire Overview Conventional Connoisseur, Wu 39

The Wealth X Ultra Wealth Report 2017 highlights the current and prospective profiling characteristics of the 226,450 millionaires worth $27 trillion. The 1% ultra wealthy comprise the broader spectrum of Sotheby’s primary customer profiles. Despite heightened geopolitical instability, the global ultra wealthy population is forecast to rise to 299,000 people by 2021.

Geographic

The market is dominated by three key players; North America 36%, Europe 28%, and Asia 26% accounting for 90% of the market share. The primary contributing countries within these continents are all growing in population and wealth. In terms of the highest populations cities in the world, leading is New York with 8,350 millionaires, Hong Kong 7,650 , Tokyo 6,040 , Los Angeles 4,600 and London 3,630.

Demographic

Gender: Male: 87% // Female: 13% Average Age: Male 45 // Female: 42 Education: Ivy League Alumni Average Net Worth: $5 million Income Segments: Self-made 66% // Inherited 12% // Mix of both 22% Industry Professions: Finance / Manufacturing / Technology / Not-For-Profit Organizations / Entrepreneurs

Psychographic

Top 10 Interests: Philanthropy / Sports / Education / Outdoors / Art / Aviation / Public Speaking / Politics / Music / Meditation

Behavioural

Spending Habits: Cars / Wine / Jewelry & Watches / Art / Property Media Usage: Facebook 71% / Google+ 37% / LinkedIn 31% / Twitter 16%

*Knight Frank The Wealth Report 2017

*The Wealth X Institute UHNW Interests, Passions And Hobbies Study 2017

• Net worth $2.1 million • Self-made • Single • Lives in London, UK • MBA from King’s College London • Entrepreneur • Homeowner to current property (Bond St., London) • Financial investments-rents overseas properties (Dubai & Switzerland) • Passionate collector of jewelry , art, wine & coins • Engages in philanthropy through her business • Technology focus through all possible mediums • Connected to friends and family through Facebook & Instagram • Buys collector items for historic value • Strongly engaged in local politics and community • Ticks off a bucket list destination once every year

INCOME

High Flyer WEALTH

Financially Independent TIME

40 Busy Bee

LEVEL OF KNOWLEDGE

Luxury Native PERSONAL PREFERENCES 60 Understated

Secondary Target Market

New Wealth Overview

New Money, Wang 26

The Wealth X Ultra Wealth Report 2017 focuses on key characteristics of individuals introduced as the ‘new to wealth’ consumer. They fall within the UHNWI and HNWI segment who respectively total a net worth of $7.4 and $27 trillion respectively.

Geographic

The market is dominated by three key players; Europe 32%, North America 27% and Asia 25% accounting for 84% of the market share for the UHNWI’s. Whereas the majority of the demographic resides in North America 36%, Europe 28%, and Asia 26% accounting for 90% of the market share for the HNWI’s.

Demographic

Gender: Male: 87% // Female: 13% Average Age: Male 35 // Female: 37 Education: Bachelor’s or Master’s Degree Average Net Worth: $1 billion Industry Professions: Technology /Entrepreneurs /Finance

Psychographic

Top 5 Interests: Sports / Philanthropy / Automobiles / Music / Health & Wellness

Behavioural

Spending Habits: Cars / Wine / Travel / Jewelry & Watches / Property Media Usage: Facebook 71% / Google+ 37% / LinkedIn 31% / Twitter 16%

*Knight Frank The Wealth Report 2017

*The Wealth X Institute UHNW Interests, Passions And Hobbies Study 2017

• Net worth of $3.6 billion • Entrepreneur • Bachelor’s degree in a computer engineering • Lives in Hong Kong • Not religious • Listens to pop music • Member of the Clearwater Bay Golf & Country Club in Hong Kong • Holidays around the world with friends • Summer home in The Hamptons • Not knowledgeable about the fine arts, wine or real estate and comes to Sotheby’s for their expertise • Status seeking • Buys flashy, expensive items to show off his new wealth

INCOME

Money Machine WEALTH

Financially Free TIME

60 Busy Bee

LEVEL OF KNOWLEDGE

Luxury Tourist PERSONAL PREFERENCES 90 Superstar

Wealthy Millennial Overview

The Enthusiast, Elizabeth 36 The Euromonitor International Report on Millenials: Impact Of Their Behaviour On Global Consumer Markets 2015 indicates the overall millennial demographic to account for 45% of the global luxury market by 2025. By Sotheby’s starting to grow the wealthy millennial into their consumer portfolio, this expands their consumer long term value for them to evolve to fall under the primary customer umbrella by 2048.

Geographic

The market is dominated by three key players; India 17%, China 14% , U.S. 14% accounting for 45% of the market share.

Demographic

Gender: Male: 87% // Female: 13% Average Age: Male 28 / Female 27 Education: Bachelor’s or Master’s Degree Average Income: $150,000 / year Industry Professions: Medicine / Law / Entrepreneur / Creative Executives / Technology

Psychographic

Leisure Interests: VIP live entertainment, Dining out, Travel, Healthy & Wellness, Shopping Opinions & Beliefs: The wealthy millennials embrace multiple modes of selfexpression and respond instantly to brands ethos that speak to their authenticity, exclusivity and uniqueness. Millennials define success as working in industries of passion. This knowledgeable segment is confident, connected to the community and open to change.

Behavioural

Shopping Habits: The wealthy millennials are impulsive buyers who seek deeprooted experiences. They embrace loyalty programs who cater to their investments of passion and value word of mouth as their most credible source Media Usage: Facebook 83% Instagram 53% Twitter 37% Pinterest 34% Technology Usage: Spend 25 hours a week to online. 19% made their first art purchase online. 87% use 2 - 3 technological devices once a day. 41% have already made a purchase with a smartphone.

• Earns $150,000 a year • Creative executive • Master’s degree • Lives in New York, NY • Non-practicing Catholic • Loves to travel to exotic places • Enjoys dining out with friends and family • Well-connected on social media • Knowledgeable about art, wine, and mid-century American furniture • Invests in pieces around $10,000 – $30,000 • Does individual research before making a big purchase • Enjoy attending in-person day sales • Buys for the aesthetic value • Emotional and impulsive buyer • Spends on unique products and experiences that reflect her personal values

INCOME

High Flyer WEALTH

Financially Secure TIME

70 Balanced

LEVEL OF KNOWLEDGE

Luxury Native PERSONAL PREFERENCES 60 Understated

Products & Value Proposition

Goals & Objectives

Sotheby’s will build on their current brand equity by developing key strategies to achieve substantial growth by exceling their winner factors within the three pillars of brand equity to establish high brand density.

Brand Awareness

Objective: • Growing private auction sales • Showcase wide range of blue chip items • International expansion to reinforce geographic placement

Brand Associations

Brand Loyalty

Objective: • Increase credibility of experts in traditional houses and online platforms • Introduce phygital gallery journey to enhance customer experience • Perfect ThreadGenius algorithms in consumer palette

Brand Associations

Objective: • Catalogue advancements in print and digital format with essential VR and AI technological advancements • Life of Luxury event focusing on key category drivers by building consumer associations with Sotheby’s curators who partner with well known global figures • The White Glove Loyalty Program. To celebrate the sale of an entire lot to a single prestigious buyer that would form an elite community of similar psychographic and behavioral traits.

Brand Awareness

Brand Loyalty

Brand Equity

Strategy Overview & Unique Selling Proposition Strategy Overview

By 2048 Sotheby’s will continue to dominate the market size by successfully implementing its key objectives. As we foresee more players in the market, we still believe the top tier of competition to be the traditional auction houses of today. Sotheby’s aims to refine its omni channel presence as a holistic experience. To retain its market leader position, Sotheby’s successful execution of its key goals will lead to market domination in private sales. This will shape the consumer profile that will speak to its compelling strong brand equity. In 30 years Sotheby’s consumer profile will comprise of the collector and the connoisseur but their investments of passion will be dynamic, impulsive and sophisticated . With this evolved consumer profile, we aim to execute our key success factors in ensuring we will always be two steps ahead of our competitors by providing outstanding products and services

Unique Selling Proposition

Sotheby’s prides itself on consistently being two steps ahead in the game with luxurious. unparalleled, ephemeral services and items. In 30 years they will still hold the market leader status that speaks to its consumer desires through its diverse brand portfolio. Sotheby’s key competitive competencies of heritage, innovation in line with their strategic thinking showcases their focus and commitment towards their wide consumer dossier. Sotheby’s is the only auction house with a TV app that exclusively allows consumers to view and download a library of 200,000 past auctions. This is an artistic method of interacting and educating the consumer about the world of auctioning. Sotheby’s is effectively boosting AR experiences and building on the potential of VR. In the next 30 years, technology incorporated with VR and AR is the next step forward in the global auction market. Sotheby’s has embraced technology to expand its reach and actively seek to cultivate relationships with new clients while strengthening their ties with the existing ones. Sotheby’s strategic advancement by integrating technology internally for smooth proposal evaluation and externally for all client-facing services. In 2017, Sotheby’s hosted a two day virtual reality event in NY, where in customers could step into surrealist artworks by Salvador Dali and René Magritte. The event hosted a crowd mixed of wealthy millennials along with the established primary clientele who stepped into an out-of-the world ephemeral experience. By 2048 Sotheby’s will excel in private sale auctions through the exclusive cutting edge technology of taking the consumer on a journey they’ve never seen before. The advancement of VR and AR will enable the consumer to walk through the painting, immerse in the heritage, the inspiration of the brush stroke and recreate the painting with the artist. The source of the sublime aesthetic speaks to the consumer’s multisensory hedonistic experience. Sotheby’s innovation techniques will sustain its position as the global auction leader.

Cannata’s Diamond – Luxury Ingredients Evolution

1. Product Excellent in relevant qualitative dimensions: Aesthetic Value: Art is form of self expression and most noble human expression. It is a luxury experience for self and for others with no transactional purpose. Investment Value: Art & collectibles age in price over time as they exist within a time capsule. Time is the ultimate luxury and Sotheby’s items speak to the consumer’s financial growth. Ephemeral Value: Sotheby’s excel the moment before and after the ephemeral experience to last as a forever memory. This builds brand association in coherence with Sotheby’s brand identity Limited Output: The genuine scarcity of the hundred year old vintage art items & collectibles builds Sotheby’s valuable brand equity Sublime Aesthetics: Items and services are presented with prestige and unique knowhow to provide a multisensory aesthetic experience

A. Cannata, 2015

Cannata’s Diamond – Luxury Ingredients Evolution 3. Price It is an extremely important lever to the brand equity mix. Extravagant: market dynamic trigger irrational change in price as the sky is the limit in an auction. There is no correlation between the selling price and cost price resulting in the price detaching in focus from the value of the item. The extreme rarity and uniqueness boosts irrational behaviour indicating no correlation with intangible value.

2. People Inside the Organization Authentic Cultural Background: Sotheby’s is one of the oldest auction houses originating in 1744 and till today holds its market leader status as the best auction and brokerage in the world. High ‘Human’ Component: 300 years of leader status stems from the continuous investment into their specialists, valuation manager’s and auctioneer that are the brand ambassador’s that speak to their brand identity of credibility and expertise through heritage. Virtuosity: Sotheby’s brand ethos stands for anticipating consumer desires and introducing the investment of passion on not just a silver plate but with the ultimate multisensory experience Outside the Organization Perceived as a Social Stratifier: Power, prestige and property of the level and type of product are key social differentiations as to when and why Sotheby’s consumer buy Perceived as Superfluous: The irrational desire to showcase art & collectibles due to its lack of functionality as a form of expression and not just financial gain. Source of Sublime Aesthetic and Hedonistic Experience: Sotheby’s commitment to provide the ephemeral experience as yesterday is but today’s memory and tomorrow is today’s dream. (Khalil Gibran)

Ultra: brokerage focuses on ultra luxury items with ultra pricing, this enhances the correlation between the cost price and the selling price. As the connoisseur understands the true value and hence would be willing to pay the ultra price. It’s an important pricing hierarchy to ensure Sotheby’s caters to the collector and the connoisseur.

4. Placement Poly-sensuality: luxury is a cultural phenomenon and a quintessential source of hedonistic pleasure for oneself. Sotheby’s will excel in private sales by simulating all five senses through personalized elements that speak beyond the glass of champagne. Distributive Rarity: Sotheby’s exemplifies the primary consumer demographic as they host their auctions and galleries in the top tier cosmopolitan cities. The perfection in distribution characteristics of expanding to precise locations, employing quality personnel that are brand ambassadors and lastly showcase galleries as an art piece in itself by investing merchandising a story through their gallery’s.

Cannata’s Diamond – Luxury Ingredients Evolution

5. Purpose Uniqueness: Sotheby’s 300 years of expertise has enabled it to evolve its strong brand equity that represents its iconic brand identity Excellence: The purpose is to personify the talent and artistic expression of its artists work and speak to the perfection of its collectibles. Sotheby’s connoisseurship embodies its true mission to excellence in every element of auctioning.

6. Promotion Coherence with Intended Identity: Sotheby’s uses pull approach towards the knowledgeable experts to showcase excellence and inform the primary consumer. The highlighted codes are pride in privacy & discretion at private sales. Message: Dominant relationship with the customer to build strong brand equity for the consumer to come to them for their exclusive items. Media: Avant garde media culture constantly educating and strengthening their commitment towards expertise and innovation. Media focused on the future newness. Technique: Culturally relativistic to its global market position and internationally acknowledge items on sale. Sotheby’s is drenched in cross cultural contamination and uses this to build a rapport across the globe. Archetype: Multiple adaptation of archetypes. Sotheby’s embodies a combination of excellence and artistic expression. The multiple adaption speaks to the core of the brand which is the internationally acknowledged product. Their responsibility to represent the artists talent and inspiration. High Level of Details and Communication Quality: Sotheby’s physicality in terms of reality is leveraged on the proposal box. This box inaugurates the ephemeral experience process till the hammer closes the sale. In line with their conceptual detailing that speaks through their quality of services in consistency with the physicality. The marketing collateral of the print and digital catalogue is a 300 year old successful initiative to promote and educate the consumer of the intangible value of the product.

Conclusion

By 2048, Sotheby’s will cater to its core customers every desire and dream through a refined omnichannel platform that sustains its market leader position through exponential growth in the private auction segment. The consumer market dynamics will focus on ephemeral services trusting its wealth portfolio within Sotheby’s expertise to fulfill their hedonistic luxury experiences. The world of auctions will evolve from the 1900s center stage investment of passion in solely art. For Sotheby’s in 2048, it will be dominating the market with its competitive competencies of expertise, credibility and heritage to delivery the ultimate ephemeral service through the advancements of VR and AR. In 30 years, Sotheby’s will be the leading innovator to take the consumer on a journey they have never experienced before. The consumer will be able to walk through the painting, immerse in the heritage, the inspiration of the brush stroke and recreate the painting with the artist. The market will evolve from art into statement land ownership, ultra-luxury yachts and owners of sports teams but the ultimate luxurious investment of passion of ephemeral services valued as highly as timeless tangible art and collectibles will only be acquired at Sotheby’s.

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LXFM 730 | WINTER 2018 PROFESSOR ALESSANDRO CANNATA BY: ABBEY DAHL SASHA NORONHA MADISON OTTENBACHER KOMAL SANDHU