Paddle8 – Shaking up the auction world
Moving from the gavel to the mouse
The click of a mouse, the sound notifying you of an incoming email – these are not sounds one would normally associate with a fine arts auctioning process. Enter Paddle8, the 4 year-old virtual auction house which has emerged as a force to be reckoned with.
Their business model is to be, in their own words, ‘an auction house for the 21st century collector through giving the global collecting community unprecedented access to online auctions of high-caliber inventory’. In other words to do everything that the grand old dames of auction houses, Sotheby’s and Christie’s, have done, but cater their business to a younger, more global and eclectic crowd.
That meant that three things were key:
- Providing convenience and enhancing the user experience of both sellers and buyers
- Offering pieces at price points which would not deter buyers from making their purchases online
- Ensuring that their inventory consisted of high quality, exciting works.
Hence, the online and mobile application platform to allow a globe trotting consumer base 24/7 access to inventory, pieces priced at a lower price segment (between $1,000 to $100,000), and having a highly experienced team of specialists to source for and authenticate pieces.
Paddle8’s online platform model has resulted in low operating costs for the company by doing away with the need to have a physical space and paper catalogues. In addition, their remote consignment model with sellers further reduces operating expenses, as the company does not need to bear the cost of storage or shipping of the pieces. Paddle8 has been able to transfer some of these savings back to both buyers and sellers in return, charging the lowest buyers premiums (12%-20%) and sellers commission (average of 8%) in the industry.
What the company has invested in is in a highly experienced team, consisting of veterans from both the art industry as well as the digital sector. In doing so, Paddle8 has been able to maintain a supply of unique, quality pieces which are showcased on a beautiful and easy to navigate platform.
Pre-auction: Sellers upload details and pictures of their pieces via Paddle8’s website or mobile application. Their team of specialists then provide free auction estimates within 5 days and work with the sellers to decide which auction platform (themed or private) would be most suitable for the piece.
Auction: After placing their initial bids for a piece, buyers are kept informed via email whenever they’re outbid, and can place a bid either through the website or mobile application.
Post-auction: Throughout this process the piece remains with the seller through a remote consignment model. Once the piece has been successfully auctioned off, Paddle8 acts as the middleman and makes arrangements to ship the piece to the buyer, who bears the cost of shipping.
The results of the effective alignment between the business and operating model? Half a million collectors from over 90 countries contributing to sales which are projected to increase two-fold from 2014.
Sources:
http://www.huffingtonpost.com/elizabeth-baudouin/paddle8-sets-the-stage-fo_b_7861616.html
Thanks for this insightful post, Chrislisl! I had never heard of Paddle8 before, and I think there is potential opportunity in bringing “grand old dames” auction house offerings to a younger generation through an innovative digital platform.
Based on your description, Paddle8’s online operating platform implicates only a single auction type: a virtual, “highest-offer-wins” bidding process. This made me wonder: is there future growth opportunity for Paddle8 in catering to a more diverse set of auction categories? I’m reminded of the book “DEALMAKING: The New Strategy of Negotiauctions” by Guhan Subramanian, a professor at Harvard Law School and Harvard Business School. Ultimately, he argues that “complex deal-making today uses elements of [both negotiation and auction] methods.” [1] And that savvy bidders can get the upper-hand during “negotiauctions” by making well-placed “set-up” (“establishing the entry process”), “rearranging” (changing the “assets, the parties, and/or creat[ing] added-value in the deal”), and/or “shut-down” (cutting-off “same side of the table competition”) moves. [Ibid.]
Ultimately, I wonder whether Paddle8 could expand its operating system to allow online bidders to compete on a basis beyond price alone. If their business model revolves around our “younger generation,” there might be great opportunity in enabling this target segment to leverage different strategic moves to buy and sell assets in “our increasingly competitive global marketplace.” [2] Many potential young bidders might be discouraged from using the service if they feel that they don’t have the economic means to compete with wealthier bidders. And igniting competition through simulated negotiations–whose outcomes do not exclusively depend on the nominal bid amount—might be an avenue for capturing those potential consumers!
[1] http://negotiatormagazine.com/articles/AR201109116.php
[2] “DEALMAKING: The New Strategy of Negotiauctions,” by Guhan Subramanian. Pp. 196-97.
Thanks Chrislisl, I had never heard of Paddle8 but I think online art sales is a really interesting business. A high school friend of mine founded a competitor (Artsy – I would say their angle is to be the Pandora of art). Lots of excitement in this field, and I think it will ultimately move online, but it seems to me the movement has been really slow. Definitely a field to watch.