Since the UK’s first lockdown put a stop to in-room auctions overnight, there has been a surge in online auctions to replace them. Change which looked set to take years has been crammed into less than eight months as technology and the Covid-19 pandemic combined to transform the market.
Auction volumes have dropped by around 20% year on year, according to Essential Information Group, a staggering achievement in the context of the wider market.
“By moving online, the auctions market as a whole has maintained access to property… Demand was still there. The whole way through this crisis, there has been cash in the market,” says Max Mason, who heads Lambert Smith Hampton’s online auctions platform, 574.
For LSH, the decision to move exclusively online came more than a year before the start of the pandemic. It launched 574 at the beginning of 2019 with a focus on eBay-style auctions and Mason has previously voiced his frustration that the sector has been slow to adopt online formats.
He is now finding there is greater awareness of online auctions in the market following the industry-wide shift brought on by the pandemic: for March to April, 574’s page views jumped by 50% from the previous year, when its marketing campaign was in full throttle around its launch. “You can see the trend,” Mason says.
For Andrew Brown, auction director at Stretton’s, the experience was different. Brown had barely arrived to take the helm at Strettons’ ballroom auction business when the pandemic hit. Decisions had to be made fast and Brown worked with his fellow directors and EIG, the auctions data and tech business, to quickly turn Strettons’ April sale into a live-streamed event.
EIG had already scaled up by this point – Sandeman had followed China’s experience with the virus closely and anticipated a surge in demand for auctioneers to be able to offer live-streamed and eBay-style auctions on their own websites.
“We had taken on more staff and during the week before lockdown and two weeks afterwards we onboarded 70 or 80 different auction houses to use our services… I saw e-mails flying around at midnight to auctioneers. Everyone stepped up to the challenge,” Sandeman says.
Brown was not entirely new to online auctions – Sandeman says he can lay claim to being the first auctioneer to offer (and sell) a lot on EIG’s platform back in 2016, when he was at Countrywide.
Nevertheless, he says he has “always had a healthy dose of scepticism about the efficacy of online auctions, in any guise, replacing the ballroom auction”.
“But without the ability to conduct the auctions in the way that we have, we would have been in real trouble as an auction house. I don’t think we would have been able to function in the way that we have.”
Strettons’ April catalogue was already out when the first lockdown was announced and viewings had been taking place for a week and a half. But Brown felt it could still have been a “recipe for disaster”.
Buyers and sellers embrace change
Fortunately, clients and buyers alike embraced the change. Strettons sold 26 lots, raising close to £6m and its totals have since grown, with September notching up £16m, its biggest sale since March 2008.
“This wouldn’t have come on in this same timeframe without the pandemic. But it has worked really very well. I am a convert,” Brown says.
Conducting sales as a live-streamed event from the firm’s east London boardroom is the closest Brown can get to recreating the theatre of the room.
“You don’t quite get the same level of interaction that you would from having a bidder right in front of you in the auction room, when you can see the whites of their eyes, but certainly there are some advantages too,” Brown says.
For Mason, who focuses on bespoke sales of single assets or small groups of assets in eBay-style auctions, the process is far more “personal” than many may think. “What I am able to do from my desk at home is to see every single one of our registered bidders. And if I feel like someone needs a bit of geeing up, instead of being on the rostrum and addressing an entire room, I can ring them personally.
“I can ring that individual bidder, speak to them, address any concerns they might have. And actually, that’s the same sort of salesmanship and skill as an auctioneer and you can apply it in a much more personal context.”
Unprecedented level of information
What both methods share is an unprecedented level of information about potential bidders. This is due to the registration process for online auctions, which typically requires bidders to register against specific lots.
So whereas previously auctioneers would have a good inkling of whether or not a lot might sell – based on information such as the number of legal pack downloads, viewings and phone calls – they now have far greater visibility for setting reserves.
“So if we’ve got 20 registered bidders, there’s a pretty good chance that it’s going to go above the reserve. If we’ve got one or two, then it prompts a discussion with our seller in terms of saying, look, if you want to get this one away on the day, then you might need to reconsider your reserve,” Brown explains.
However, as Brown points out, this also feeds into something auctioneers are often less happy to discuss: success rates.
For traditional auction houses which previously only used ballroom sales, success rates have generally increased during the pandemic – and it’s because of that visibility. “If there’s no one registered for a lot, you withdraw it,” Brown says.
This could cause an interesting problem if auctioneers move back to the ballroom.
“There is going to be an imbalance in terms of people’s success rates. And it’s what we are judged on, rightly or wrongly.
“I think that that may be one of the things that feeds into people’s reluctance to move back to the room. If you’re doing 74% and your competitor is doing 92%, prospective sellers are going to go with the guy who does 92% – not actually realising that he isn’t actually selling any more lots,” Brown explains.
Data should be used to provide advice during the course of marketing, informing decisions on guide and reserve pricing, says Mason. Withdrawing a lot should be an absolute last resort. With 574’s model, there is also the scope to extend the auction to give the asset extra time on the market.
“There is no point having all of this dynamism, this online platform where you can move things about, if you don’t have the information to do that. For us, the data is absolutely everything. That’s not just limited to the auction sector. If you look at pretty much any successful online-based business in the world at the moment, it’s all based on the data they collect and how they use that. And it’s the people who are cleverest with that use that tend to be the most successful. Certainly for me, it has been the biggest revolution of online sales.”
Unlimited possibilities
Going forward, Mason says the ability to hold online auctions at speed, without constricting the timelines of vendors, opens up “unlimited possibilities.”
“That’s the beauty of moving into this new sector,” he says. That means working with LSH’s national network of 40 offices and with service lines including insolvency. He is also keen to rethink preconceptions about the type and size of assets that are suited to auction – why not offer longer marketing periods for larger or more complex assets? “We’re not limited to a catalogue launch date or an auction day,” he says.
Brown, meanwhile, is optimistic that there will be some sort of return to the room – but taking on board the best things that the sector has learnt from running auctions in a lockdown.
“To lose the theatre, the style and skill of the auctioneer, the auction day would be a real shame,” he says.
But as auctions continue to become a far more accepted way of selling things, he suggests digitisation may well be the catalyst for growing the sector’s market share from its longstanding 2%.
“I don’t see it moving to anything like 50%, maybe not even 10%. But any sort of move away from that 2% would be welcome,” Brown says.
This debate was part of EG’s Future of Auctions series
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