Sotheby’s France

1. Sotheby’sFrance Van Gogh $ 80,000,000 Best in France HEC Paris April 2004 Renoir $ 75,000,000 Rubens $ 75,000,000

2. Sotheby’s history France’s benefits Sotheby’s key values Constraints in France Adaptation to France In the strategy In the management In the recruitment In the operating policy Future outlooks and France attractiveness Presentation Overview

3. Sotheby’s history • 1744: Samuel Baker founded Sotheby’s in London • 1955: Opening of the New York office • 1967: Opening of the Paris office • 1974: The first French auction held in Monaco by Peter Wilson (an immediate success). • Early 1990s: A strategic shift with the will to sell in France given the potentiality of the French art market. • 1993: a mini “New Bond street” built in Paris, the ambitious Galerie Charpentier. • 2001: Reform of the status of art auction dealers.

4. Sotheby’s business in France • Traditionally France has been an art export center. • But there was a deep crisis in the nineties… • … As a consequence, Sotheby’s needs to be able to sell in France directly. • The bill reforming the status of French auctioneers is eventually passed in 2001.

5. France’s benefits • Paris is one of the top market places worldwide for art. • Sotheby’s has an image of luxury and expertise. • The company’s culture is close to the French culture (excellence, refinement, taste,...) • There are many collectors in France (potential buyers and sellers).

6. Sotheby's customers • There are two types of clients : • The sellers • The buyers • Sotheby’s leaders care very much for reputation and trust to reach the top market products they are looking for. • Trustworthy to organize the auction of major collections and important heritages. (e.g. the paintings shown on the first slide have all hit records and were sold by Sotheby’s)

7. Sotheby’s key values • The company can rely on trust, expertise, a unique Brand name, knowledge. • Unlike many competitors, there is no outsourcing. • These values are essential in the art market, Sotheby’s has a worldwide reputation and traveling clients. • Main corporate value: ‘local roots and global reach’ ( “une PME internationale”).

8. The French art market • The French market represents in 2004 10% of the world market (7,5% in 2001) 223 M€ in 2003.

9. Constraints in France • The legal constraint (the worse constraint) • Before the 2001 reform, Sotheby’s was not allowed to hold auctions. • After 2001, Sotheby’s can hold auctions but is not allowed to buy and sell for its own. • The establishment (corporatism). • Skepticism towards this foreign newcomer. • The art market, another ground of the ‘exeption culturelle française’.

10. Adaptations in the strategy • Sotheby’s had a worldwide monopolistic strategy when it arrived in France. • However, there is a huge competition on the French soil and too many competitors. • Sotheby’s realized that fighting now would be costly and quite ineffective. • Thus they preferred to wait for more maturity and opportunities to impose a leader in years to come.

11. Specific workforce adaptations • English speaking experts are needed (always in touch with the US headquarters). • No expatriates (it would be too expensive), but only  French “internationalized workforce”. • Furthermore, there are some internationally renowned French experts. • The recruitment is based on reputation and not on a diploma (unlike the US branch).

12. Adaptations in the management • Given the corporatism in this industry and in France, there are no “professional managers”. • The experts themselves are the managers (e.g. Mr. de Proyart, vice president and book expert). • There are no managers, only art experts that have to deal with management issues.

13. Adaptations in the operating policy • In the US , you can guaranty the sale because the auctioneer itself will buy the item at a minimum price if it has not found an acquirer. • In France, you can only guaranty a minimum price; thus if the item does not reach this set price, it is not sold at all. • Therefore, Sotheby’s is just a broker in France and had to rethink its business plan specifically for this country.

14. Key Constraint Costs • The French branch is not self-funded, it relies heavily on the US headquarters. • Networking throughout France (to find new pieces), expensive but long term investment. • Due to French regulation, they cannot build potential client databases (they do in USA or UK) • The auctions can only be seasonal and therefore there are irregular cash inflows (need to borrow). • Communication with headquarters is essential but expensive. (IT= $ 25,000,000 worldwide)

15. Key Benefit Numbers • Revenues in France (2002): • € 50,000,000 with 17 sales for Sotheby’s • € 57,000,000 with 30 sales for Christie’s • With a strong Euro, there will be more and more auctions on the French soil. • France must catch this opportunity to get even more attractive.

16. Essential problems • The French legal structure is a very heavy constraint: work law, art market regulation (e.g. French custom services visit Sotheby’s five times per year). • The French tax structure. • This results in the flee of national artistic treasures (especially the Impressionists), being sold in London or New York: reforms should be taken now before it is too late.

17. Hope lies in tomorrow • The art market was one of the first truly global markets, and has profitable outlooks. • Paris is very competitive, dynamic and innovative market place (in London or New York, Christie’s and Sotheby’s have the monopoly). • We are going towards the democratization of art. • Yet, it is needed to rethink management procedures and more flexibility. Sotheby’s will need true managers as the company grows.

18. We Thank • Jeremy Durack, Managing Director, jeremy.durack@sothebys.com • Jean-Baptiste de Proyart, Vice-president, jeanbaptiste.deproyart@sothebys.com

19. Bibliography • Art and its object, Richard Wollheim • Le mot peint, Tom Wolfe • L’artiste et les commissaires, Yves Michaud • Le marché de l’art contemporain en France, Bernard Rouget

20. Our Team • Raphaël Encaoua, encaouar@hec.fr • Blaise Guerrand Hermès, guerrandhermesb@hec.fr • Yannick Samson, samsony@hec.fr • Yann Vincent-Genod, vincentgenody@hec.fr