The Bidding Business

f n souzamain The Bidding BusinessIt was a decade ago when Saffronart, an online auction house specializing in modern and contemporary Indian art, held its first sale. “We sold $125,000 in art and we thought that was amazing,” said the house’s co-founder Minal Vazirani, 38. Six years later, when just one online auction made $17 million, the Harvard Business School knew they had a subject for a case study. Today, Saffronart has an office in the Fuller Building on 57th Street and galleries in Mumbai and London, and runs half-a-dozen online auctions annually, selling not just art but vintage and contemporary Indian jewelry and has recently added real estate. They also have competition: Both Sotheby’s and Christie’s accelerated the pace of their Asian sales after the region’s economy, and Saffronart took off.

Ms. Vazirani never intended on going into the art business. “I had studied chemical engineering and was on a very different career track,” she said. Then she and her husband moved from California back to India, and began buying art. “It was what we did together. But the Indian market was completely different,” she said. Pricing could vary wildly. “If you bought in Mumbai or Bangalore, you found a price differential for an artist. And there was no information about modern Indian art. We thought there must be others like us.” So they founded Saffronart, so named because it implied both the exotic and exclusivity.

“Saffronart was able to see a market beyond boundaries,” said Mukti Khaire, assistant professor of business administration at the Harvard Business School, who studies the role that entrepreneurs play in new markets, particularly in creative fields such as fashion, art and film. She had friends who had bought from Saffronart and believed the auction house was playing a major role in creating a market, and so she selected it for study. “Let’s say they had been a physical auction house based in India. They would have a limited number of customers. Being online allows them to tap into a larger group of customers who might have an appreciation for Indian art and the means to buy.” 

Not that everything initially went smoothly. Saffronart found there were some collectors who just didn’t like auctions. “So we launched something called Collectors Corner, which is a weekly selection of works for sale on the Web site, but not in an auction format,” she said. But the auction house’s biggest breakthrough, said its co-founder, was that “every image that we put up online has a price with it. That might sound intuitive today, but you couldn’t do that with Indian art.”

The company deals with Indian art, pre- and post-independence. Modern artists were born pre-1947, and contemporary artists, generally, after. Top modernists include M.F. Husain, F.N. Souza, Tyeb Mehta, S. H. Raza and Vasudeo Gaitonde. Leading contemporary artists include Jagdish Swaminathan, Suboph Gupta and Jitish Kallat, artists whose prices have been climbing in both the East and West.

Professor Khaire credits the company with good timing: The auction house began selling at a time when the art world was beginning to take Indian art seriously, which was crucial to its success. “When there’s an ecosystem of critics and historians, the buyer can do research, which might help build confidence when it comes to purchasing.” The Harvard study, she says, shows that the online sales model works in industries where items are resold multiple times, such as automobiles; where research can create transparency; and where the buyer can get a full sense of the object they’re contemplating purchasing. “It’s unlikely you would buy something online from a Brazilian clothing company because the sizing is unfamiliar,” says Ms. Khaire. “But you just might buy a piece of Brazilian art.”

Christie’s and Sotheby’s started holding greatly expanded modern and contemporary Indian art sales, and pairing up with local Indian galleries and auction houses, not long after Saffronart began doing business. The upstart had to find ways to compete, said Ms. Vazirani. “Our buyer’s premium is 15 percent,” versus the 25 percent elsewhere. “Because the buyer pays a lower premium, they can bid higher. The payment back to the seller is calculated on the hammer price. So the seller gets a larger chunk from us.

“Also, [with us] you can go online and check a bid history, as opposed to a saleroom where you don’t really know how many bids are in the room,” she said.

“But, the business is growing. When we started, Americans made up 5 percent of the bidders, and now it’s 25 percent.”

editorial@observer.com