Sramana: There is a very compelling element to your story. You are going to have access to the larger ticket items that are the economic drivers of a traditional auction house. However, traditional auction houses do not have the ability to scale. Auctionata has the ability to scale much faster.
Alexander Zacke: That is exactly the case. We can scale very quickly. Auction houses have not grown as fast as the market that surrounds them. We believe that since we can reach a global audience, we can scale much better. People are coming from all over the world to these auctions. They will register and then 30 minutes later, buy a piece for $100,000 and send the money the following morning.
I have called some of those people and asked them why they were willing to do that because I did not think it would be possible at that price point. The outcome was that they had trust in our site and that they felt we were a very serious business. Most of them thought that our business had been around for a long time and we had just created our online presence. That proves that we executed our strategy. We have 300 art expert profiles online which includes their resumes. That is how people know that we are serious.
Sramana: This is one of the best e-commerce business models that I have seen in a long time. The only one that comes to mind that is close to what you are doing is BlueNile. They also deal in expensive items and build trust with their consumers. You said a large percentage of your business is from China. Obviously, there is a lot of new money there. What are they buying?
Alexander Zacke: We do a lot of auctions with Chinese art and those are good auctions. The Chinese are everywhere in the world and they bring art back to China. In the early 20th century during the Boxer Rebellion and the subsequent looting of the imperial palaces, there was an enormous amount of Asian art taken out of China.
When the economic rise of China started in the late 1990’s or the 2000’s, there was an enormous wealth that came up. There are over 1 million people who have over $1 million in their bank accounts. In the early 2000’s, they started to find out that a lot of art was in Europe and America and that although people collected art, it was not that expensive. They started to buy this art and the prices really started to explode. Something that I would have sold 20 years ago for $1,000 will now sell for $100,000 or even $1 million. Chinese painters have risen dramatically during this time. There are 8 Chinese painters in the top 20 right now.
The Chinese have a very different business culture. We absolutely must have Chinese speaking people in our business providing customer support. Our catalogs must be translated into Chinese. We even have Chinese support agents during our live auctions who can assist with bids.