Auction house underdogs.

In describing them as grumpy old men with with “gouty [gaits] that [make] them slow to adapt,” and a “fixation on ancient rivalries that leads them to butt heads repeatedly rather than focus on reviving their businesses for the rapidly changing world around them”, The Economist captured the feel of Christie’s and Sotheby’s, the world’s two oldest auction houses, with a dash of witty humor.

But the metaphor holds a bit of truth, because at 522 years old, both firms are certainly stiff and struggling, argues the London-based paper, and on the business end, they’re over-reaching. Consider the following: Both firms continue to make heavy guarantees to consignors at significant losses in order to keep up appearances; they focus too much on slumping Old Masters interest, while the market swings towards contemporary works; they’re missing out on promising art investment funds and art advice services as collectors increasingly “regard their contemporary art as an alternative asset class”; and least surprising of all, they’ve been slow to adopt online art sales.

But as the two grey firms shake their canes at each other and flail in the wind, smarter, more attuned competition is gobbling up market share, passing them by. These actors––both new (and old)––understand and cater to the new economics of the sector, a buyer-centric marketplace that’s freed from the dominance of these two gatekeepers. “Time was when the big auction houses had a near-monopoly on information about the art market, which gave them an edge over customers as well as potential rivals,” wrote The Economist. “But now buyers, sellers and dealers are much better informed, and the mystique of the auction room has faded.”

Our peers at the London paper did well to summarize Sotheby’s and Christie’s malaise. But the more worthwhile story, only briefly addressed by them, is that of Phillips’ ascension.

At 220 years old, it’s over half their age, so it certainly is grey in its own right. But it’s more silver fox than liver-spotted. Like the old rascal, Hugh Hefner, it hasn’t let its age hold it back; and like Jeff Goldblum, it’s found a way to work its charm in a manner that’s youthful yet age-appropriate. Indeed, Phillips is seen as the smaller, tertiary rival to its more illustrious cousins, but it’s bursting with the verve and virility of a young company with its entire life ahead of it.

The Economist details here:

“Phillips’s elegant new headquarters, with its carefully curated contemporary-art exhibitions, in Berkeley Square in London, mask a lean operation: two offices and a staff of just 225 compared with seven or eight times as many at each of the other two houses. The focus is on getting the new rich hooked on buying, first, watches and then contemporary art; and on finding out what such clients want and providing it.

The strategy is working. From a standing start, Phillips sold $80.3m-worth of watches in 2015. Total auction sales, at $523m (mostly of contemporary art), were 34% higher than in 2014. [Edward Dolman, CEO] expects Phillips to reach $1 billion within three years.”

We’ve been impressed with Phillips’ moves over the last five years: its intelligent, clear-eyed embrace of the new conditions of the art marketplace (and an emerging young customer base), and its comfort with conducting a lean operation. And we think its smartest move of all has been its decision to specialize in vintage watch auctions, a growing new opportunity, and tapping the best timepiece auctioneer in the business, Aurel Bacs (in the feature photo), to head the new watch sales department. (Hodinkee has done a wonderful job documenting this.)

New competition is pounding at the door of the established art world, that much is clear. Lean Luxe favorites, Paddle8 (whose CEO, Alexander Gilkes, is a subscriber) and Auctionata, to take two examples, are both enjoying the success of online auctions, and have answered the call of the younger, more web-savvy collector quite well. But in terms of a robust, holistic, and forward-looking approach, it’s Phillips, greying at the temples, and a twinkle in its eye, that currently stands tallest.

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