Both Tiffany & Co. and Sotheby’s are looking to China for future growth, but their current struggles indicate they have a hard road ahead. Luxury sales are slowing, Chinese art buyers are failing to pay, and the domestic competition is rising.
Bloomberg reported in January that Tiffany was in for a “less-than-glittering” 2012, with slow sales in crucial European and Asian markets.
“No U.S. luxury merchant is more exposed internationally,” wrote Cotten Timberlake. Tiffany gets almost half its sales outside the U.S., and depends on the international stores’ higher profit margins.
Sotheby’s appeals to an even richer crowd than Tiffany & Co., but that doesn’t mean it’s immune from economic slowdowns. According to the Financial Times , the auction house is suing two buyers for failure to pay. Sotheby’s has decided to “name and shame” the buyers in an effort to discourage other delinquencies.
Meanwhile, the BBC reports Christie’s and Sotheby’s are facing new competition. According to Katie Hunt, rivals have emerged that “present a major challenge to their long-standing duopoly and demonstrate how the art world is being transformed by the tastes of China’s newly affluent art collectors.”
The French auction body Conseil des Ventes says half of the world’s top 10 auction houses are now Chinese. Sotheby’s and Tiffany’s may yet win out as a long-term investment play . But they’ll have to deal with the current global economy, and still outrun their new competitors.
adapted from nasdaq.com
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