sothebys com_group1.pptx

7/27/2019 Sothebys com_Group1.pptx

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Group 1

Abhishek Singh(PGP/16/003)Anshuman Tigga(PGP/16/005)

Sudhanshu Shukla(PGP/16/052)Babita Pegu(PGP/16/136)

Harsh Bajpai(PGP/16/197)


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Sothebys - Introduction

Consignors SothebysBuyers

PropertyProperty

Hammerprice +buyers

premium

Hammerprice commissio

n/expenses

255 years in fine arts auction business

Reputation for selling important painting, jewels and antiques at record-

breaking prices

In 1985 sold Van Goghs Landscape with Rising Sun for $9.9 million

NY based and has major presence in 98 other cities

Others Divisions include Sothebys Financial Services, Sothebys Trusts and

Estates Services, Sothebys International Reality Group, Sothebys Appraisal

Services, Sothebys Insurance Brokerage Services, and Sothebys Restoration

Services


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ValueProposition

High-end auctioningof premier andvaluable items

Market orAudience

B2C & B2B, premier artsand antique items

Revenue ModelPremiums from bothconsignors and buyers.

Some percentage ofhammer price

CompetitiveEnvironmentMajor competition from

Christie

Value ChainLive and online fine artsauction which connects

consignor with buyers

RepresentationLive auction in a hall,

online auction throughits site and partner

amazon

OrganizationalStructure

Specialist, technical &operational executives

ManagementAn enriching experience

of 255 years in the finearts auction business

Business Model


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Live Auction ProcessSeller contacts Sothebys specialist

Authentication check

Market Value evaluation

Shipped to headquarters

Catalogue is made

Phone to Prospective buyers

Buyers could leave bidsLive auction

Buyer Pays immediately

Art transport department arranges shipping


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Online Auction ProcessFormation of network of dealers of fine arts , antiques

Dealers to sell only on either of Sothebys sites

Dealers make catalogues

Material Handling costs borne by dealers

Dealers paid no sellers premium

Auction lasts for two weeks on sites

All lots kept in warehoused leased spaces

Each lot was catalogued and managers decided on which site to sell

Pick up list was generated

Outsourced shipper was responsible for packing and shipping


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Challenges in migrating to new ways doing the

business

Transparency & fairness in online auction process(increments in bidprice)

The approximate cost per interaction is US $10, indicating that customer-support costs increased considerably as a result of the Internet strategy.

Change in business model &value proposition

Technology constraints- limitations of customers hardware & software


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Physical Lots for virtual Auction-Drawbacks &

limitations

For live auctions lots were not photographed & Sothebys chargessellers for the photography services while in virtual auction every

item is digitally photographed at no charge to the seller.

Materials handling costs increase for these lots consigned toSothebys and sold on the website.

Managers and observers agree that logistics requirements (costs andoperational complexity) for the auctions themselves and for shippingpurchased lots increase as a result of taking auctions online


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Dealer (Associate) lotsan improved strategy for

virtual auctions

Sothebys would act as information managers and a branded outlet rather thanphysically handling goods.

When Associates sell on the website, Sothebys.com never touches their goodsand thus incurs virtually no variable costs. The Associates are responsible forinventorying, cataloguing, provision of shipping estimates, packaging, andshipping. Material handling costs are borne by Associates

By creating the Associates network, Sothebys.com has transformed itself from afirm with extremely low scalability occupying the far right of the scalabilitycontinuum, to a business that is information-intensive, occupying a position onthe far left of the continuum.


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High Low

Information Commodities withStandard Handlingissues(Books)

Unique & Awkward(Paintings, antiques)

Unique withStandard Handlingissues (AirlineTickets)

Scalability Continuum

Sothebys.com illustrates both extremes of the scalability continuum, a framework that

shows what effect the need for non-information elements of service, such as customer

support and logistics, has on the economics of a firm engaged in e-commerce.

Sothebys.com is an organization that suffers from the diseconomies of scale caused bythe logistical and customer-support requirements of auctioning goods it provides online,

and benefits from the economies of scale generated by auctioning goods associates

provide online.


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Profiling E-operations

Profiling method draws on the product profiling procedure

developed by Terry Hill for use in operations strategyanalysis

Profiling provides a quick, visual means of capturing key

operational differences between traditional and e-commerce methods and decide whether E-commerce modelis scalable or not.


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Self-sourcing-Degree to which an organization can encourageits customers to do some of the work of providing a

product/service for themselves

Utilizing the Internet to sell items that would sell for less thanUS$ 10,000 does not help Sothebys since these items are nothigh margin items and the costs of the employees that evaluate,catalog and handle items is very high due to their unique skills.

In contrast, by developing an alternative model whereinAssociates auction off items on a virtual basis, Sothebysswitches much of this work to its Associates, who in effect

become its customers.


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Using Associates as sales agents also greatly improves shipping

aspects and accountability/legality issues

Using Associates to virtually sell items but physically handle

them, the difficulty and responsibility for handling these bulky

and fragile items becomes their responsibility

Facilities costs can be greatly reduced for some businesses

when business is conducted online because of the ability to

reduce or remove physical interfaces with customers


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Job specialization: Businesses can greater differentiate andspecialize their workforce because of the dis-intermediationeffect of not requiring real-time, face-to-face interaction with

customers

Scheduling becomes easier because employees can be matchedwith aggregated demand rather than dealing with widefluctuations in demand at individual locations

Inventory can be centralized at few distribution centers ratherthan holding inventory at numerous distinct locations


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FacilitiesCost

Self Sourcing

Accountability/Legality

Job Specialization GeneralPurpose

Scheduling

Inventory

InformationIntensity

Shipping

Communication Barriers

High

High

Low

Low

Bulky/Fragil

e Products

Virtual

Products

Low High

Decentralized

Centralized

SteadyDemand FluctuatingDemand

Specialized

Low High

Visible/High Cost

Virtual/Low Cost

Traditional methodsSuperior

E-Commercemethods Superior

Scalability Low High

Sothebys Preliminary E commerce model


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FacilitiesCost

Self Sourcing

Accountability/Legality

Job Specialization GeneralPurpose

Scheduling

Inventory

InformationIntensity

Shipping

Communication Barriers

High

High

Low

Low

Bulky/Fragil

e Products

Virtual

Products

Low High

Decentralized

Centralized

SteadyDemand FluctuatingDemand

Specialized

Low High

Visible/High Cost

Virtual/Low Cost

Traditional methodsSuperior

E-Commercemethods Superior

Scalability Low High

Sothebys Associates Virtual Auction model


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Scalability success factorsOrganizations with information-intensive services will benefit from takingthem to the web completely; while businesses delivering services with highcustomer support and logistics needs may see their costs rise when they put

them online.

Sothebys has found a way to create a new value proposition that, whilerelated to its traditional offering, is inherently more information-intensive.

Sothebys should consider its capabilities before taking the business tointernet. The capabilities should be such that they serve as capabilities inonline business.(Sothebys capability Specialists)


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References E-services: operating strategya case study and a

method for analyzing operational benefits: Kenneth K.Boyer a, Roger Hallowell, Aleda V. Roth


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Thank You

sothebys com_group1.pptx

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