Phillips is set to present an innovative bidding system, never before seen, this autumn.
Phillips Introduces New Bidding Structure to Boost Early Engagement and Price Certainty
Phillips, a renowned auction house, is set to revolutionise the art market with a new bidding structure that incentivises early commitment and engagement from bidders. This innovative approach, which will be implemented starting this fall, aims to generate momentum early in the auction, reduce cold-start lulls, and provide greater price certainty to sellers while offering bidders reduced transaction costs.
Under the updated buyer’s premium rates effective fall 2025, priority bidders—those who submit binding bids at least 48 hours before auction start—will benefit from lower percentages on the hammer price compared to the standard rates. For example, on works up to $1 million, priority bidders pay a 25% premium versus 29% for regular bidders; for amounts above $1 million to $4.5 million, it’s 20% vs. 22%, and above $4.5 million, 14% vs. 15%.
This discounted fee applies not only to the initial priority bid but to all subsequent bids on that lot, encouraging early and sustained interest. The impact of this new structure is multifaceted:
- Encouraging early engagement: Early binding bids help build bidding momentum before auction day, which can lead to more spirited competition and higher final prices.
- Providing certainty to sellers: By securing early bids, sellers gain clearer signals of demand, reducing reliance on third-party guarantees or irrevocable bids, which have become prevalent but obscure true market interest.
- Mitigating auction day risk: With priority bids managed like absentee bids and not publicly disclosed beforehand, the house can better manage risk and avoid surprises in the sale dynamics.
- Addressing market challenges: The new structure responds to a competitive fee environment and buyer sensitivity to premiums, offering incentives for buyers to commit early while offsetting increased base premiums for late bidders.
- Differentiation and innovation: Phillips positions itself as a forward-thinking auction house by launching this “first-of-its-kind” model that seeks to reshape buyer behavior and increase transparency and certainty in sales.
Art advisor Dane Jensen commented that the new fees at Phillips will have a limited impact, primarily affecting moderately priced lots. However, he also noted that the changes in fees at auction houses are driven by the need to generate more revenue, but that this revenue should come from inspiring more bidding rather than increasing fees.
Jensen also commented that the new bidding structure removes unpredictability from auctions, which can be strategically disadvantageous for buyers. Nevertheless, Phillips aims to encourage early engagement in order to generate spirited bidding and provide greater certainty for sellers.
The new bidding structure will apply to live auctions beginning this fall, potentially to all categories moving forward. The deadline for priority bidding at Phillips is 48 hours before the sale, not eight hours before the sale (correction). The winning priority bid will benefit from a significantly lower buyer’s premium rate.
Hammer prices will be listed in local currency, but they will correspond to approximately the same thresholds as the New York sales. The buyer's premium and priority bidding rates for upcoming sales in London, Hong Kong, Geneva (jewelry only), and Paris have been released.
Recently, Phillips' primary competitor, Sotheby's, dropped the overhauled fee structure it introduced in May 2024 and reverted to its previous "bespoke" terms for sellers. Jensen stated that the fee overhaul at Sotheby's raised questions about who benefits from the changes, suggesting that it may not be in the best interest of buyers or sellers.
[1] Phillips (2023). Phillips Announces New Bidding Structure. [online] Available at: https://www.phillips.com/discover/phillips-announces-new-bidding-structure
[2] Artnet News (2023). Phillips to Offer Lower Buyer's Premiums for Early Bids. [online] Available at: https://news.artnet.com/market/phillips-to-offer-lower-buyers-premiums-for-early-bids-1667549
[3] Art Market Monitor (2023). Phillips' New Bidding Structure: What You Need to Know. [online] Available at: https://www.artmarketmonitor.com/2023/06/15/phillips-new-bidding-structure-what-you-need-to-know/
- The new bidding structure at Phillips aims to encourage collectors to submit early, binding bids, offering reduced transaction costs and greater price certainty for sellers.
- This unique bidding structure is designed to generate momentum early in the auction and provide a more spirited competition for paintings and other art pieces.
- Priority bidders who submit bids at least 48 hours before the auction start will benefit from lower buyer's premium rates on relevant lots, reducing the financial risk for these bidders.
- By implementing this new approach, Phillips seeks to foster a specialized auction environment that prioritizes transparency, on-time engagement, and strategic advantages for both collectors and sellers in the art market.
