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)

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)
Sothebys - Introduction
255 years in fine arts auction business Reputation for selling important painting, jewels and antiques at recordbreaking 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 Property
Consignors
Property Sothebys
Hammer price commissio n/expenses
Hammer price + buyers premium
Buyers
Business Model
Market or Audience
B2C & B2B, premier arts and antique items
Value Proposition
High-end auctioning of premier and valuable items
Revenue Model
Premiums from both consignors and buyers. Some percentage of hammer price
Competitive Environment
Major competition from Christie
Value Chain
Live and online fine arts auction which connects consignor with buyers
Representation
Live auction in a hall, online auction through its site and partner amazon
Organizational Structure
Specialist, technical & operational executives
Management
An enriching experience of 255 years in the fine arts auction business
Live Auction Process

Seller contacts Sothebys specialist
Authentication check
Market Value evaluation Shipped to headquarters
Catalogue is made
Phone to Prospective buyers Buyers could leave bids
Live auction
Buyer Pays immediately Art transport department arranges shipping
Online Auction Process

Formation 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
Challenges in migrating to new ways doing the business

Transparency & fairness in online auction process(increments in bid price) The approximate cost per interaction is US $10, indicating that customersupport costs increased considerably as a result of the Internet strategy. Change in business model &value proposition Technology constraints- limitations of customers hardware & software
Physical Lots for virtual Auction-Drawbacks & limitations

For live auctions lots were not photographed & Sothebys charges sellers 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 to Sothebys and sold on the website. Managers and observers agree that logistics requirements (costs and operational complexity) for the auctions themselves and for shipping purchased lots increase as a result of taking auctions online
Dealer (Associate) lotsan improved strategy for virtual auctions

Sothebys would act as information managers and a branded outlet rather than physically handling goods.
When Associates sell on the website, Sothebys.com never touches their goods and thus incurs virtually no variable costs. The Associates are responsible for inventorying, cataloguing, provision of shipping estimates, packaging, and shipping. Material handling costs are borne by Associates
By creating the Associates network, Sothebys.com has transformed itself from a firm with extremely low scalability occupying the far right of the scalability continuum, to a business that is information-intensive, occupying a position on the far left of the continuum.
High
Scalability Continuum
Low
Information Commodities with Standard Handling issues(Books)
Unique with Unique & Awkward Standard Handling (Paintings, antiques) issues (Airline Tickets) 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 by the 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.
Profiling E-operations
Profiling method draws on the product profiling procedure developed by Terry Hill for use in operations strategy analysis
Profiling provides a quick, visual means of capturing key operational differences between traditional and ecommerce methods and decide whether E-commerce model is scalable or not.
Self-sourcing-Degree to which an organization can encourage
its 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 than
US$ 10,000 does not help Sothebys since these items are not high margin items and the costs of the employees that evaluate, catalog and handle items is very high due to their unique skills. Associates auction off items on a virtual basis, Sothebys switches much of this work to its Associates, who in effect become its customers.
In contrast, by developing an alternative model wherein
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
Job specialization: Businesses can greater differentiate and
specialize their workforce because of the dis-intermediation effect of not requiring real-time, face-to-face interaction with customers
Scheduling becomes easier because employees can be matched
with aggregated demand rather than dealing with wide fluctuations in demand at individual locations
Inventory can be centralized at few distribution centers rather
than holding inventory at numerous distinct locations
Sothebys Preliminary E commerce model

Traditional methods Superior Facilities Cost Self Sourcing Visible/Hig h Cost E-Commerce methods Superior Virtual/Lo w Cost
Low
High
Specialized Fluctuating Demand Centralized
Job Specialization General Purpose Scheduling Inventory Steady Demand Decentralize d
Information Intensity
Shipping Accountabili ty/Legality
Low
Bulky/Fragil e Products
High
Virtual Products
High High
Low Low High
Communicatio n Barriers
Scalability Low
Sothebys Associates Virtual Auction model

Traditional methods Superior Facilities Cost Self Sourcing Visible/Hig h Cost E-Commerce methods Superior Virtual/Lo w Cost
Low
High
Specialized Fluctuating Demand Centralized
Job Specialization General Purpose Scheduling Inventory Steady Demand Decentralize d
Information Intensity
Shipping Accountabili ty/Legality
Low
Bulky/Fragil e Products
High
Virtual Products
High High
Low Low High
Communicatio n Barriers
Scalability Low
Scalability success factors

Organizations with information-intensive services will benefit from taking them to the web completely; while businesses delivering services with high customer 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, while related to its traditional offering, is inherently more information-intensive.
Sothebys should consider its capabilities before taking the business to internet. The capabilities should be such that they serve as capabilities in online business.(Sothebys capability Specialists)
References
E-services: operating strategya case study and a
method for analyzing operational benefits: Kenneth K. Boyer a, Roger Hallowell, Aleda V. Roth
Thank You

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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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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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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Copyright:

Available Formats

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)

Hammer price commissio n/expenses

Hammer price + buyers premium

Live Auction Process

Online Auction Process

Auction lasts for two weeks on sites

Outsourced shipper was responsible for packing and shipping

Challenges in migrating to new ways doing the business

Physical Lots for virtual Auction-Drawbacks & limitations

Dealer (Associate) lotsan improved strategy for virtual auctions

Information Commodities with Standard Handling issues(Books)

its customers to do some of the work of providing a product/service for themselves

In contrast, by developing an alternative model wherein

aspects and accountability/legality issues

than holding inventory at numerous distinct locations

Sothebys Preliminary E commerce model

Job Specialization General Purpose Scheduling Inventory Steady Demand Decentralize d

Low Low High

Sothebys Associates Virtual Auction model

Job Specialization General Purpose Scheduling Inventory Steady Demand Decentralize d

Low Low High

Scalability success factors

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