January 21, 2005
The typical Costco shopper's list: cereal, paper towels, tuna fish,
original Picasso? Although it may not be standard fare, an original
crayon drawing by Pablo Picasso was sold for US$39,999.99 on Costco
Wholesale Corp.'s Web site yesterday.
"Well, it was made available to us, and we always try new things," said Chief Executive Jim Sinegal, who noted that Costco sells mostly prints and lithographs. "What we do in the future will depend on availability and value."
The Issaquah-based wholesaler has sold two original Picasso drawings since it began selling art last spring, both of which were offerings from Jim Tutwiler, an art dealer from Orlando, Fla. Tutwiler reserves the art for Costco for a specified time in his own warehouse and ships it out once it is ordered.
The drawing, which sold after a week on the Web site, was signed and dated Nov. 29, 1970, and was authenticated by Picasso's daughter Maya, considered the final authority on her father's work. The first Picasso drawing, also authenticated by Maya, sold even before it went on the Internet.
Sinegal said Costco sells its art at a markup of no more than 14 percent, which is true for all its products. Private art gallery prices often reflect 50 percent to 100 percent markups because of the cost of the gallery overhead, which includes expensive rent for prime locations, and gallery commission fees that often reach, or surpass, 30 percent of the work's value.
"The cost of merchandising is no different from anything else," Sinegal said of Costco's ability to sell the art at what would be considered bargain basement prices in a gallery. "But you do have to jump through a lot of hoops to assure the authenticity and value."
Jerry Bengis, who as a member of the International Society of Appraisers wrote a letter certifying Maya Picasso's authentication for Costco, said the Picasso would probably sell for double the price in a private gallery.
"Picasso probably did it in a minute and a half, so it would be tough to sell this thing for more than $100,000," said Bengis, who said Picasso probably bartered the drawing for services. "But Picasso's work is the gold standard of art, in that the prices of his work, whether print or painting, increase every year."
Costco, which also sells framed lithographs and prints by celebrated artists such as Marc Chagall, Fernand Leger and Henri Matisse, plans to increase and diversify its offering of fine art, although it has one stipulation: no nudity in the artwork.
"We would like to continue to add other pieces of original art," said Ginnie Roeglin, a senior vice president at Costco. "We have a variety of dealers and a lot of interest from members, so we are looking to diversify."
And although it is unlikely that the distinguished auction houses such as Sotheby's are quaking in their boots at the new competition, smaller, private gallery owners are faced with a new rival: the big box retailer.
"You're talking about David and Goliath, a critical issue for all sectors, from clothing to food, that are battling with Costco and Sam's Club," said Meli Solomon, the owner of Solomon Fine Art in downtown Seattle. "This is uncharted territory for fine art, where buyers and sellers typically want to meet in a more prestigious environment that supports the value of the work."
Professor William Bradford at the University of Washington School of Business said that, eventually, prices in the art world will have to drop to reflect the increased competition.
"We are going to see other major retailers experimenting with this type of sale," Bradford said. "From Costco's perspective, it is just another commodity that they can earn revenues on, like any other item that will sell and reasonably quickly."
"Sellers are often concerned with the ability of purchasers to pay, and dealing with a large business like Costco wipes away that uncertainty," Bradford said. "The money involved in the deal is solid."
Besides providing that kind of insurance to the seller, Costco will refund the buyer's money if there are post-purchase doubts.
Costco's high-end sales have typically included big-ticket electronics such as 50-inch plasma televisions, which can run $6,500. If Costco charged the full 14 percent markup on yesterday's sale, it would have made a profit of $4,913.
Some art vendors, though, aren't worried by the encroachment of Costco on the art world.
"There have always been wholesalers out there who would sell at a special rate," said William Traver, the owner of William Traver Gallery. "It is surprising, but the fact that it is discounted does not effect the art world at all."
Source: eCommerce Times
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