Beruflich Dokumente
Kultur Dokumente
Case Analysis on
Submitted by
Nitam Baro 18021141075
Sanath Minz 18021141096
Sanjay Sijui 18021141098
Sagar Kumar Sah 18021141122
Question 1: What created the opportunity for Saffronart?
V. Revenue Source:
70% revenue of Saffronart’s revenue comes from auction of art works. The
auction process happens online over a period of 2 days, in contrast to traditional
auction houses where auction happens over a few hours. This longer time slot
gave the bidders more time to consider their purchase and make bids, often
allowing them to stretch previously established budget.
Three auctions were held every year and was main source of revenue for
Saffronart.
VI. Fixed Price Offerings
One of the major drawbacks of physical auction houses was that they did not
have any steady revenue stream. To hedge the risk of depending on a single
source of income, Saffronart also sold art online. However, the best works of art
were sold through auction, as it generated the highest profitability.
Contemporary Indian Art
Saffronart further, widened its portfolio of offerings by diversifying into
Contemporary Indian art. This segment found a very receptive audience among
the young mobile art lovers and quickly started contributing significantly to the
revenue stream.
Question3: What have they done right & what they have done wrong?
Answer: The Vaziranis had ventured into a business space where the
competition was weak. There was no existing industry structure to mediate
between artists and consumers of artistic creations. By entering into the
secondary market, they were able to influence the demand for modern Indian
art. Taking advantage of the internet boom, they were able to capitalize on the
interests of tech-savvy Indian diaspora. As the internet penetration increased,
they were able to focus on Indian market too.
The traditional art galleries do not put price on the art works, because they want
to leave room for negotiation. But, being transparent on prices and providing
archives on the histories of artists and their works, Saffronart gave a new
dimension to the market. By opening the art market to the whole population,
Saffronart was able to bust the vulnerability of the customers to information
asymmetry. Though this process they were able to do three key things: spotting
opportunity, acting on it and legitimizing them. They have succeeded in gaining
the acceptance of the external stakeholders. They have established trust with
different art galleries and consigners which helped them in sourcing quality art
materials. By conducting exhibitions before the auctions and later permanent
galleries, they have established authenticity for the value they offer to the
customers.
In a market not well established and studied in depth, the Vaziranis tried to
educate the customers and thereby building reputation for honesty and
professional integrity. This is particularly critical when the market is not known
for openness or transparency. By making available the history of each bidder,
they removed the suspicion of auctioneer-generated fictitious bids. This gave
way to the entry of a lot new customers who were otherwise skeptical on the
auction houses. The company also gained in studying the buying behaviour and
patterns.
By entering into a market space hitherto untested, the firm was able to create a
new market. The market for modern Indian art has widened and deepened.
Though Saffron art had the first mover advantage, the industry was not having
any significant entry barrier. This led to the entry of many new auction houses
which posed a competitive threat to Saffronart. The bargaining power of
suppliers and customers also increased with the entry of new players. Many
galleries, even forward integrated into secondary market as auction houses. The
initial focus of the firm to establish trust and not enter into contacts with
established galleries translated into lower switching cost for the suppliers. This
led to difficulty in sourcing of high quality art works. Global majors like
Christie’s and Sotheby’s had established partnerships with major galleries and
at the same time Saffronart tried to compete in terms of reducing seller’s
commission, which is not sustainable for a long term.
While establishing network in the market, the Vaziranis played the entire role in
trust building endeavour, which later on posed a challenge to the firm during
expansion. As the firm expanded in business, they found it difficult to
individually interact with each supplier or customer. Thus there was a lack of
development of a professional team as the face of the firm apart from the
Vaziranis. The promoters of the firm lacked the foresight to develop a
professional team as the business grew exponentially. This was evident when
individuals were reluctant to interact with other Saffronart employees other than
Vaziranis.
The restriction of operations to the Indian geography translated in to a
disadvantage to the firm because other international players were able to source
art works from outside India and also access to customers outside India. The
firm also did not take into account the cyclical nature of the market and not
diversified large enough instead of focusing into small number of products and
geographies.