As any other industry in this most unusual year, the fine arts market has not been spared by the constraints brought about by the Covid-19 pandemic. This article looks briefly at how each market player has been specifically affected and what trends and opportunities might arise from this experience.
How has the art world being affected so far?
Art galleries around the world have reported a median decrease in sales of 43%, with galleries having a turnover of US$500,000 or less bearing the brunt of this spending contraction. This is despite a considerable increase of 37% in online sales from 2019.
These figures tell us that for galleries online sales remain still a small percentage of total sales and they have not been anywhere near sufficient to cover the severe losses caused by the pandemic. One of the main challenges is the time and cost required to implement an attractive and user friendly online platform, not to mention the cost of advertising it online. In these difficult economic times, only very few international galleries can afford to take this step and some might even transform themselves in due course as third party providers of online gallery space for smaller sellers, thereby adding a new revenue channel to their business.
All major art fairs have been cancelled in 2020, and one would expect less famous counterparts to have suffered the same fate. Sometimes online viewing rooms have been set up to provide some form of interaction with the general public but these appear to be limited attempts as opposed to a proper experimentation of a new type of art experience.
From 2015 to pre-Covid 2019, sales though the main auction houses grew by an astounding 58%, from US$636 million to US$1 billion. Whilst it would be challenging, if not impossible, for auction houses to maintain the same rate of growth in 2020, online sales are turning out to be more profitable in the context of auctions than in direct sales from galleries. For example, Sotheby’s reported not only a yearly 131% increase in online sales as at May 2020 but, more importantly, a 74% increase in the average price of the work sold online. This indicates that Sotheby’s has been able to successfully generate enough interest to entice their customers to follow and bid online on big ticket works of art, which would traditionally have been acquired through in person bidding.
The private sales sector might see a resurgence in the next few years as private and institutional owners who are under pressure to raise cash might choose to sell some of their works of art within their private network in the hope of a discounted but highly discreet and fast sale. For collectors who keep their ears to the ground in these troubled times, there might be excellent opportunities to find real bargains in the market that might not reach galleries or auction houses.
Even though without them the whole industry would obviously not exist, very little attention has been paid by both private studies and government stimulus plans on the impact of the pandemic on artists. Being a full time artist is a brave and often financially difficult choice and one can safely suppose that the pandemic might become the nail in the coffin for many people who chose to follow this passion or were hoping to do so. Unless sufficient attention is brought to the financial plight of artists, we might end up unnecessarily losing a great deal of creative talent and realizing it too late.
What can we Learn and Expect from these Changes?
What we can learn from 2020 is that buyers and collectors are still very active and have responded well to online initiatives that are properly structured and advertised to them, although this is still only possible for large players in the market. In the near future, as clients get more used to following art sales online, one can expect this segment of the market to continue to grow. In the longer term and post-Covid, however, it would not be surprising if the proportion of online sales begins to decrease, particularly for major works over US $1million, to readjust to a world without social distancing. Despite all of the great advancements in technology, there is still nothing that comes close to experiencing a work of art first hand, as well as thrill of sitting in an auction room.
For the more astute and pro-active collectors, the private market in the next few years might bring about some interesting opportunities as the world takes full stock of the financial difficulties brought about by this long period of economic stagnation. For collectors looking to sell, instead, this might be the ideal time to consider estate structuring and strategies to enter the market at a more financially opportune time.
Finally, we expect that, in line with the pre-Covid trends, financial and insurance products related to fine arts will continue to grow providing both sellers and buyers with more options on how exploit or acquire art-related value.
How can We Help?
Kelmer is able to help clients managing their collections both from the selling and the acquiring perspective, whether it be finding the right experts to carry out technical work and authentications, carrying out financial analysis, presenting works to major auction houses or galleries for appraisal and sale, or planning a more discreet sale or acquisition within Kelmer’s international fine arts network.
If you would like to discuss your fine arts interests and plans, feel free to contact us.
– The Impact of Covid-19 on the Gally Sector, an Art Basel and UBS Report
– Hiscox Online Art Trade Report 2020
Piermario Porcheddu, Director at Kelmer Australia PTY Ltd
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