A Humble Lesson for Art Globalization: Key Findings in Art Economics Report

Dr. Clare McAndrew has just published on September 10th, a special edition report presenting The Impact of COVID-19 on the Gallery Sector. The key findings in this research analyze the changes in employment, sales outlets, strategies, exhibitions, and collector perspectives.

As expected, the immediate consequences of the lockdowns, travel bans, and supply chain shocks have destabilized the art market economy through the first half of 2020: galleries have downsized; staff have been furloughed or made redundant; exhibitions and operations have been substantially curtailed; and sales have contracted in the double digits.

As the business model of the art market is based fundamentally on discretionary spending and strongly dependent on in-person contact, values (and volumes) have dropped significantly with a reported decline of 83% in the value of their sales.[1]

In the absence of usual business strategies, the growth of online sales accelerated in 2020. Online strategies and tools also moved to the forefront and became critical for some galleries’ survival. Besides galleries, the online viewing rooms of art fairs and a range of innovative auction platforms also expanded the scope of digital sales available within the art market in the absence of physical events. In 2019, the share of online sales of the galleries surveyed was 10% of total sales, with the majority of those (7%) carried out directly by the galleries via their own websites, social media channels, online viewing rooms, or email. The market may have resisted online sales prior to COVID-19, but digital technologies were already necessary means for galleries to connect with new buyers. Of those dealers reporting online sales, an average of 26% were to new online buyers with which the gallery had never had personal contact. Interestingly, new online buyers were more critical for smaller galleries, accounting for 35% of the online sales of those with a turnover of less than $250,000. For those with a turnover of greater than $10 million, this share was only 18%.[2]

Although the COVID-19 pandemic distracted many collectors from focusing on their collections in the first half of 2020, the survey indicated that most had continued some activity in the art market. Most collectors (92%) across all regions had purchased a work of art in the first six months of the year.[3] The value of spending was also at a relatively high level for some collectors. Less than one quarter of collectors buying in 2020 had spent less than $50,000, while a majority (56%) had spent over $100,000, including 16% spending over $1 million.[4]

Although collectors were active online, it is still not necessarily their preferred means to interact with the art market, especially in high-value transactions. Despite the widespread use of the online platforms during 2020, when asked how they would prefer to view art for sale, 70% of the collectors surveyed opted for attending a physical or offline exhibition at a gallery or art fair versus 30% who preferred using online viewing rooms or other online shows. The most important reasons given for preferring offline were being able to view and better assess the works’ scale, condition, color, and other physical features (with 80% of the sample viewing this as very or extremely important). Most collectors also placed a high or very high value on the experience and sense of discovery and excitement of viewing works in person, alongside being able to discuss these discoveries and having other forms of social contact with artists, galleries, and other collectors at live events.[5]

In terms of their interactions with galleries during the crisis in 2020, many collectors were only interacting and purchasing from galleries they already knew. The survey revealed that 41% were focusing only on galleries they had bought from before and had established relationships with, while a further 37% said they were doing this alongside being open to working with new galleries. Some collectors were doing so to reduce risk in uncertain times, others were also actively supporting their regular galleries through a difficult phase, and there was a very high level of awareness and concern regarding the precarious position that some businesses were.[6] Furthermore, this study shows that one third of collectors were also sticking to only buying works by artists that they were familiar with or had bought before.[7]

It seems that this scenario is not going to be changing any time soon, since there is still some reluctance about travelling in 2020: just over half of the sample said they would not consider attending local gallery exhibitions or fairs, while over 70% said they would not be willing to plan for attendance at overseas fairs or gallery shows before the end of the year.

It is essential to highlight that this report does not provide signs of a slowing interest in the art market. On the contrary, Of the collectors surveyed, 59% felt the COVID-19 pandemic had increased their interest in collecting, including 31% saying that it had significantly done so.[8] Furthermore, during the presentation of this report, Paul Donovan, Global Wealth Management Chief Economist of UBS, stated that forced savings during lockdown had left some UHNWI and HNWI consumers with extra money to spend. However, mobility is a key factor. While there is considerable interest in acquiring artworks (especially from known artists), the international travel ban and the logistic nightmares are substantially delaying the business closing of deals.

The pandemic has had a humbling impact on all industries, including the luxury segment and the $64 billion art market, where a strong correlation with wealth exists. Yet many businesses have demonstrated resilience and adaptability in the face of the crisis. This is why in Artemundi we are doubling our efforts to challenge these adversities and take the advantages that have risen in the current scenario.