Counting the cost: how Covid-19 has clouted the art market

It’s no secret that 2020 is proving to be a bad year for the art market. The pandemic has caused chaos in the supply chain in the first six months via the cancellation of just about every art fair and live auction along with gallery shows – not to mention non-selling exhibitions and biennials.

But what exactly does ‘bad’ mean in this context – exactly how bad has it been for the sellers, and for the buyers? And how has the art market reacted?

Dr Clare McAndrew, the specialist art economist behind the influential Art Basel / UBS Art Market report published each year, has been finding out. The result comes in a new study, again for Art Basel and UBS, with the commendably explicit title The Impact of COVID-19 on the Gallery Sector: a 2020 mid-year survey.

This half term report is based on a survey of 795 galleries specialising in modern and contemporary art (so not Old Masters) who were asked how the pandemic had affected them in 2020. Alongside that was a survey of 390 high-net-worth collectors, those with a current net worth above $1 million.

The report is a meaty 116 pages in length, so we’ve distilled the key points for you.

Galleries

Galleries have been laying off staff – an average of four employees each, with around half of the losses being full-timers. 

Galleries have been closing their doors. Nearly all galleries (93 percent) had shuttered their premises for some time in the six month period, the average closure period being 10 weeks. The survey was distributed in early July, at which time 79 percent of galleries said their physical premises were open.

Sales are down. Comparing the first six months of 2020 with the same period in 2019, gallery sales were 36 percent lower on average. Smaller galleries, those with turnover below $500,000 pa, reported the largest declines.

Recovery will be slow. Only one in five of the galleries polled expect sales to pick up in the second half – and while most felt 2021 would be better, only 45 percent of the galleries expected full-year sales to increase from 2020.

Online selling works … for some. The galleries’ online business rose from 10 percent of total sales in 2019 to 37 percent in the first half of 2020. Of those dealers reporting online sales, 26 percent were to new online buyers – meaning customers with which the gallery had had no personal contact before. (Not all galleries have found online a good option, however – around a quarter of the sample reported making no online sales at all so far in 2020.)

Buyers

Collectors still collect. Most HNW buyers remained active in the market, with 92 percent purchasing a work of art in the first six months of the year. A majority of them had spent over $100,000 in the period, including 16 percent spending over $1 million. On average each collector bought four works in the first half of 2020 – against six in the whole year for 2019.

Online viewing works … for some. The online viewing rooms of art fairs and online third-party platforms were used by just over one third of the collectors to buy art in the half-year; fully 32 percent had bought directly using Instagram. But collectors still like in-person visits; when asked how they would prefer to view art for sale, 70 percent of the collectors surveyed opted for attending a physical or offline exhibition at a gallery or art fair versus 30 percent who preferred using online viewing rooms or other online exhibitions. And despite ongoing restrictions on travel and events, most collectors (82 percent) were still actively planning to go to exhibitions, art fairs, and events in the next 12 months.

COVID-19 is good for collectors. Among the HNW collectors surveyed, 59 percent felt the COVID-19 pandemic had increased their interest in collecting – including 31 percent who said that it had “significantly” done so. “Young and wealthier collectors appear to be most optimistic,” the report says – which is what you’d expect. Over 60 percent of millennial collectors say they’re optimistic about the market’s performance in the next six months to a year, compared to just 24 percent of boomers.

Art fairs

Art fairs aren’t guaranteed a future. “There is evidence of a potential knock-on effect of the pandemic for art fair participation in 2021,” notes the report. The cancellation of art fairs meant that galleries’ sales via this channel were radically reduced from 46 percent in 2019 to 16 percent in the first half of 2020. Looking forward, only a third of galleries thought art fair sales would improve in 2021; and galleries reported that they plan to reduce the number of fairs they will exhibit at in 2021, with the average dropping from four to three fairs – though the biggest decline was for the largest galleries, with at  sales of between $250,000 to $500,000 planning to keep their attendance more stable (at an average of three fairs).

Collectors won’t be going to so many art fairs. HNW collectors attended an average of three art fairs  (two locally and one overseas) in 2019; the survey suggests they expect this to drop to two art fairs in 2020,

The cost of art fairs was brought into focus. Art fair expenses were the single largest component of total costs for galleries (29 percent on average in 2019, higher than payroll or rent). Savings on art fairs helped to compensated for the lack of sales since other costs remained relatively stable.

Galleries’ priorities have changed. These are the top four concerns reported for the first half of 2020:

  1. Increasing online sales and exhibitions: 76% of respondents (vs 17% in 2019)
  2. Reducing costs / boosting profit: 73% (27% in 2019)
  3. Relationships with existing collectors: 73%
  4. Incorporating new technologies: 55%

Compare that with the top four priorities last year:

  1. Art fairs: 79% (just 20% in H12020)
  2. Current artist exhibitions: 62% (40% in H12020)
  3. Widening the geographical reach: 57%
  4. Relationships with existing collectors: 53%

In other words, art fairs have dropped right down the list of priorities; cost optimisation and online selling have leapt up; and the need to maintain relationships with existing customers remains important.

The report is available as a free downloadable PDF here.


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