How digital platforms are changing the art market
Digitalization influences both the way artists create art as well as the market and its accessibility. Digital platforms act as mediators and multipliers: They bring galleries and customers together and open up a global market for artists and small investors that was previously reserved only for large international players.
A visit to the gallery was still possible for art lovers for a long time despite the corona pandemic: Galleries were still allowed to exhibit, receive visitors and sell works of art even in November 2020. In contrast to museums or theaters, which are classified as leisure facilities, galleries have retail status. Despite a lack of cultural alternatives, however, the hoped-for onslaught of galleries and the associated sales failed to materialize.
On the one hand, because the wealthy group of foreign art lovers was largely eliminated due to global travel restrictions. According to the Gallery study 2020 of the Federal Association of German Galleries and Art Dealers (BVDG), large galleries generate 40% of their total turnover from international customers, in Berlin even more than half (52%).
On the other hand, collectors have often been part of an older target group, which has often avoided crowds due to the risk of infection and has therefore postponed the enjoyment and purchase of art beyond 2020. However, by restricting face-to-face events and physical contacts, the corona pandemic has also promoted new trends such as online viewing rooms, online auctions or sales contacts via digital channels such as platforms or social media.
Digital disruption is reaching the art market
According to the gallery study, German galleries converted only 336 million euros in the first half of 2020 due to the drastic effects of the corona pandemic and expect a loss of more than 40% on average for the full year. A major setback for a fast-growing market in and of itself, as the local gallery sector was able to almost double its turnover in 2019 from 450 to 890 million euros compared to a survey in 2012. Particularly remarkable: Around 15% of sales were achieved online in 2019, while digital platforms did not yet play a significant role in 2012.
Increasing digitization is particularly welcome for smaller galleries. This is because these are subject to particularly large economic risks: They bear relatively high fixed costs for representative spaces in prime metropolitan locations with comparatively low sales.
In addition, there are sometimes exorbitant costs for participation in trade fairs. However, due to the elimination of important but at the same time expensive and therefore risky art fairs such as Art Cologne, the profitability of some galleries even rose in 2020. Although they achieved less turnover, they were able to save 40-50% of their trade fair budget.
The elimination of physical trade fairs as a presentation platform also accelerated the digital art market, which could lead to a significant reduction in over 300 art fairs worldwide and expensive, permanent exhibition space in the longer term. Because virtual exhibition spaces, animated paintings and online ordering not only work on a large scale, but also for smaller galleries.
Galleries need more cooperation rather than competition
In addition to new, digital business models, cooperation between large and small galleries has also gained in importance in the past year, which are ultimately profitable for all parties. For example, the “Hiscox Online Art Trade Report 2020”how the world's leading art houses are becoming platforms that offer smaller galleries and art fairs the opportunity to use their spaces and digital resources to exhibition and sell their works. With the so-called “Platform,” David Zwirner, for example, initially created a presence for New York galleries, which was eventually extended to London, Paris and Brussels.
Although exhibition and meeting places for collectors are increasingly shifting from real to virtual places, the classic gallery space still has its place. This is because networking and long-term contact with artists and customers is particularly important for young, not yet established galleries. On the one hand, because visionary gallery owners can recognize and build up talent. On the other hand, because galleries depend on long-term placement expertise and a growing clientele of loyal collectors.
Of around 14,000 artists presented by German galleries in around 4,000 exhibitions per year, only a few market their art themselves. The vast majority of artists depend on galleries as a “catalyst” to display and sell their work. However, their business success often depends on a few collectors from the gallery network.
Digital platforms connect artists and investors
It would therefore be beneficial for the art market if, through digitization, borders were more permeable and market barriers were removed and regional art markets could position themselves globally. This would make it possible to strengthen artists and make them more easily accessible to collectors interested in art all over the world.
Accordingly, virtual showrooms and online auctions offer real added value for exhibitors and collectors: They make art accessible worldwide, provide information and offer sales and investment solutions. Digital platforms can play a key role in this by bringing together partner networks of galleries, art experts, reviewers and insurers and enabling an optimal selection of art objects. In addition, investors can actively participate in their investment by being able to view the works of art through interactive exhibitions or tours. With innovative digital solutions such as tokenized securities, even retail investors can invest small sums in works of art.
Whether analog or digital: Art is becoming increasingly popular, will always have a high emotional value and is therefore regarded as a prestigious and value-stable component in the portfolio.
