Moving Art Online

D-day is getting closer.

Kenneth Schlenker
Aug 25, 2014 · 6 min read

Why is it that only 5% of the art market has moved online?

Here are a few things that we’ve learned about the art world and why it is hard to move online. However, this is changing fast.

In the past 2 years, we have built Gertrude, helped by a global community of curators and collectors who made it a place to learn, discuss and collect contemporary art. We’re now hosting Salons in 7 cities globally, with more to come.

In the art market, you need to trust people

Stakes are just too high. This holds true whether you are active on the primary market (buying work first hand from the artist or his gallery), or the secondary market (buying from another collector, second-hand).

You need to trust the person you are buying from (is this the right price? is it authentic? is it in good condition? is it even by a relevant artist?), and the person you are selling to (is the buyer going to support the artist? will they pay? are they “fishing”? will they “burn”* the work? will they flip the work for vast profit and harm my reputation on the market?).

It’s hard to trust people you don’t know

The need for trust is so big that people who buy/sell artwork develop a tightly knit network of people they trust, usually over years, within which they deal exclusively (this holds true for private sales, which represent 53% of global art sales in value).

To lower risks, people make it very hard to get in their “network of trust”. That’s why it’s hard for new comers to start collecting, something we know well from building Gertrude. Also, to protect people, most transactions are kept private and undisclosed.

These are the reasons why the art world seems very closed and opaque to the outside world.

Does Anyone Here Speak Art and Tech?

Intermediation is a necessary evil

Because most people don’t have a large personal “network of trust” (it’s very time-consuming to build one), they go through credited intermediaries — private dealers, advisors and auction houses.

These intermediaries can either help buy/sell privately (leveraging their own private networks), or publicly at auction (47% of the global art market).

In both cases, they act as a buffer, allowing buyers/sellers to remain discrete if they wish and providing important guarantees — against forgeries, overpricing, etc. They also guide collectors in what, when and at what price they should buy/sell (advisory).

The first form of intermediation (guarantees) is inefficient and technology will change that. The second form (guiding collectors) is very important and will probably develop in the future as new collectors arrive.

Public auctions have a lot of value to collectors, because sellers get to maximize the value of their artwork (by having buyers compete for it), and buyers are not discriminated against — meaning anyone who can pay the highest bid gets the work.

SAM FALLS, “Untitled (Pattern 4)”, 2013, sold for close to $25k (£15k) in July of this year at Phillips London. Total fees paid to Phillips were of close to 35% (10% seller commission and 25% buyer premium). It took 2–3 months to sell from signing the consignment to receiving a wire. The artist — Sam Falls — didn’t earn anything from the sale.

However, layers of intermediation on the art market have a cost.

Buying and selling artwork is slow, expensive and inefficient

(a) transaction costs are on average 20–50% — in commissions paid by the buyer and/or seller to one or several intermediaries. The commission structure is often opaque, meaning the buyer and seller rarely know who they are really paying.

(b) liquidity is low — because the matching between demand and offer is done “one-to-one” through phone calls, text messages, email and hand shakes (private sales), or because the auction schedule means a seller only has a couple of good occasions per year to sell (public auctions).

(c) friction — it often requires the buyer/seller to deal with multiple people for invoicing, transportation and insurance. It’s not unusual to wait several weeks or months between the time you decide to buy/sell and when it’s done.

Christie’s buyer commission for a $90k artwork is 25%, to which you need to add the Seller commission of approx. 10%.

Existing online marketplaces

Traditional auction houses are making big bets to move online (like Christie’s 60 online-only sales or Sotheby’s Ebay partnership), offering the ability to bid online on fixed auction schedules, essentially mirroring what they have been doing for 250 years, online. Paddle8 is offering an online-only solution with a better pricing (21% fees in total).

This will only make the market marginally more fluid (mostly on the buyer side), but will not fundamentally change the price or friction on the market.

Artsy, Artstack and Artbinder have been very successful at digitizing and making accessible the images of artwork from around the world. But up to this date, we have seen no online marketplace take over a significant portion of art sales (online sales represent in total 5% of the market).

When it comes to buying/selling art online, they offer a way to buy/sell that’s only marginally better than before.

To buy on (primary market), you need to email the gallery who will decide if they want to send you the price and availibility

The problem is that collectors are still frustrated by the inefficiencies in the art world (a, b and c) — and think buying/selling artwork should be as convenient as hailing a cab with Uber (with more guarantees, though).

Conversations are already online

The real online revolution on the art market is that a growing share of dealers and collectors now buy and sell through email, SMS or Instagram.

Buyers of the latest contemporary works [… now] have the confidence to make financial decisions based on photographs. (NYTimes, on JPG Bombing)

You will find most galleries sending high-res JPGs of artwork to their collectors before they are even shown at the gallery or at a fair. On the secondary market, advisors and collectors exchange emails and SMS all day long.

All of them use Instagram to activate their network, find/show new artwork, and even buy/sell when they can (the transactions happen outside of Instagram).

What a marketplace could add

Even though conversations are happening online, there is still no credible marketplace to encompass to entire collecting process — from conversation to transaction, to delivery and insurance.

Also, online marketplaces usually allows people to leverage their existing networks (people they know and trust) in new, more efficient ways.

For example, Airbnb shows that you can expand your existing network in a trustworthy manner — using social proof and peer reviews, so you can trust people you don’t know (you’re giving them your house keys).

Secret App lets you talk to your existing network (people who are on your phone’s contact list) without revealing your identity. It’s a very important trend to watch — because for a large portion of the art market, discretion is key.

It’s a good day to bring the art market online.

We think the art market still needs a place to do business online that is trustworthy, confidential and mobile.

We are working on this.

We think we will bring trust and efficiency to the art market at a scale and level of convenience which has never been attained before.

Sign up here to stay in the loop.

Kenneth and Team Gertrude

BONUS: You may ask, why not use Secret App to buy/sell artwork?

.. This is why.

Welcome to ArtList

Buy outstanding art directly from private collections…

Kenneth Schlenker

Written by

Entrepreneur, formerly @Bird, founder @stellarbaseinc, @artformco and chief host @gertrwde

Welcome to ArtList

Buy outstanding art directly from private collections worldwide. We write stories about them.

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