Is the Art Market Primed to Expand Massively in the Future?
Back in 2014, Carter Cleveland, founder of Artsy.net, an online resource for art education and collecting, made 6 bold predictions about the future of art. Among them was a prediction that the art market would expand massively in the future. The rationale for his optimism was twofold. Firstly, he pointed to a great, untapped potential on the demand side of the market: for every household that collects art, there are 37 with the same average income who don’t. The second reason was cultural in nature: `he posited that if art becomes a ubiquitous part of culture, collecting art would become just as common a pastime as buying any other luxury item.
While the online art market has seen fairly rapid growth in the last five years, the traditional art market has not lived up to this expansion prediction thus far. When Cleveland made his prediction in the summer of 2014, the global art market was valued at about $66 billion annually; by 2018, the market was valued at $67.4 billion according to 2019 Art Basel and UBS Global Art Market Report, registering barely any growth. Certainly, the Internet and Instagram in particular as a popular communication channel for art has made it much easier to discover art and has helped to bring art into the cultural foreground. And yet, despite the unprecedented accessibility of art in our time, the overall size of the art market has not changed significantly in the past decade. Collecting art doesn’t yet appear to be as popular for households with disposable income as buying other luxury goods such as designer watches or handbags. Expanding the pool of collectors is reportedly a major concern for art dealers: the 2019 Art Basel and UBS Global Art Market Report claimed that finding new buyers remained the biggest challenge cited by dealers in 2018.
So, what’s holding the art market back from a major expansion?
One plausible, if not the only, explanation lies in the opacity of the art market, especially the tendency for prices to be veiled in secrecy. This curious aspect of the industry sets it apart from other markets dealing in luxury goods. While it’s true that the art market is less opaque now than in years past, opacity remains a trademark feature. Sales prices from public auctions are available from a number of resources, such as online auction house catalogues, ArtNet’s Pricing database, and reports delivered through ArtTactic’s Analyst annual membership plan, but primary market prices and prices for sales transacted privately through dealers, galleries, and auction houses are rarely disclosed.
Due to the idiosyncrasies and inner workings of the traditional art market, art dealers have historically had good reason to favor non-transparency around prices, especially in the context of high net worth collectors. A dealer’s reputation is often a starting point in setting a price for a work by a new artist, and branded dealers like Gagosian who carry greater provenance owing to their celebrity status can command higher sale prices than the typical mainstream galleries can. Dealers also cultivate relationships with choice collectors by offering them discounted prices that are not given to other buyers. If a dealer knows a collector will demand a higher discount, they might raise the quoted price to protect their margins. Dealers also try to avoid price decreases for fear of signaling that an artist they represent has fallen out of favor and souring the relationship with the artist. When a new customer enters a gallery, their body language can affect the price a dealer offers them. All of these considerations and norms have encouraged a standard practice among dealers of never posting sales prices publicly.
The problem with maintaining secrecy around prices in a digital age of abundant information however, is that it runs counter to prevailing market trends and consumer sentiments. Online marketplaces have globalized markets on a scale never before seen, and consumers have come to expect not only easier access to markets as a result, but also the transparency of information that allows them to easily search for, filter, find, review and compare any luxury goods they may wish to purchase. A lack of price transparency looks increasingly out of step with wider market trends today and is evidently something aspiring art collectors find problematic.
When asked to describe the most important factors when buying art online, according to the 2019 Hiscox Online Art Trade Report, 87% of respondents said “price transparency: clear pricing and the possibility to check past and current prices”. Artsy reported last year that for all sets of artworks published on the platform, inquiries were between four and nine times more likely to turn into a sale on artworks with their prices publicly available. The disconnect between the practice of hiding prices for artworks and the expectations of modern consumers was nicely illustrated by a 2019 ArtNet news story describing the reaction of collector and art trader Stefan Simchowitz after he had asked a gallery’s front-desk attendant about the price of a painting and was told that only the sales director had access to that information. “What do you mean, you don’t know?” he asked. “You work here.” There is clearly a strong argument to be made that publicly available prices can not only increase sales to seasoned art buyers but also help to convince new buyers to enter the market.
There is a great opportunity today to improve information transparency in the art market through the distributive power of online platforms geared to provide more visibility into the range of artwork available for sale and to make transactions simpler and easier. But the underlying problem of poor price transparency is less technical than it is cultural: many art dealers are hesitant to change their old habits of secrecy around prices, especially those who have been operating successfully in this manner for many years. Dealers perform a variety of roles in the art trade: among them, they act as representatives for new artists, and undertake a range of marketing activities on their behalf; they act as advisors to collectors and may represent their interests, and are instrumental in the execution of many private transactions. In all of these capacities, they exert a powerful influence on the flow of pricing information in the art market, and they, therefore, play a pivotal role in any efforts to make that flow of information more transparent to the public. As such, they would be well served to heed the Clay Shirky principle that ‘Institutions will always try to preserve the problems of which they are the solution’. A greater willingness on the part of dealers and gallerists to post prices publicly and leverage the power of distributed, global online platforms to make them highly accessible would massively reduce the art market’s opacity. This might, in turn, bring about a long-anticipated, but thus far elusive, massive market expansion.