Art Shipping: Too Small or Perfectly-sized? Can you build a valuable business in this niche market?

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Levi Strauss is the archetypal “picks and shovels” success story, moving to San Francisco in the 1850s during the California Gold Rush and achieving success by selling miners dry goods and other basic needs. His business outlived the boom and bust of the time and eventually grew into a multi-billion dollar denim business.

The art market — also historically prone to booms and busts — is valued at ~$45b annually, although less than 10% of that ($3.8b) is transacted online. Startups like Artsy have raised significant capital ($100m in disclosed financing!) to make it easier for consumers to discover and transact online. It remains to be seen how quickly art collectors and lovers will move their spending online. But online or offline, fine art is expensive and costly to ship, and the process by which the art world ships goods hasn’t experienced much in the way of innovation. With the art market increasingly global — the number of international art fairs has increased by 500% in the last ten years — shipping is increasingly important. Rather than betting on a behavior change in a considered, super-expensive purchase, we wonder whether the ‘picks and shovels’ startups in the art sector — those serving existing behaviors primarily — have been underappreciated.

Today, we initiate coverage on Art and Collectibles Shipping Logistics with our first report on the sector. We are adding this coverage to our [Disrupting Luxury] Playlist, which includes our Fine Art Marketplaces coverage. We have identified 8 companies that compete in this sector by connecting individuals and businesses with third-party shippers who can handle rare, expensive or collectible items.

The 8 startups in this sector have cumulatively raised $138m. Uship is the funding leader with $70m in disclosed financing from DB Schenker Rail (UK) Ltd, Kleiner Perkins Caufield, and Benchmark. ARTA, focused solely on the art vertical, has raised capital from a cross section of industry stakeholders.

How big is the opportunity?

Worldwide logistics execution, a focus of companies in this sector, no surprise, is a large market, estimated to be €2.3t ($2.7t) annually. Of course, only a small subset of that total accounts for fine art and collectibles. Adam Fields, founder of ARTA, believes the global fine art transport market is worth $12b. It’s probably bigger if you include freight forwarding and insurance, two obvious adjacencies.

What’s wrong with just sending it through FedEx?

Is there a need for art shipping? The broader shipping industry is largely dominated by a few companies: UPS (Ticker: UPS), FedEx (Ticker: FDX), and the United States Postal Service. However, these companies’ services are not necessarily suited for shipping goods that (a) cannot fit into a standardized box, (b) are valued over $70,000, and © require very specific instructions for care. In these cases, customers must find a shipper that can meet these needs.

But shipping expensive, delicate collectibles or rare items, such as fine art or antiques, has two primary problems: (1) price and (2) reliability.

  1. Although price is variable and depends on the weight of the item and the shipping distance, price transparency is often not available. Customers need to visit different sites to get individual quotes, comparing price options is time-consuming and potentially unrealistic.
  2. When shipping a delicate collectible with high monetary or sentimental value, reliability and safety are imperative. Finding a shipping option that is trustworthy, capable and tailored to specific items, however, can be time consuming and challenging.

Companies in this sector apply new models to the Art & Collectibles Shipping Sector in order to provide better solutions to customers. They do this primarily by offering a marketplace of options through which customers can compare various aspects of shipping options, rather than manually checking price quotes from individual companies. Options are typically vetted and screened for specific types of moving jobs, so customers can be confident that items are being handled by the right professionals.

This piece discusses some of the advantages of ARTA’s platform and notes:

“Instead of waiting days to obtain and compare prices, ARTA offers a platform where anyone — whether a gallery, auction house, collector, or art adviser — can get quotes from the top 300 art shippers around the world”

ARTA is the only company in the sector that specifically handles fine art. The company is willing to facilitate shipment of fine art of all sizes and values. By being a first-mover in this space, ARTA could gain an advantage by acquiring the bulk of the supply (the shippers) and subsequently the demand (galleries, museums, collectors, art fairs, etc.). For ARTA to succeed, it will have to acquire a large and loyal customer base to defend itself against much larger competitors.

Noting that establishing a loyal customer base will be critical, we view the participation of auction houses, galleries, artists, and collectors in Arta’s cap table favorably. It suggests to us that the company is solving a problem that impacts multiple stakeholders in the fine art ecosystem.

Art shipping is a niche. However, “too small” markets can be quite lucrative. And if the market is indeed $12b (+ freight forwarding and insurance), we don’t think it’s that small at all. To wit, with moderate market share and take-rate assumptions, it’s not tough to imagine a business in the sector doing $100m of revenue.