Thursday, April 03, 2008

What should artists do about marketing their art in a recession? - Part Two

Two for £2
coloured pencil on Saunders Waterford HP, 11" x 8"

copyright Katherine Tyrrell

In January I wrote about What should artists do about marketing their art in a recession? This is Part Two. We're still not 'officially' in a recession but.....
Things are bad and they are going to get worse. That was the message from analysts in the City today as they looked at indications of the latest damage being inflicted on the British economy from the global credit crisis.
The Guardian - Banks retreat from risk as credit crunch spreads (3rd April 2008)
The end of the financial tax year in the UK is on Saturday and it seems like a good idea to recap on what's actually going on at the moment in the marketplace - at least in the UK. We've seen a plethora of new stories relating to the credit crunch and the US 'recession' - or more of the same - emerge in the last few days
"Recession is a possibility but recession is a technical term," said the Fed chairman, pointing out that statistics released later in the year would determine whether the US had suffered two quarters of negative growth. "I'm not yet ready to say if the US economy will face such a situation. However, it's clearly been a period of very slow growth stretching back to the fourth quarter of last year."
Ben Bernanke, Chairman of the Federal Reserve
Next week, in Part 3, I'll return to trying to work out what might be the best way forward over the next two years or so - but this time I thought I'd put up the warning signs first and let people provide their reactions and comment on what they'll be doing first - so that post will then be summarise my own thoughts and those of you who want to comment.

Virtually all my references are coming from one paper - The Guardian has been pretty reliable in analysing the credit crunch and associated fall-out in the last six months so I'm sticking with it - partly because it's not one of the "financial papers"! (If that makes sense!)

First a preamble. Judging by comments last time, the situation may not be the same everywhere despite the global nature of the financial markets and the reach of the hedge funds. So if you think the situation is different in your neck of the woods then say so - but maybe check out the money and economics columns in your local broadsheets first?

Secondly, I'm focusing on the wider environment and the housing/mortgage market and the credit situation generally because buying and selling houses and wanting to upgrade present properties are a couple of the main reasons why people buy art. If you have a hefty knock to people's confidence and/or ability to move or upgrade then the art market is bound to feel it.

So what are the main messages which have been coming through loud and clear in the last few days.
The market is being depressed by the credit crunch, with banks hoarding cash and demanding that borrowers put down huge deposits.
House prices likely to fall by a quarter in two years
  • The USA has the fall-out from the sub-prime crisis and in the UK property prices are predicted to drop by 20% in the next two years - after they have now fallen for 5 months in a row.
  • Many people face difficulties in making repayments and/or will be facing significant negative equity in the next two years. It seems likely they won't be looking to move until they can be more certain that the market isn't going to get any worse - unless they can't refinance.
  • People looking for property is at an all-time low - which also means that people with money will be driving very hard bargains. In Florida, there are now bus tours for those shopping for repossessed properties.
  • However a lot of people who used to have 'mega' money - because they worked in the financial markets in the City or on Wall Street - have lost their jobs or will do so soon. People with transferable skills will be OK - others won't.
  • Consequently, quite a lot of people without an income (either now or under the potential threat of a drastic loss in income or home) will be thinking about offloading assets and downsizing - which possibly means lots of redundant art coming up for auction - which will then compete with any new originals being offered for sale - in galleries or online.
  • The 'buy to let' market may well fall over in the next two years in the UK
  • At the top end of the market, there are lots of investors looking to get out of their investment funds and banking shares as the banks and investment houses are beginning to reveal the full extent of their losses (at last!). Yet more big banks are losing their Chairman (the latest being UBS) as they confess to the full extent of their billion $ losses.
  • As a result investors are buying gold - and they're buying art - but at what are, in my opinion, inflated prices. Let's face it - art is not gold unless it's an old master.
Stocks and property are wobbling, credit has evaporated, but in the surreal world of London's auction houses, which this week staged a series of bellwether auctions of impressionist and modern art, the bonanza goes on.
The Daily Telegraph - Art market holds steady as stocks and property wobble - By Tom Stevenson
  • In the meantime galleries serving the low/middle end of the market (ie £200+ prices) are finding the going tough and a number are 'shutting up shop'.
  • One of the issues that is clear is that statistics for art markets are confusing as they tend to cover all market sectors - and it's very apparent that different sectors have different prices and different buyers - and the latter all experiencing very different situations at the present time.
Now last time it was suggested that I was being unnecessarily pessimistic. However I'd like to point out that the results to date suggest otherwise plus I've got 'blink' on my side. I 'know' it's going to get a whole lot worse before it gets better. (This from a woman who has a track record! Which basically means I've predicted 'stuff' before eg I told my investor friends that M&S were 'in the toilet' before it became apparent in the share price in the financial markets. However I'm a watcher rather than an investor so make of that what you will).

I'm a pragmatic at the end of the day. In my view it's always better to plan for the worst case scenario and be pleasantly surprised than to do otherwise and experience a very nasty shock. But horses for courses - it's your choice!

I listed potential strategies for facing a recession back in January and a number of you added a number of very constructive comments about what you're planning to do.

So - how's it going? What are you doing that's different?

Or are you now finally persuaded that the current situation in your neck of the global woods means that this is something which will mean you need to adjust your marketing strategy?


  1. I love how you make such ordinary everyday things look special.

  2. Katherine,
    This is interesting, we are in the same thought pattern. I just posed a similar question in my Weekend Chat Line.

    The economy is definitely a concern as I begin my art fair season this spring. I was going to expand and do some higher end shows but instead decided to stick with the familiar...where my expenses are less and I've already developed a following.

    I've also worked this year to increase my internet presence and will be doing more "home town" marketing.

    This is just something we have to get through. And the point is "get through"...if this is to happen we need to be smarter and more creative in our marketing. The situation cannot be ignored.

  3. Adam - thanks for the cartoon - it did make for rather depressing reading didn't it given I've split off 'what to do' from 'Is this real?'

    It seemed to me that back in January we weren't too sure whether it was going to get bad. Whereas since then all we've heard just confirms the overall direction - and the question now seems to be "How long?" Two years is a very different proposition to two quarters.

    As Marsha says - it's not something we can ignore and we need to find ways of 'getting through'.

    All things must pass - but it'd be rather nice to know more about how long this particular economic juggernaut will take in rumbling past.

    Marsha - I'm not surprised we're in the same thought pattern. I know I've been feeling bludgeoned by more tales of woe in the last week or so. I'm coming across to your blog to have a read of what you have to say.

    Jeanne - I was just so struck by what we take for granted as 'everyday'. Not being blessed with the warmer climes of California, pineapple have always been rather expensive over here - and now I can buy two for a still life without batting an eyelid! They were literally 2 for £2! It just seemed odd to have such an offer in the supermarket which is right next to where all the big banks now congregate on Canary Wharf. A sign of the times maybe?

  4. Art buyers and collectors are a special breed. They may suffer from economic situation,but they will stay with their interest in art and they will continue to buy. The internet has become a valuable tool for collectors to investigate certain market segments to find emerging artists in their field of interest. I expect that smaller budgets will work in favour of emerging artists rather than established ones. In other words I see good chances coming up.

  5. Good point Martin - in my view it's very much about using a mindset which enables people to take advantage of the current situation - or at least ride it out - rather than becoming a victim of it.

  6. Katherine I watched a programme recently (on one of the UK channels, you may have seen it, about reasons for the current US recession and it's effects) and the presenter spoke to many well known business men (Branson, Soros etc) so he had good sources - those that made the mega money may have lost their jobs but they gambled with company money, not their own. Basically there are a lot of seriously wealthy people now with time on their hands - for example finding hotel space at luxury hotels is very difficult and companies set up to cater for the whims of wealthy clients are seeing an upturn! I would say there is a market there for artists to exploit if they know where to look.

  7. Good point - and yes I think I watched the same programme as you.

    However since it aired, we have had
    * Phillip Green (who owns half of every high steet in the UK) predicting pain for retailers.
    * IKEA warning that their sales were being hit badly by the housing and credit crisis and
    * the IMF saying we are in the worst financial crisis since the Depression!

    So yes, opportunities for some - but we can't all hike our prices and chase the 'bad boys'! ;)

  8. katherine - glad you liked the cartoon

    re-how long : eleven year cycles was what a knowing friend of mine says.

    mind you, with the fast arriving ecological crisis, maybe we're all up for topsy-turvy ride....


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