Wednesday, December 23, 2009

Reviewing Art in 2009 (#2) - the art business

The above chart is one of the big stories for individual artists marketing their art in 2009. Read on to find out more about it and other ways in which the art business changed in 2009. I've also provided a set of predictions for 2010 at the end of each section.

Art Economy

The world art market had already been losing momentum for a while after rising vertiginously since 2003. At its peak in 2007 it was worth some $65 billion, reckons Clare McAndrew, founder of Arts Economics, a research firm—double the figure five years earlier. Since then it may have come down to $50 billion.

The Economist - A special report on the art market Suspended animation (Nov 26th 2009)

The macro perspective

Let's just take a minute to remind ourselves of what's happened in the last year. This post last year - Art in 2008 - A Review (Part 2) - painted a very gloomy picture - and I wasn't far wrong!

This time last year we were faced with the prospect of a rerun of the Great Depression. The economy was shrinking very fast and there was general gloom and doom. As the year started there was a seemingly endless list of major high street companies going bankrupt. As the year progressed, measures were taken to cut costs. Business closed, employees were laid off and salaries were cut.

In the end the bailout of the banks and the money pumped into the markets by governments around the world who were determined to help us spend, spend, spend did help to boost confidence and we avoided the recession getting any worse than it might have done.

As a result companies were able to borrow very cheaply, stock markets have rallied in the last nine months and houses have started to sell again. By the summer comments started to focus on the likely speed of recovery from the recession.

Below are the predictions I made for what would happen to the art economy and art businesses in 2009 - with my comments as to what happened in reality.

My predictions for art in 2009 - and what actually happened

  • A lot of significant art will come to the market in 2009 by those forced to sell. TRUE We saw the Lehman Brothers bank collection amd Bernie Madoff's assets being sold off. The Royal Bank of Scotland has announced plans to sell its art collection. Meanwhile it's become clear that some people are offloading their art via private sales which enables them to avoid public scrutiny of their financial well being
  • Business will not be 'normal' and margins will be cut. TRUE There were a series of squeaks by some of the major museums when they suddenly realised how exposed they were without funding from the banks. Jobs were cut. Developments were deferred. I know I began to wonder at one point whether the larger museums had ever heard of risk management! It certainly seemed to me that membership of the boards of some museums was due for a review!
  • Art businesses risk losses and jobs will certainly be lost. TRUE In New York more than 60 galleries shut. The auction houses slashed costs. For me one of the best measures of how deep the recession went is that Damien Hirst had to lay off all the assistants who made his work. He meanwhile tried painting his own paintings - and did it rather badly!
The response of both auction houses to the current slump has been broadly similar: staff cuts, unpaid leave, a squeeze on salaries, slashed marketing and travel budgets, and an edict that the glossy auction catalogues, which in the boom cost each of them £25m a year to produce, were no longer to be handed out like chocolate drops.
The Economist | A special report on the art market - Suspended animation
  • Artists will need a different business model. TRUE? My notion was that artists with a portfolio of income streams were more likely to survive the recession. People have been somewhat circumspect about how they are doing - however I've got the impression that those with more than than one string to their bow have got through the recession in rather better shape than those who create art and do nothing else. Many whose financial status enabled them to take a break from producing art for sale so that they could work on the future development of their art have said how much they've appreciated that break
Predictions for 2010

Are we out of the woods? Are there still wolves at the door? My personal opinion is 'No' and 'Yes'.

  • There are still fears around of a double dip recession. That's when it gets bad, gets better and then gets bad again - and that's what frankly I'm expecting to happen. It makes sense to me in the context of everything that has happened. Apparently according to at least one economist the thrifty are responsible - because they're refusing to spend all their money and live on credit!
  • We've avoided the worst of what could have happened but now we have to pay for it. All that money pumped into the economy now has to be financed and make no mistake while the bankers continue to get their bonuses, we'll all be faced with paying off the debt incurred via our taxes etc for years and years to come. That in turn will have a knock-on effect on domestic finances and how many people want to buy art.
Art media and genre

Here are my predictions from last year - and what happened
  • affordable art will be judged to have a potential 'lipstick effect'. TRUE It was certainly the case that smaller works and fine art prints sold better than larger works. They seemed to enable people to feel good by buying something new at a price which they felt comfortable with. For the first time I also saw small works by very popular artists
  • there will be a resurgence in figurative art of the sort which has an underlying narrative which people can connect with. Spending may favour more traditional decorative art with a hint of fantasy and what makes makes you feel good - UNPROVEN I'm not sure that many artists identified and played to themes which would resonate at a time when people lacked confidence and wanted reassurance. By way of contrast I don't think I've seen a single painting of city bankers / men in white shirts and loud braces this year. Plus pictures of comfort food continue to be popular and I do seem to have seen an awful lot of pictures of people dancing or partying this year.
  • Art which incorporates warm / sunny / feel good colours can expect to generate better levels of sales - UNPROVEN again, I think this might have been a missed opportunity. I don't recall any particular change in palette although a number of the 'feel good' paintings seemed to be done in "Barbie" colours. Looking back at this prediction I begin to understand why.
  • the following niche genres will continue to do well - wildlife art, botanical art, miniature art, feline art - TRUE simply because each always has a devoted following of long term collectors. Those running exhibitions by those working in animal and wildlife art, botanical art and miniatures told me that sale values have held up remarkably well. Given the evidence of the red dots in exhibitions I believe them.
  • fine art printmakers could potentially do better than those producing one-off original pieces. I didn't get to all the printmakers shows but do remember being absolutely amazed at the extent of the sales of prints at the RA Summer Exhibition. Printmakers seemed to be the only people making real money!
Perhaps the best news of the year for me came at the end of the year
  • the Turner Prize was again given to a painter. It's as if contemporary painting has become respectable again!
  • a Raphael drawing and Peter Doig figurative paintings have been selling for millions of pounds at auction
  • at the same time, almost a year after he had his multi-million dollar auction at Sotheby's Damien Hirst exhibited his 'paintings' at the Wallace Collection to howls of derision!
It did make me feel as if sanity was beginning to return to the world of art!
Predictions for 2010
  • Specialist genres will continue to be relatively stable in terms of sales
  • there will be much less emphasis on installation art requiring significant sponsorship (which now has limited availability)
  • traditional visual arts (eg paintings and drawings) and figurative art may continue to enjoy a higher profile
  • authentic art - of and belonging to a culture - will be valued more highly than that which has been customised for specific buyers (e.g. "made for the west")
Meanwhile the Guardian offers its perspective on prospective new trends
Everyone's looking for trends, and there are some. Whereas the last decade was about territories – China, India, Asia, Iraq, Iran – the next will be about formats and mediums (new and old); not so much painting, photography and sculpture but more textiles and tapestries, digital art, gardening art, eco art, all things cosmic, woodcuts and even wax.
The Guardian | How alternative investments have performed since 2000
Art Galleries and Museums

We've seen a lot of galleries fail in 2009. We've also seen some relocate to cut costs. While others - with money in the bank - have taken advantage of the way in which the recession hit some galleries to reposition themselves to take advantage of the recovery. No surprises there. Except that this has all happened before and it would appear that lessons have not been learned by some gallery owners.

Gallery owners who survived were good business people who has learned the lessons, understood their exposure to risks and had already sought to minimise its impact. As I predicted Galleries which have been around a long time and have a big and well managed customer list have generally survived - particularly those which deal in the type of art which people like to buy.

Back in 2006, I commented as follows
Galleries seem to be changing their approach - very, very slowly. Although development is still extremely slow, more galleries seem to have begun to understand the need for an integrated marketing approach between the bricks and mortar side of things, conventional paper-based media and the use of the social media aspects of the web 2.0 world. The scope of a blog to provide a feed announcing new work and enhance communication has not gone unnoticed. Whether we see more of them though in 2007 is anybody's guess!
To be honest, I've continued to see change - but not a lot. The major changes I saw this year were the two galleries which exhibit art society work in the UK (Mall Galleries and the Bankside Gallery) both updated their websites so that more artwork can be seen online and more artwork can be sold. It's a start - and was long overdue - but it's not enough.

More promising were developments such as:
  • the Mall Galleries adoption of the Own Art scheme which allows people to buy art in instalments. It had a very positive impact on the number of sales in the very first exhibition where it was used.
  • the creative use of non-gallery space in New York for holding exhibitions
Predictions for 2010
The first one is a given. I expect a minority to adopt the approaches outlined in the second and third predictions - but in my view this will be the way much art will be seen and sold in future. The business case for keeping a gallery open simply for casual visitors who may or may not buy does not stack up for most in the long run.
  • I'm getting more resigned to the fact that most galleries will continue to be very slow in adopting changes to make art more accessible and affordable.
  • gallery owners who are managing their margins will take their art out of B&M galleries and into temporary spaces and their own homes - the notion of the traditional parameters for an exhibition are changing. If you can sell most of an artist's work in one night at a private view by getting the right people to attend why do you need a gallery?
  • there will be more virtual exhibitions by those appreciate the scope of the Internet for selling art. It's already happening and will continue to grow. The question mark is over the pace of change.
Online purchase of art

This section highlights some trends which I didn't spot earlier in the year. It also concerns the chart at the top of this post

Etsy's increase in traffic year on year now tops 100% and has really taken off since the summer. It's niche status also means that more of its visitors are likely to be people prepared to buy. What you might be surprised to find is that the Etsy site is now way bigger than the artshop on ebay site. For me it's a measure of how eBay has fallen from grace with individual artists and how well the Etsy model works.

eBay is no longer the place it was and traffic is more or less static
. It was hit badly by declining traffic and transactions at the beginning of the year (as were most sites). I now tend to think of it as being a bit like one of those department stores which has franchised out space for other retailers. However, some would say it's being hijacked by the high street retailers - and this trend is likely to continue.
For the first time, auctions have been outnumbered by straight sales at fixed prices.
The big retailers will demand and get lots of space on eBay for their listings and how they want to see the site to develop. The eBay servers are currently straining to serve and in fact crashed on one of the busiest weekends of the year in November due to a huge hike in the number of listings. Make no mistake - an individual artist is now a very tiny minnow indeed on eBay.

In another surprise, while writing this piece I discovered that Zazzle has overtaken Cafe Press which rather seems to have lost its way.

In 2010, I'll be keeping a closer eye on which sites generate traffic through my various information sites (see Online Art Galleries and Stores - Resources for Artists and Print Art on Demand - Resources for Artists which both have charts which maintain an up to date perspective on the traffic to various online galleries and website services). I'd recommend that keeping an eye on the charts of how well each site is doing in terms of traffic will help to maximise effectiveness.

These are my predictions for next year
Predictions for 2010
  • Online sales income will continue to rise for three reasons
    • more and more people will buy online over time
    • Niche sites are getting better at making items accessible and easy to find amongst a wealth of competition
    • Niche sites are linking to places like Facebook which now generate significant traffic
  • The credibility of trading venues will become more important to both seller and consumer - particularly as those less used to online purchasing get online. Those who come late to new online phenomena tend to need more reassurance that what they are doing is safe.
  • Etsy will do very well - and eBay less well
  • Online gallery sites will look for endorsements from quality artists who sell well as a way of marketing their sites to other artists
Art Shops and Supplies

I predicted that Some suppliers of art materials will not survive the recession in 2009. I also suggested that
If I were a major art supplier I'd be creating a very helpful and informative art blog which mixes information for artists about art materials with news of new products and offers.
I'm still of the opinion that such an approach would help those who supply art materials.

I've heard a lot of comments about generic art shops suffering in the recession and some closing down. Sales seem to have become a non-stop feature at some. For me it's a given that art shops which stock the same brands as those sold online for cheaper prices by others will one day wake up to find that purchasers favour best price over convenience - and that 'best buy' is very often found online

However it's not been a total good news story for online suppliers. I predicted that stockholdings would be the issue for online suppliers. That's because classic cost-cutting strategies in a recession include extracting maximum value from existing stock holdings before you order any more. If you've been behaving like me you too will have been working your way through your own personal stock piles rather than buying more - and that inevitably will have impacted on orders to online suppliers too.

Judging by some of the marketing communications I've received, some of the online suppliers have obviously been caught out with stock they may wish they hadn't bought. We've seen some pretty deep discounts across a range of items this year as "extract the cash" became the name of the game.

By way of contrast the niche shop - selling very specialised and/or high quality goods seems to have generally survived pretty much intact. Never an outlet which caters for the mass market, these stores are often amenable to doing business by mail order but are not about to make all of their product lines easily accessible via the web. Which means people continue to visit and continue to spend rather a lot of money before they get out the door! It's a very neat strategy and it seems to work.

For me the moral of the tale is that if stockists tend to go for the basic and generic only and expect that will keep everybody happy they'll get a rude awakening at some point. In my experience the people who are likely to spend serious money and become repeat customers over time are the people who have very specialised wants. They tend to search out the niche provider to satisfy their needs and you can only extract their cash if you give them what they want.
Predictions for 2010
  • more and more generic art shops will begin to look like craft centres as customers choose value and choice over convenience and opt to buy online
  • highly specialised shops will continue to be popular - so long we remember we like them and continue to give them our custom. (You'll find some of these in my information website My Favourite Art Shops - Resources for Artists)
  • More and more online suppliers will get competitive over shipping costs rather than lose sales at the point where the shipping costs kick in. I know I've stopped an order before now because of the surprise I got when adding in shipping!
and finally.............

You may by now have spotted some general themes emerging from this analysis. Writing it all out has made some of the messages much clearer to me than they were when I started.

For me one major theme is about a return to authenticity and quality - where one can be confident in the origins of a product and the calibre of the production process used - whether it is artwork or paint or a book about 'how to paint'.

Another major theme concerns the niche provider who aims to sustain trading by serving a particular segment of the market extremely well. Customers are likely to be brand sensitive and getting a good fit between marketing and artwork or product is critical. If your artwork or product is highly specialised with a limited audience you need custom made and specialised ways of marketing it to a dedicated set of consumers where quality and value are often the key criteria informing a purchase. The trick here is to make the artwork or products accessible in a limited fashion. There may be only one outlet. It may have limited opening hours. However if you've got what people want then they will travel long distances and turn up to inspect it in person.

By way of contrast, art and art products which have been highly customised / stylised for a mass market and produced in large numbers over time will become less marketable over time. Flooding the market with work/products which are all very similar in the end diminishes its intrinsic value. if your artwork or art product falls into this 'generic' category (ie it is not highly specialised) then your customers are very likely to become price-sensitive. This suggests a need for an online presence and being part of a sophisticated and slick operation which maximises added value and satisfaction for the customer

Of course the really big trick is not kidding yourself as to whether your artwork falls into the generic or highly specialised category! :)

Links: If you like reading about what the past year look like in previous years try checking out the following:

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