A year like no other in 2020 led to a 22% drop in global art sales to US$50.1 billion, but flexibility among market players led to innovations in buying and selling that softened the decline and could reshape the art world for years to come, according to the annual Art Basel and UBS Global Art Market Report.
While significant, the falloff in sales last year over 2019 levels wasn’t nearly as severe as the 36% drop in 2009 at the outset of the global financial crisis, according to the more than 350-page report, which was released on Tuesday.
One reason for the relative buoyancy, even as the event-and-relationship driven market experienced the huge upheavals caused by canceled fairs and live auctions, is the fact that many wealthy individuals came through the pandemic economically unscathed, says Clare
McAndrew,
founder of the Ireland-based Art Economics, and author of the report.
Billionaire wealth actually grew by 32% (versus a 45% drop in 2009), according to the report, and among lower levels of wealth, there were people who “continued to work and make money, and didn’t have the same outlets for spending,” McAndrew says. “That played into the hands of the art market in that people had time and money, and the galleries and auction sector really ramped it up in terms of what was available and how that looked and felt online.”
That the art market turned digital in 2020 was one of the key storylines of the year, and it was a shift that worked: Online art sales doubled in value last year to reach a record US$12.4 billion, with the sector’s market share growing to 25% in 2020 from 9% a year earlier.
Among digital channels, 49% of high-net-worth collectors bought through online auctions, while 47% bought via gallery online viewing rooms (OVRs), and 45% bought at art fair OVRs, the report said. Among auction-house online sales, 67% were between $5,000 and $250,000.
In conducting research for the annual report, McAndrew says the vast majority of gallery owners and directors said they are likely to continue with the online strategies they developed during the pandemic, “even though they are keen to do events when they come back.”
But in a note of caution concerning continued online growth, dealers also said that most of their online sales were to existing clients. According to the report, new buyers represented 32% of gallery online sales, down from 57% in 2019.
That’s because dealers had a more difficult time getting to know new clients in 2020, with their doors shuttered, or hours limited, much of the year and with most art fairs canceled. One of the great advantages of art fairs is the chance to meet new collectors, and to entertain them at related events and dinners, the “things that hook people in for the long term,” McAndrew says.
Gallery owners and directors told McAndrew that generally, “it’s easy enough to get someone to buy from you once online,” but it’s hard to establish a relationship that could lead to a collector working with you for years and years “from just an online encounter.”
Not surprisingly, for 2021 the top priorities of dealers is client relationships and art fairs, in addition to online sales, according to the report, which gleaned gallery sentiment from two surveys of the gallery sector conducted during the year.
Overall, the value of gallery sales fell by 20% to US$29.3 billion in 2019, with the biggest declines—an average of 31%—among dealers with annual sales turnover of US$10 million, the report said. The volume of reported sales dropped too, to a median number of 34 in 2020 from 55 in 2019.
While 54% of galleries lost profits in 2020, a surprising 28% were more profitable and 18% reported stable profitability. The gains largely resulted from big cuts in expenses, including fees for art fair booths and the costs of flying art, and staff, across the world.
In 2019, art fairs accounted for 26% of gallery operating costs—more than payroll and rent, the report said. These costs fell to 16% last year, and were 0% for nearly 30% of those surveyed.
As one dealer reported: “Our revenue was down significantly, but the reduction in the huge expenses for fairs allowed more net profit. Our gallery has a deep client base that allowed this in 2020, but over time the lack of refreshing that base will begin to hurt.”
Dealers also survived by cutting staff, from receiving government assistance, and rent reductions provided by landlords or local governments. Now that some of that assistance is no longer available, and the event-driven side of the market hasn’t yet returned, “this will be the tricky time for a lot of businesses,” McAndrew says. “I do worry we may not have seen the real effects from the employment and business-structure side of things.”
In the auction market, public sales fell by 30% to US$17.6 billion, while private sales rose 36% to US$3.2 billion. Most notably, Greater China (which includes Taiwan and Hong Kong) overtook the U.S. to become the largest global auction market by sales value with a 36% share, up 7% year on year. The U.S. had a 29% share of the market, down 6% from a year earlier, while the U.K. had a 16% share, down 2%.
China’s growing market share reflects the wealth in the region, and the fact that the country emerged from pandemic-fueled lockdowns earlier than countries in the West. While the U.S. dominates in the US$10 million and above segment, there were “some very strong sales at the super-high end” last year, McAndrew says.
As a result, China ended up with a 43% share of the market for public auction sales above US$10 million last year, by value, compared with a 42% share in the U.S.
Also, value-added tax issues that made it cumbersome for some corporate and institutional buyers were resolved in the middle of last year, which helped sales.
One positive sign for 2021: A poll by UBS and Art Economics found that 66% of surveyed collectors are more interested in collecting as a result of the pandemic, and for 32%, they are significantly more interested. And most, 57%, plan to buy more works this year.
