THE ONLINE ART MARKET: FREEDOM TO BUY ANYWHERE
E-commerce has long revolutionised music and books but its impact on the art market is more recent. It was only a matter of time though. Over the past 10 years, the move online has been one of the biggest trends in the art market, second to the inexorable rise of the art fairs. ‘The biggest driver is the wider acceptance of e-commerce. This is how collectors buy everything else, so why not art?’ says cultural economist Clare McAndrew.
The online art market has matured and buyers have a number of options. Traditional auction houses offer timed auctions where the bidding takes place online only and over a period of time, as opposed to live auctions. Early adopters like Sotheby’s launched their online formats as early as 2004. Next to this bricks-and-clicks business model are online-only auctioneers of the likes of Paddle8 or Heritage Auctions, the largest online platform for art and collectibles.
Online marketplaces, such as online galleries and aggregators that offer fixed price options, are gaining traction too. Artsy, a New York based startup, partners directly with international galleries, auction houses and art fairs, to provide collectors a central destination to discover, buy and sell artworks from anywhere in the world. Not to be left behind, industry giants like Amazon and Ebay have also entered the art market. Amazon Art was launched in 2013 offering more than 60 000 artworks supplied by over 150 galleries and dealers.
The story of Artsy highlights some of the challenges facing the online art trade. It also exemplifies why the uptake has been slower than in other industries. The art market, which is notoriously opaque, relies quite a bit on confidentiality. Dealers sometimes create a sense of scarcity and introduce collectors to works by certain artists as a privilege. Prices bound to subjective factors are highly volatile and when an artwork sells for either too little or too high, the future price of that artist may be affected.
So at first the art world was resistant to moving online and relinquishing secrecy. When Artsy planned to take the galleries’ inventories and publish them online with a price tag, the reception was more than icy, eventually forcing the startup to overhaul its business model to maintain the status quo and redirect the actual sale transaction to the gallery. Artsy convinced two superstar galleries to come on board, Gagosian and Pace, and launched to the public in 2012 as a tech platform helping galleries expand their audiences across the globe and generating revenue through galleries’ subscriptions.
Today Artsy is probably the biggest player in the online market, offering over 800 000 works from more than 2000 galleries and facilitating over $20m in art sales each month with an average distance of 4800 kms between buyer and seller. Artsy hosted more than 190 auctions in 2017 with top partners, including the world’s top three auction houses, Christie’s, Sotheby’s, and Phillips. Last year, the startup raised $50m dollars in venture capital, including Larry Gagosian and the co-founders of Airbnb, MTV and Zillow, among others.
For collectors, there are many advantages to purchasing art online. It forms part of our new habits and it gives us access to artworks and artists from all around the world, making the art market truly global. It also bypasses what new buyers can experience as the pretence of the art world and find quite intimidating. In 2017, Sotheby’s announced the elimination of the buyer’s premium for online-only sales, a step that makes art even more accessible.
Price transparency constitutes both a barrier and an opportunity. Not surprisingly, younger buyers expect more transparency. Christie’s seems to be leading the way here. Last year, the company started publishing their online-only auction results while also selling art online for a fixed price.
Art buyers have cause for concern however, starting with the quality of the art. An image is not as good as the physical object and cannot replace seeing and engaging with the real thing. A certificate of authenticity and a condition report can mitigate the risks. But then fulfilment can further complicate matters, with shipping, costs and implications including taxes, and return policies.
But in spite of these vagaries, collectors seem to find the sale of artworks online adequate enough. According to the latest Hiscox Online Art Trade Report, the online art market grew by 12% last year and went from $1.5b in 2013 to $4.22b in 2017. It still represents a small portion of the collecting landscape but Hiscox predicts that it will grow in the next 5 years, roughly doubling to $8.37b by 2023.
Locally, the major art auction houses seem confident about the future of online sales. Aspire runs 5 online auctions annually and plans to concentrate on the online market to grow and diversify their collector base locally and globally. ‘Currently, we present less expensive artworks on this platform to encourage younger and new collectors. We are also able to use the online channel to run thematic, curated auctions as the overhead costs are significantly lower’, says Ruarc Peffers, a founding director at Aspire.
Strauss & Co, who launched their first online platform in 2013, have 7 online auctions planned for this year. ‘Our total turnover for 2017 was R329m of which R21m was generated by our online only auction platform, accounting for 6,5% of our turnover. Considering that online auctions are focussed on more affordable art and decorative arts, we particularly welcome the income they generate’ says joint MD Bina Genovese.
Tech advances are likely to further transform the art market and can already benefit art lovers in their purchase decisions. Artsy has developed The Art Genome Project to give recommendations. Unlike Amazon or Spotify whose recommendations are based on what others like, the project focuses on similar objects and has an in-house team manually assigning traits and a value to individual artworks.
The data science startup Art Advisor, snapped up by Artsy last year, has developed a system that focuses on art investment with algorithms to predict the potential future value of an artist. Not developed with art in mind, Instagram has gained extraordinary traction in the art world and become de facto the most popular app to share and discover art.
Cryptocurrencies and blockchain technology are impacting the art trade too. London-based Dadiani Gallery announced last year it was the first British gallery to accept cryptocurrencies as a payment method. In August 2018, Paddle8 will accept Bitcoin. Blockchain has the capacity to deeply transform the art market. It can provide a global register for art objects and impart much needed transparency regarding transaction prices, title and provenance, condition and shipping reports.