Gallery Sales Dropped 36% as Art Market Reeled from Pandemic
Installation view of “Cosmoscow” International Contemporary Art Fair at Gostiny Dvor in Moscow, Russia on September 12, 2020. Photo by Sefa Karacan/Anadolu Agency. Image via Getty Images.
Art sales are down overall this year despite a surge in online activity, according to two new reports based on surveys of gallerists and collectors, and analysis of auction house data. Taken together, the analyses—one written by art economist Clare McAndrew and published by Art Basel and UBS, the other from art market analytics firm ArtTactic—help quantify the many ways the art market has been impacted since COVID-19 shuttered most galleries, fairs, and auction houses more than six months ago. They also offer a glimpse of areas where the market has managed to adapt for survival and future success, and others where it’s falling short.
McAndrew’s report, “The Impact of COVID-19 on the Gallery Sector,” draws on survey responses from 795 galleries and 360 high-net-worth individuals who collect art, and paints a sobering picture. Her findings show galleries seeing significant drops in sales that they’ve offset in part through painful layoffs, upticks in online sales, drop-offs in travel and fair-related expenses, and support from government programs. It also suggests many collectors have continued to support the galleries and artists they knew before the pandemic, largely via digital sales channels, but haven’t been connecting with new dealers and artists as often as prior to the pandemic.
The ArtTactic report, “RawFacts Online-Only Auction Review, January–August 2020,” looks at leading auction houses’ efforts online between January and August, as nearly all in-person sales ceased. While Christie’s, Phillips, and Sotheby’s have clocked far more online-only sales already in 2020 than they did in all of 2019, Sotheby’s in particular has emerged as the winner in the digital shift thus far. The report suggests online-only sales will be a more significant part of all three houses’ businesses going forward. But, as in the gallery sector, auction houses’ digital efforts can’t singlehandedly make up for the loss of in-person transactions.
Sales are down overall
Change in total gallery sales from H1 2019 to H1 2020. © Arts Economics 2020.
Galleries’ sales dropped 36% on average in the first six months of 2020 compared to the same period in 2019, according to McAndrew’s report, with 83% of all responding galleries saying their sales had fallen. That decline varied somewhat by region, with galleries in greater China seeing a drop of 55%—even though many were able to reopen much sooner than their colleagues elsewhere—while dealers in France reported a smaller-than-average drop of 32%.
“It is such an unequally divided marketplace, with some people doing so extraordinarily well all the time, a whole lot of people doing OK, and then most people really struggling—artists especially,” McAndrew said. “So you have to think, what’s going to happen to those people who were already barely surviving on a couple of sales from smaller galleries if those galleries close? It might actually reduce the number of artists as well.”
In the auction sector, ArtTactic’s new report charted an increase in online-only sales revenue of more than $400 million across the three leading houses in the first eight months of the year compared to all of 2019. But even that dramatic surge can’t singlehandedly make up for the $2.8 billion drop the same three auction houses saw in overall sales in the first half of 2020, according to an earlier ArtTactic analysis.
Smaller galleries are being hit harder
The drop in gallery sales through the first half of 2020 was most acute for smaller outfits. Dealers with annual turnover of less than $250,000 saw their sales value drop 39%; for galleries with annual turnover between $250,000 and $500,000, the drop was by nearly half (47%). Meanwhile, galleries with annual turnover of more than $10 million reported slightly better than average sales declines of 35%. This dynamic risks exacerbating existing power imbalances in the art market, where a dozen galleries with locations on multiple continents and vast artist rosters increasingly resemble multinational corporations, while dealers representing emerging artists often rely on a staff of four or fewer.
A third of galleries surveyed for McAndrew’s report had downsized their staff in the first half of 2020. Galleries with annual turnover over $10 million were the second-most likely to have laid off workers, at 37%, but the same cohort that saw the biggest drop in sales value was also the most likely to have laid off employees. Among galleries with an annual turnover of $250,000 to $500,000—which on average have just five employees—38% reported downsizing their workforces. The report notes that while some larger galleries could still make further staff cuts in the second half of 2020, many smaller galleries have reduced their workforces to the bare minimum.
“Even among the galleries that come through, you have to look at what’s changed in those that survive,” McAndrew said. “How much has their employment changed? Because you can survive, but if your gallery goes from being 20 people to being two people, that’s a huge economic impact, even though the gallery’s technically still open. I think that will happen a lot and that’s going to be the biggest issue.”
Surging online sales are helping
Average share of online sales by gallery annual turnover level. The share of online sales is based on a weighted average of sales in 2019 and 2020. Galleries are segmented into turnover categories according to their 2019 turnover levels. © Arts Economics 2020.
Many galleries and auction houses have turbocharged their online sales efforts in the past six months—prioritizing online viewing rooms, experimenting with virtual reality presentations, and testing new ways of reaching collectors—and their digital-first strategies largely paid off. While online sales accounted for just 10% of sales for galleries in 2019, they made up 37% of their sales in the first half of 2020, according to McAndrew’s report.
Growth in online sales was even more dramatic for auction houses, according to ArtTactic’s report, which showed online-only sales of fine art at Christie’s, Phillips, and Sotheby’s spike 240% in the first eight months of 2020 compared to all of 2019, up from $94.4 million to $321 million. Sotheby’s came out on top thus far, with online-only auctions up 413% between January and August 2020 compared to all of 2019. In those eight months, Sotheby’s brought in a total of $402.6 million, versus archrival Christie’s take of $186.7 million over the same period.
Despite these historic highs in online art market activity, it remains to be seen if these shifts in business practices will persist once COVID-19 is under control, or if the upswing was a compensation for the mass cancellation of in-person events like fairs and auctions. Anders Petterson, ArtTactic’s founder and managing director, believes the numbers reflect “a systemic change or shift, rather than a temporary adjustment.”
He added, “We will see more hybrid elements coming back into the online sales when normality resumes—i.e., in-person auction, telephone plus online [bidding]—I believe this competitive dynamic will continue to be important particularly for higher price segments.” All three auction houses tested this type of hybrid approach this summer, relatively successfully.
Collectors stayed active
Share of collectors spending more than $1 million or $100,000 over two years. © Arts Economics 2020.
Despite restricted movement, health risks, and fears of a prolonged global recession, collectors were active in the first half of 2020. Of the 360 high-net-worth collectors surveyed by McAndrew, 92% said they’d purchased at least one artwork in the first half of the year, 56% said they’d already spent more than $100,000 on art this year, and 16% said they’d spent over $1 million. Many tended to support the artists and galleries they knew before the pandemic—only 14% of collectors said they were actively seeking new galleries, while 41% said their focus was on galleries with which they already had relationships.
Despite this, online sales helped galleries and auction houses connect with new clients. In the gallery sector, this was especially true for smaller galleries: New online buyers accounted for 35% of all online sales by galleries with annual turnover of less than $250,000, but just 18% of online sales for galleries with annual turnover above $10 million.
Across all galleries, the largest share of sales (44%) were made via galleries’ websites or over email in the first half of 2020; notably, nearly a third (32%) of collectors said they’d bought art via Instagram in that period. Unsurprisingly, there was generational variation in the adoption of digital sales. Millennial collectors and members of Generation X were more likely to have bought works through galleries’ online viewing rooms or websites than their boomer forebears, who were more likely to visit galleries in person to make acquisitions.
For auction houses, online-only sales were invaluable for reaching new collectors and converting existing clients to digital sales. Sotheby’s reported that more than a third of their online buyers between January and June were buying at Sotheby’s for the first time. Christie’s told ArtTactic that 31% of their online buyers since the lockdown period began have been existing clients transacting online for the first time.
The ArtTactic report also suggests collectors have grown more comfortable buying high-priced works online. The average price paid for a piece of fine art purchased online via Christie’s, Phillips, and Sotheby’s in the first eight months of the year was $25,298, a dramatic 167% increase from the 2019 average of $9,476.
“In the early phase of the pandemic, [the shutdown] forced more expensive works online, as no other channel was available,” Pettersen said. “With online buyers responding positively to this, it created a kind of snowball effect: an increase in buyer confidence in terms of buying art and collectibles online at higher price levels; [and] more confidence among consignors (and auction houses) in offering [or] selling higher value lots online—each round of auctions re-enforcing the confidence in the next.”
The future is uncertain
Despite some bright spots—like market players getting more comfortable buying and selling art online—dealers’ prognostications for the rest of 2020 and beyond are cautious at best. Of the galleries surveyed by McAndrew, 79% believe sales for the entire year will be lower than they were in 2019 (when the market as a whole actually dipped 5% from 2018), and 58% of those dealers expect their sales to be significantly lower. The biggest galleries had the most pessimistic outlooks, with just 10% of galleries with annual turnover of $10 million or more expecting their sales to pick up in the second half of the year. As for 2021, smaller and larger galleries concurred: Less than half (45%) expect their sales to go up next year from their 2020 levels.
“There have been people who’ve managed to keep going and make some good sales, but they tend to be the exception rather than the rule,” McAndrew said. “The fact that the majority of those affected expect the rest of the year to be either stable or lower means that [that 36% gallery sales drop] could get slightly worse.”