Hiscox Report Shows Significant Online Art Sales Growth, with Consolidation Ahead
The online art market grew in 2016 against a backdrop of a sleepy market, according to a new report from Hiscox, the specialty insurer.
The fifth annual report, entitled “A market yet to awaken?,” documents strong annual growth in online sales, but slowing momentum in converting customers to buying art online. The report, released Tuesday, forecasts “long-awaited consolidation” in the sector, which today is fragmented across several main players.
Sales in the online art market rose 15% to $3.75 billion in 2016, taking the online share of the overall art market to 8.4%, up one percentage point from 2015, according to the TEFAF Art Market Report 2017. A separate estimate, from Art Basel and UBS’s The Art Market | 2017, put online sales of art and antiques at $4.9 billion, up 4% from the prior year.
Hiscox’s report includes survey responses from 758 art buyers, up from 672 respondents in 2016, as well as 132 galleries and dealers, a slight increase from last year’s number. This year’s edition also includes a new component, 42 interviews with managers and “key staff” at various online art platforms who provided information to Hiscox.
The sales growth of the past year came largely from increased online sales at traditional auction houses, and more frequent purchases by existing online art buyers.
Christie’s saw online-only auction sales jump by 84% over the year, to $217 million. Sotheby’s online sales grew by 19%. As a share of overall auction sales, online sales at Christie’s more than doubled between 2015 and 2016, but still account for just 1.5% of auction turnover, implying substantial room to grow. Heritage Auctions, which deals largely in collectibles, reported it conducted 41% of its auction sales online in 2016. Online sales at Heritage totaled $348.5 million in 2016, up 1.3% from the prior year.
Existing online art consumers were more likely to be repeat customers. The share of art buyers who purchased more than one artwork online in the prior 12 months rose two percentage points to 65% in 2017. Online purchases were also increasingly likely to be at the low end, the survey found, with 79% spending less than $5,000 per purchase, up slightly from 78% in 2016 and 67% in 2015.
The biggest concerns of online art buyers were the condition of the work, whether it would appear different in real life than on-screen, and authenticity. The report found upwards of 75% of buyers still hesitated to purchase art online because of concerns about the condition of the work or that it would look different than it appeared on-screen, figures that haven't improved much since 2015. But those figures were lower for buyers under 35, suggesting that an emerging collector base could support the online market going forward.
But the report documents stalled conversion of offline art buyers into online art buyers, with many surveyed still voicing concern about the quality and pricing of what they’re buying online.
“The customer wants to buy online if they know they’re getting the best stock at the best price, and at the moment that’s not totally clear,” said Robert Read, head of art and private clients at Hiscox. “Once that does become clear, the fulfillment has to be nailed down as well.…That’s the reason why we shop on Amazon; you get all three.”
Art buyers surveyed named several services that online art platforms could offer to shore up their confidence. The most popular were condition reports, certificates of authenticity, and a 30-day return guarantee, with 75% or more of respondents consistently citing those in each survey going back to 2015. Majorities of respondents also said their confidence could be bolstered by the option to purchase insurance at point of sale, more information about shipping and packing methods, and more information the artworks and artists themselves.
In this still-evolving market, Read said, auction houses Christie’s and Sotheby’s may have an advantage because their recognizable brand names reassured hesitant buyers.
“I think the brand really helps because the brand gives people confidence,” he said, adding that the two auction houses’ deep pockets have also enabled them to invest in their online platforms without the added effort of raising capital.
The report documented the evolving competitive landscape among the online art platforms, with a timeline of several key launches, mergers, and acquisitions, including the 2016 merger of Auctionata and Paddle8, which was unwound earlier this year, with the former filing for insolvency. Of the 42 industry players surveyed, 71% saw more consolidation ahead.
The report noted that the online auction space would be the “battlefield” over the coming year, with a smaller share of those surveyed (24%) expecting increased competition in fostering gallery sales online. The survey found that over a third of galleries don’t yet have a clear online sales or e-commerce strategy, which Read noted could be because most galleries are small and may not have the resources to launch and maintain a successful online presence.
He said he expected online platforms to increasingly offer both options—an auction feature and purchasing at a fixed price—to cater to a broader base of customers.
“It remains pretty fractured and very regional,” he said. “Those are the things that are holding it back.”
—Anna Louie Sussman