A big drop, it's true, but not a collapse. The art market seems to have held up reasonably well in the face of Covid 19, according to The Art Market, the latest report by UBS and Art Basel.
© Art Basel
The 2021 vintage is not too bad, considering: the annual report on the art market published by Art Basel and UBS highlights the good performance recorded by the art market in 2020 despite the pandemic, even if unbridled enthusiasm is hardly the question. Though down by 22%, global art and antiques sales achieved $50 billion in 2020—a symbolic waterline—whereas during the 2009 financial crisis they plummeted 36% to below $40 billion. The top three art market countries were unchanged, led by the US (42% of market share), with China and the UK following neck and neck with a share of 20% each.
For economist Clare McAndrew, author of the report and founder of Arts Economics, the art market has yet again proved not only its resilience but also its ability to surprise. "A drop in sales was inevitable with events being canceled, travel prohibited and businesses closing. The art market was more vulnerable to the crisis than other sectors because it relies on optional, non-essential purchases," said the economist a few hours before presenting her report during an online conference. "On the other hand, I was amazed at how well operators maintained a good level of business; they were resilient, and worked really hard to ensure that the year wasn't as disastrous as it might have been."
Online Sales Boom
Though distinctly gloomy in the first half of the year, with a 30% nosedive, gallery sales eventually stabilized in the second half. "Another positive surprise this year was operators' ability to cut costs, with some dealers even managing to maintain profitability," said the analyst. For while most dealers recorded a drop in margins, 18% maintained their 2019 level and 28% even saw their profits rise. "Dealers and auction houses worked hard to maintain exhibitions and transactions, mainly online," says McAndrew. Her report focuses on what is undoubtedly the outstanding aspect of this singular year: the fact that online sales, after simmering for some time, finally exploded. They literally doubled in value, posting a record 12.4 billion—25% of the art market as a whole—and even topping the share of retail sales.
Fairs at a Low Ebb
The situation with fairs was far more precarious. Almost all of them were canceled in 2020 and are now awaiting their fate in 2021, subject to the dictates of quarantine on entry to the countries where they are held, possible last-minute lockdowns and travel restrictions. "We saw dealers' share of sales at fairs fall from 42% on average to 13% last year," said Clare McAndrew somewhat despondently, saying that some managed to save the day thanks to Online Viewing Rooms (+9%), "but not enough to offset their losses." In addition, "fairs are above all key venues to meet new buyers. Galleries were able to rely on their existing customer base in 2020, but it's absolutely crucial for them to renew their lists." The number of individual customers over the year was down by 14%, from 64 (2019) to 55 (2020) on average.
However, despite everything, some galleries managed to make ends meet because they didn't have to fund the high costs of participating in these events, they are now struggling. "When the fairs reopen, galleries will be considering more and more carefully which ones to attend. They were already doing so before 2020, but I think we will see fewer large-scale international events, with more regional meetings and other types of collaboration, like Gallery Weekends," says the economist. In her view, there is a pressing need to return to the physical, real-world, despite the success of various online initiatives. And collectors want to return to fairs and galleries as soon as possible: 75% of them prefer to see a work in the flesh rather than through a screen, as is clear from the Art Basel and UBS survey.
HNWIs Drive the Market Upwards
Desire, boredom and frustration are some of the reasons many collectors have been exploring and investing in art even more than usual during the pandemic. With opportunities to visit galleries and buy in person shrinking with each month, they were particularly active in this first year of the pandemic. On average, they bought nine artworks in 2020, compared with ten in 2019: this was a good showing, given the overall situation, and their behavior undoubtedly helped the market escape the worst.
"The other thing that saved the market from sliding into a very tough recession was that the effects of wealth were not quite the same as with previous crises," says Clare McAndrew. Above all, top earners' incomes rose, particularly with the wealthiest billionaires. "This left some people even richer, with more time to spend and fewer luxury consumption opportunities like high-end travel: a situation that undoubtedly helped the art market. The survey we carried out with UBS shows how active HNWI (high-net-worth individual) collectors were all through the year." Of these extremely affluent collectors, millennials spent the most: 30% of them invested over $1M in art last year, compared with 17% of boomers.
The younger generation was also the most active on the Internet, through the Online Viewing Rooms offered by art fairs and galleries, online auctions and social networks.
When asked about the challenges facing art professionals in the next few years, Clare McAndrew says: "Crises like these can also bring about restructuring and innovation in markets. The shock of the pandemic is creating momentum for change and encouraging new collaborations and practices in galleries and the auction sector. It forces us to explore what we are doing, what's good and what could be improved. Perhaps it's also teaching us the importance of embracing change and renewal, rather than avoiding it or saying we don't have time to deal with it!"