I- Global outlook
The global sales of art and antiques reached $50.1 billion in 2020, a 22% decrease compared to 2019. As expected and with the online transaction of the Art World, online sales of art & antiques reached a record of $12.4 billion and accounting for ¼ of the market’s value. The US, UK & China are still the three major art hubs in the sector while experiencing a decline in sales generation. The US still has a market share of 42% in 2020 compared to 44% in 2019, the UK accounts for 20% and China for 20%.
An important issue to note for the art market in Europe in 2020 was the introduction of numerous requirements and regulations under the 5th EU Anti Money laundering directive and in the UK, the UK money laundering and terrorist finance amendments regulations which became effective in January 2020. These regulatory frameworks implied that all art market participants involved in transactions over €10k need to carry a KYC and due diligence checks.
In general, sales in the US market fell by 24% and reached $21.3 billion. Comparing this to the last economic downturn, this is still above market level at 76% (meaning that it still performs better than during the subprime crisis). The US market retained its leading position.
With the exception of domestic sales, the US has always been a crucial platform for cross-border trade. This has always been their key competitive advantage to maintain their leading position in the market. Although the Trump administration protectionism was a major cause of concern for the industry (i.e. trade wars with China), trade regulatory concerns diminished over the year. To note, importation of art pieces to the US was generally constant, however, in 2020 it fell by 55%. Looking at this data, two questions can be asked in order to identify the reasons of such a fall: 1) Capital gains tax change are being introduced in the Art sector targeting very wealthy and up-marketactors (still to be determined) 2) The logistics volatility heavily impacted the art market in terms of export & import (high volatility in cargo pricing, low aerial traffic…).
In the UK, sales declined by 22%, reaching a total of $9.9 billion in 2020, the lowest level in a decade. However, they still retain 20% of the global sales despite an extremely challenging environment - Brexit and the pandemic - making it a difficult year for the UK. The final “Trade & Cooperation agreement” signed in December 2020 and January 2021 stipulated that imports to the UK will now be subject to VAT and other charges which was an inhibiting factor to the art market relations between UK and EU (please find more information about brexit and impact on logistics here). To note other markets like the US and China remain unaffected.
According to the Art Basel report, London will keep its spot as a global hub due to the bluechip infrastructure and friendly regulation for top tier sales. It is likely though that lower value sales may shift outside the UK (perhaps to France). Concerning the top-tier shift, it is still a question without an answer (although members of the French Art Trade are hoping to gain from this momentum).
China’s sales lowered by 12% in 2020 to reach a value generation of $21.1 billion. This is the third consecutive year the market is experiencing a declining year, however it is important to note that this fall is still less severe than in other markets.
The Chinese art market was the first to experience lockdowns, however in the second half of 2020 they managed to benefit from a strong momentum. China recorded strong sales at auctions which helped them to move to the first position in the auction market.
According to some experts mentioned in the study, the recovery of the Chinese market overall can be partly attributed to the resolution over VAT issues which arose back in 2018 and 2019. To explain very briefly, back in the late 2018, auction houses could issue only formal VAT invoices for the premium they received from buyers (hammer price and premium). However, most vendors (people selling at auctions) were private people, which makes the whole process difficult interim of tax and document issuance to the sellers and went against the legislation instaured in Mainland China. Starting May 2020, many changes in the regulations allowed auction houses to issue full invoices which made the whole process easier and hence stimulated sales in the second half of the year. This demonstrates how important the tax and legal framework is in art acquisition and in creating the infrastructure that enable the art sector’s flourishment.
Rest of the world
Overall in the EU (excluding UK) market share was stable (12% of the market yoy). France was experiencing constant growth in 2019 (see Art Basel report 2020), however in 2020 sales dropped back to 6%. Germany and Switzerland accounted for 2% respectively.
Overall and as seen in other industries, the fallout of the COVID-19 crisis has had a negative effect on dealer’s sales. Indeed, compared to 2019, the dealer sales fell by 20% reaching $29.3 billion (compared to positive increase of 2019 and to 2018 of 2%). The key to survive for dealers was to reduce major operating costs to sustain profitability. Considering the new economic landscape, dealers' priorities shifted to focus more on existing clients rather than seeking new clients, online sales (rather than bricks and mortar and exploring new ways to cut costs. Looking forward to 2021, most of the dealers interviewed ranked the following in terms of priority: 1) Client relationships 2) Onlines sales and 3) Fairs.
The overall consensus about the market outlook remains positive. 58% of the interviewees expect an improvement of sales. Building strong relationships with clients will be key in 2021, as the dealer’s size of clients base during this unprecedented time was narrowed (from 64 on average clients per gallery to 55 clients).
To note, only 1% of the dealers surveyed closed permanently due to financial reasons affiliated with the cancellation off art fairs (making it impossible for them to sustain their business in terms of cost/benefit).
Looking at the distribution across segments, the lower-end dealer with turnover lower than $250k, had the poorest performance. If we cross-check this report with this article about the dealer market during COVID-19, we can assume that brand reputation plays an important role (mainly when deploying online strategy to mitigate risk). However, this can be challenged. Small and mid-size galleries that used to operate with efficient structure managed to increment their agility and their lower value pieces sold more easily due increased accessibility. Large players took a bigger hit in terms of operational cost.
To note, in terms of dealer’s performance, it is stated that there are important differences across regions: US (11%), Africa (18%) or Asia having a disparate decline in the first 6 months compared to the second half of the year. Overall, some of the sharpest declines were across dealers in Europe (on average 28%): UK (24%), France (32%).
Looking at the sub-segments, dealers in the contemporary art market managed to “outperform” other categories.
Based on the survey results we see that the median number of work sold in 2020 was 34, compared to 55 in 2019.
In previous years, surveys consistently showed the market was suffering from the absence of credit or lending infrastructure and were unable to access business loans. However, in many markets, government loans were made available during 2020, enabling some business to survive. Out of the respondents, 68% said having access to government lending, 18% from banks or private institutions & 10% from loans from personal/private sources.
Public auctions sales in fine art & collectibles reached in 2020 $17.6 billion, a steep decline of 30% compared to 2019 (excluding private sales). Based on estimations, Private Sales reached $3.2 billion in 2020 which were up by 36% compared to 2019. This shows that the traction is still strong and is extremely positive for the auction world. Largest auction hubs remain the same, the US, UK and China account for 81% of the market share in public auction. To note, China hijacked the US to become the largest market with 36% of the market share. Post war and Contemporary Art remains the largest sector in the fine art public auction sector followed very closely by Modern Art (both of them accounted for 81%). Many auction houses had to suspend live auction ad shifts to an online only format. The digital move created another kind of excitement.
In short, the auction decline can be explained by three main factors: 1) Reduction in volume 2) Reduction in value 3) Reduction in bidding (with very few buyers competing for lots).
IV- Art fairs
Out of 365 global art fairs scheduled for 2020, 61% were cancelled and 37% held physical live events while the remaining 2% of the fairs decided to do a hybrid event. On a survey conducted by Art economics, 62% of art fairs offered an online viewing room (OVR) version of their fair in 2020 (e.g. Frieze, 1-54…).
Looking at live events, the share of sales from live art fair declined dramatically accounting only for 13% of the dealer’s total sales against 45% last year, to note 9% were made through OVRs.
41% of the High Net Worth Collectors (HNW) surveyed in this study bought their piece through an art fair & 45% through an OVR.
Half of the HNW collectors surveyed are keen to assist at art fairs during the first 6 months of 2021 and 64% would be willing to attend local events. More than 68% are extremely interested in attending any fairs in Q3 and 80% in Q4.
As expected, online sales reached a record in 2020 landing at $12.4 billion (essentially doubling in value). Similarly in the fine art auction sector, 22% of the lots sold were in online sales (doubling compared to 2019) (interestingly, works over 1 million represented 6% of the online auctions). The Art market transition to online was crucial to sustain during the pandemic. It is the first time that e-commerce sales exceeded general retail. Across the market, dealers, auctions houses, and art fairs invested in their online exposure to ensure business continuity and consistent visibility. To note, bluechip actors had the largest increase due to their branding and reputation (more information about blue chips' recognition in this exploration article). 90% of HNW collectors visited online websites, OVR or online auctions and felt that the transparency in pricing was crucial while browsing art works online.