The first six months of the pandemic massively transferred art sellers to the Internet environment, and initially everyone found a separate niche:
• art fairs went online, with their OVR (online viewing rooms) resembling each other;
• galleries have mastered virtual reality for a more profitable display of pieces of art and brought the collector closer to the artist by digitizing workshops using 3D-view technology. Top galleries announced the development of virtual residences for artists and provided their own sites for small galleries with the aim of maintaining them in the regions, as well as maintaining the class of young collectors, who would become clients of the top galleries in a decade;
• auction houses offered buyers mixed bids of various price categories and trends of art, often combining pieces of art and luxury goods in one catalog. For all the Internet conventionality, New York, London, and Hong Kong remain the centers of the auction market: the auctions, declared by these cities, are the most successful. At the same time, the logistics factor turns out to be secondary (the seller and the buyer are mostly located within the same country), the main thing is the prestige of the location affecting the value of the work.
Let us stress the increasing attention of buyers to multi-gallery platforms (the market leader is Artsy) with a continuous change of offers. The main motivation of collectors in this case is a search that has an educational implication: it is much more interesting to the user than static online exhibitions offered by galleries, even if the search itself does not end with an acquisition. This should be a message in future — galleries should either present their art on the web in a more dynamic and informative way in order to attract attention of a growing number of online shoppers, or to unite in communities, establishing their own local "Artsies" (trying to be in the public eye, which is much more difficult).
However, not the Internet was seen as the main savior of the art market, with the onset of the pandemic, but private sales — it was there that both auction houses and galleries rushed. According to the results of the first six months it became obvious that auctions were winning, and what was more — it occurred due to the return of public sales. It is strange, but if previously many people had preferred private sales, then during the pandemic, public auctions with a virtual auctioneer became a kind of a unifying factor reminding people of the physical world. Though in order to gather collectors for the auction, the auction houses had to spare no efforts — either combining paintings with sneakers and skeletons, then combining young and aged audiences, or even raffling dinners with stars, having sought the support of Google.
Though the lag of galleries in the race for the right to be called the best player of the art market in 2020 was a surprise. To begin with, it turned out that most of the status sellers were renting spaces, not owning them. And half of the galleries had to be physically closed during quarantine. Further more, it was admitted, though with reluctance, that personal contact with the buyer is much more important than the signboard under which the purchase is carried out — and private sales without gallery openings and art-fair hype subsided. The transition to online has restored the private sales market only to a certain extent: programmers set up the acceptance of payments via the Internet for galleries, but they could not explain what language to communicate with an online buyer.
Fairs, which have rapidly gained weight in the last five years (up to half of the gallery transactions were held there), turned out to be the least protected among all the players at the art market. The pandemic showed that their business model of providing trading platforms for galleries was just a lessor-tenant relationship: the fairs had no art or artists to sell them, and collectors who had attended the fairs for decades scattered to galleries and auction houses. Online offices, with which Art Basel and Co. replaced physical fairs, began to fully sell only in the fall of 2020 — when the quarantine returned, and the additional printing of dollars caused an excess money supply.
New professions and skills
Artsy held an online conference How to Meet the 2020 Collector Online late in 2020, seeking to find tools to increase the amount of private transactions (and at the same time increase its own traffic and sale of subscriptions). All the participants of the conference unanimously announced a serious problem: they found the tools (online, obviously), but there are very few workers (professionals familiar with Internet marketing) in the art environment. Instagram marketers, hitherto serving underage beauty bloggers and quarantine culinary communities, were hastily uprooted to help the galleries.
However, a new challenge expects for the galleries here: users spend more and more time with their smartphones than in front of the screens of stationary computers — and gradually a vertical, rather than horizontal, format is becoming a visually habitual picture of their Internet life. Accordingly, it is necessary for the art market to make it interesting and easy for the buyer to view and buy works through the phone, simultaneously with raising his or her confidence. How many galleries could we immediately name that have simultaneously adapted mobile versions of sites and do not offer the user to enlarge a stationary website with his fingers on the phone? Fingers do not get tired of it — the brain does. And the user leaves the platform. How can you sell vertically — galleries might ask Instagram (which, by the way, has recently launched its TV and has outrun even more other social networks in its flight towards internet perfection).
An equally important term, first mentioned in art reports, is "dialogue commerce" — a type of communication that has proven its significance during the pandemic. "Non-Art" adopted it a few years ago, and therefore in 2021 we are expecting a massive arrival of specialists to the art market for the sale of anything by means of admonitions in online chats. Those who doubt their success should be recalled that two years ago, Larry Gagosian, the most successful dealer of the pandemic, invited the most successful online mattress seller to the gallery management team. The mechanisms of persuasion are very similar: the buyer spends an average of 10 years of his life with a piece of art, just like with a mattress.
More than two-thirds of non-art millennials need continuous, supportive services for any online activity that replace the way they are used to do things in the “physical” world, according to the data gathered during the 2020 quarantine period by Accenture, an Irish analytical company. Let us interpret it: the generation of middle-aged shoppers wants to get from technology what they are used to in face-to-face meetings or over the phone. In the case of the art market they wish live communication and the most complete package of guarantees.
Another thing is that when the auction market (we believe, very soon) returns to full-fledged physical work with very developed Internet technologies, it will face two groups of collectors - those who selectively preferred teleconferences in 2020 with a hint of a live auctioneer, and those who have got the hang of playing online bids at "clean" online auctions. Which of these groups do you think will be the first to run to the auction rooms?
Millennials vs Generation Z
While the art market has been chasing millennials since the beginning of the 2010s, with a break for hunting adherents of cryptocurrencies in 2017, it has suddenly turned out that Generation Z has grown up — with their own interests, opportunities and habits. Having celebrated the legal age and having become mass market participants by 2019, digital adepts who prefer to work and shop from home have perfectly adapted to quarantine. What drives new potential collectors? First of all, the possibility of active participation in the processes: the "buzzer" is not a consumer, but a full-fledged creator; not a patron, but an active promoter.
Today, 16 - 24 years old young people come to an art gallery with the question: "If we buy from you not one painting, but three, could we get a seat at the board of directors?" Galleries, surprised by the rush of young buyers, nevertheless think about forming a board - something needs to be done to sell! This also includes the reconsideration of the format of art: it does not have to be physical in the new world - digital art is easier to share, maintain, and transport: in a cloud service, blockchain or on a flash drive.
Expansion of NFT
Due to the growth of the bitcoin rate at the end of 2020, the capitalization of cryptocurrencies has significantly increased. Most bitcoin owners, realizing the volatility of the digital market, have chosen to diversify their assets: leave part in cryptocurrency, withdraw part in fiat money, and invest the third one in various tokens (virtual counterparts of stocks in the digital world). The digital market has oriented itself surprisingly quickly and offered pieces of art as such an asset. A unique essence, a unique single copy of each of them made it possible to legally link non-fungible tokens and digital art objects (there are legal inconsistencies with physical ones so far) for subsequent operations at the digital market.
Today we see the formation of an oligopoly system among platforms inherent in the entire art market: so far there is only one and clear leader (Nifty Gateway), but do not forget that Christie’s appeared 22 years later than Sotheby’s. Likewise, there is a division into "curatorial" and "open" platforms — quite an analogue of the division of the market into fine and decorative and applied arts. A list of blue-chip artists is also being formed, but the local Picassos and Basquiats still have to experience an impressive race up and down the ranks of the top artists. Well, let us not ignore joining the game by the three largest auction houses, whose five sales covered 74% of the market. It would be interesting to see if the “big three” will have been retaining even 25% of the NFT market by the end of the year: one thing is to “rock” the boat, generating market interest (and its own base of young clients), and quite another is to stay in this boat.
And we will not see the most important division of the art market - into public and private - in the case of NFT: the very nature of the blockchain in which tokens exist, presupposes openness at this stage of the technological development of the society. Therefore, we will leave the reader alone facing the following question: what will happen faster — will the public sale of tokens drag “physical” art to its blockchain side, or will NFTs soon also be sold at the “black” non-public art market?
Ecosystem of Art+Tech startups
Young art and technology companies received US$ 640 million in direct investment from 2000 to 2019, according to Deloitte Art & Finance 2019 report. The bulk of Art+Tech startups, or 64% of ideas that emerged after 2017, focused on sales: market places, galleries, auction houses, and payment systems. At the same time, three other spheres - logistics and collection management, information and analysis of big data, and search and development, including educational projects — were not popular with young startups, with only 12% of the market share each.
The coronavirus pandemic has changed the balance of forces. Art+Tech sales startups have found themselves in fierce competition with all art sellers who have moved online — and already with their own audience. The approach to investment has also changed. We observe that today Art+Tech startups are seldom funded according to the traditional "round" scheme, and more often their technologies and teams become part of large strategic companies, sometimes in the form of departments, and receive money for development. In other words, a merger takes place. Sometimes — with the loss of their own identity, but financially, both parties benefit.
A new, fifth vector has been added — visualization: a profitable presentation of a piece of art through VR (virtual reality) and AR (augmented reality). Until 2020, such projects most often did not have a business strategy and were ordered by private collectors, non-profit institutions, museums, or foundations. And today they have become independent business units.
Only the sphere of logistics suffered, taking into consideration the remaining spheres: under quarantine conditions, it turned out to be irrelevant until the international fairs resume their activities. The sphere of search and development has significantly developed: we have such Art+Tech startups as the British GLASS (search for provenance via WhatsApp chat) and numerous online residences where careers of artists are built up. And the user can watch this and (in the future) invest in careers directly. All this contributes to transparency, which has been talked about on the pages of Deloitte Art & Finance reports in recent years by numerous survey respondents: collectors, artists, investors, and functionaries of the art market.
At the same time, Art+Tech startups have officially received US$ 380 million in investments since the beginning of 2020 - 61% of all investments made by investors in Art+Tech over the past 20 years before the pandemic. The overwhelming majority of them, as you would expect, refer to NFT platforms, but another word is increasingly flashing — Gamify, predicting a massive transition of gamers (with their habits, preferences, and budgets) from the gaming industry to the art space.
Brief summary from Fuelarts
Thus we see how the development of technologies increases the transparency of the art market today — whether we like it or not. Though, what is even more pleasing, such an openness of the market has been already finding reciprocal interest on the part of art lovers and buyers - expressed in an increase in sales through Internet applications and an increase in attention to art in general.
The main thing to say, warning of excessive enthusiasm, is: technological means are not a panacea that can change the art market once and for all. Art dealers will not enter sales data to the blockchain, as they did not enter them into the ledgers 100 years ago, if they do not see any benefit in it. Artists will not sign digital certificates if they are not sure that the data about their authorship will not only go to the tax authorities, but will also become the basis for a guaranteed payment.
Hence, we have achieved the buyer's confidence in the art market through transparency today. The next step is the mutual honesty of market players.