The art market shrank by 22% in 2020, down from $64.4 billion in sales in 2019 to $50.1 billion last year. That drop, reported in economist Clare McAndrew’s “The Art Market 2021” report (published today by Art Basel and UBS), puts a figure on the enormous impact of COVID-19, which forced much of the art world to shift online only almost exactly one year ago.
The report also quantifies the art market’s digital pivot. Online sales value doubled, from $6 billion in 2019 to $12.4 billion in 2020; they also more than doubled as a share of all sales by value, going from accounting for 9% of the overall art market in 2019 to a full quarter of all sales by value in 2020.
The report notes that despite significant losses in sales and jobs—the number of people employed by galleries dropped by 5% in 2020, while auction houses’ employment dropped 2%—dealers remained relatively optimistic. Only 20% of gallerists surveyed felt their businesses had performed poorly in 2020; 58% of dealers expected their sales to increase in 2021, while just 15% expected them to decrease.
“The fact they could pull back all those expenses—like travel and fairs—was obviously huge,” McAndrew said. “But it’s not just when we’re away, it’s when we’re here—entertaining people and having big openings and dinners and all these things that go along with running a gallery. For smaller galleries, those expenses are quite substantial on top of travel and everything, and by cutting them back, they managed to either stabilize their position, or in some cases—not the majority by a longshot—did a little bit better than the year before.”
About half of the galleries surveyed for the report either held steady or actually increased their profits: 18% of dealers maintained their net profit level from 2019, while 28% were more profitable in 2020 than the previous year.
“People were there and they had money, especially at the high end, and were really looking for ways to spend it,” McAndrew said. “There weren’t that many other outlets for more discretionary purchasing.”
Of the more than 2,500 high-net-worth individuals surveyed for the report, two-thirds said the pandemic had increased their interest in collecting. Among those high-net-worth collectors, millennials were the biggest spenders, with 30% of them reporting they’d spent more than $1 million on art in 2020. Such figures are encouraging, but the report also suggests dealers were largely focused on making sales to existing clients last year, while finding and nurturing new collectors proved more challenging, especially in the absence of in-person fairs and with many galleries’ showrooms closed for months. Galleries’ collector bases went down from an average of 64 clients in 2019 to 55 clients last year.
“A lot of galleries really relied on their existing client base to make sales, and they pushed sales with clients they knew already,” McAndrew said. But “people do become maxed out, people won’t buy every single year. Galleries need to keep on refreshing their clients over time, or they don’t have those established clients for the future.”
Auction sector shakeup
This partly reflects the fact that China reopened and resumed in-person events much more quickly than the U.S. and U.K., where most auctions have taken place virtually for the past year. Many observers also noted the strength of auctions held by Phillips and Sotheby’s in Hong Kong in the second half of 2020. According to one report, the city’s contemporary art sales surpassed those held in London last year, making Hong Kong the second-biggest market after New York. Overall, sales in Greater China fell in 2020, but the 11% drop in the region’s auction sales by value was much smaller than the U.S. auction market’s 44% drop and the U.K.’s public auctions sales total shrinking by a third.
“It’s partly about the strength of what came onto the market, especially toward the end of the year: there were some very high-quality, high-end works that just haven’t been around in China for the last little while,” McAndrew said. “When you add up the private and public sales, the U.S. may come back, but it’s really up for grabs on the public auctions side, because the long-term wealth dynamics and economic dynamics in China are still really strong.”
A coming Beeple bump?
While much of the traditional art market has been operating at a reduced cadence for the past year, the market for non-fungible tokens (NFTs) has seen astronomical growth on digital marketplaces like OpenSea, Nifty Gateway, and SuperRare. This development culminated last week in the sale of an NFT artwork by Beeple for an astonishing $69.3 million at Christie’s, making the mononymous digital artist (real name Mike Winkelmann) the third-most expensive living artist at auction behind blue-chip stalwarts Jeff Koons and David Hockney.
For McAndrew, these developments could help unlock a sector of the art market that has long been hampered by technical issues. “Previously, collectors didn’t really feel like they owned something—what they’re buying might be an original or limited-edition work, but it could just be copied,” she said. “It’s a hugely positive development for digital art creators and collectors.”
Whether or not the art market reaps benefits from the NFT boom, it will take time for business to return to its pre-pandemic level—which itself was largely stagnant. With in-person art fairs poised to resume and auction houses lining up eight-figure lots for their spring sales, there are reasons to be optimistic. But it will be a gradual recovery and, McAndrew cautions, COVID-19’s full impact on the art industry may not come into view until 2022.
“The difficult thing is going to be this year and next year, especially in this transition period where events and fairs are not back to normal by any stretch. It’s not quite as lively as it has been in other years, but all of the help has dried up for businesses,” she said. “This is going to be the really tricky time.”