The art market is in the throes of a radical change. For centuries murky and unregulated, it operated on a confidential, often personal basis. Now, however, it is being challenged by a new set of factors: the globalisation of its clientele, the imbalance between supply and demand, a fiercely competitive market place and the increasing quantities of investment necessary to become a significant player.
The latest manifestation of change is the acquisition in February by Christie’s of the art gallery Haunch of Venison (p55). This has dismayed dealers, as the auction house is reinforcing its attack on the one area where they still had the edge, the market for contemporary art. And the auction house may gain access through Haunch of Venison to at least two major art fairs, Frieze and The Armory, although this remains to be determined, but not the Basel fairs (p55). Last month both Sotheby’s and Christie’s had booths at the dealer-run European Fine Art Fair in Maastricht (p62); Trojan horses, hissed some dealers.
The acquisition is not the only sign of change. Dealers themselves are selling at auction, most notably and controversially in February in New York, when the Swiss gallerist Pierre Huber sold part of his “private” collection at Christie’s, causing a storm among his colleagues (p56). Other dealers have recently taken the auction route, the list being too long to reproduce in full: Otto Naumann, Christopher Gibbs, Gordon Watson and Peter Nahum. The traditional delineation between dealers and auction houses has now become totally blurred, protest many dealers.
The truth is that the two parts of the market have always existed in a symbiotic relationship. Auction houses use the dealers for supply–recently, Sotheby’s was trawling the galleries in Dubai, seeking consignments for its October Modern and Contemporary Art of the Middle East sale. At the Gulf Art Fair in the same place, dealers were happy to cite auction prices when selling works from their booths, showing just how interdependent the two halves of the art business are. And it is not unheard of for dealers to conduct “auctions” among their best clients when they are selling work by a particularly hot artist.
What is changing is the nature of the market. It is now global, and dealers and auction houses need to source inventory and service customers from all over the world, particularly the new rich economies such as Russia, China and India.
This, as well as the soaring price of art, means that much larger investment is necessary: all the players need solid financial muscle to be able to buy inventory, compete in obtaining consignments and look after their artists. Dealers and auction house business getters are travelling more and further to see their clients: Sotheby’s travel and entertainment costs, for example, increased by 24% last year according to its balance sheet.
Further upping the ante is the imbalance between supply and demand. The art trade has always been different from other businesses, in that the problem is obtaining the best work for sale, rather than selling it. The supply of “old” art is finite and decreasing as collectors and institutions cherry-pick the best. While there is a renewing supply of “new” art, the current boom is cleverly manipulated by the dealers to “place” works of art and ensure they do not reappear at auction, thus controlling the flow.
And at auction, competition for consignments between the two main houses has squeezed margins: both are turning to private treaty sales to bolster profits. Christie’s latest acquisition extends its position in the private sales sector, as Haunch of Venison is better known for its powerful position here, as well as giving it access to the primary market.
So what can dealers do to counter Christie’s move? This section of the trade is still highly fragmented, and consists mainly of undercapitalised one-man-bands alongside a small group of mega-traders like Gagosian who have gone global. Consolidation would be the answer, but this is unlikely to appeal to individual—and highly individualistic—dealers. Their best strategy to compete with auction houses is to find and nurture new talent in the field of contemporary art, and do original research and produce scholarly catalogues in the field of traditional art, something auction houses do not do. Their “consolidation” is through art fairs, which is the nearest dealers can get to replicating the competitive “now-or-never” heat of the auction. This is why the question of auction houses exhibiting at fairs has raised such a storm.
The writer is The Art Newspaper’s art market editor.
Originally appeared in The Art Newspaper as ‘The changing landscape of the art market'