Amazon.com is no different than Sears. In the old days, people would sit in their home and leaf through the Sears catalogue - essentially a virtual marketplace - then when they wanted to buy they would place their order over the phone and products would arrive through the mail. Voila! Amazon simply replaced a paper catalogue and a phone call with a series of clicks. The only value Sears added over Amazon was the chance, if a buyer wanted, to come and see the products in person in the brick and mortar store, where they could speak with product experts and take the product home with them that moment. This is obviously important to a certain segment of the market because we now see Amazon opening brick and mortar stores.
In some sense then, the difference between online marketplaces and brick and mortar stores is becoming smaller all the time. But in this journey, the traditional brick and mortar stores have suffered heavily: Sears has only just avoided complete bankruptcy; whilst Amazon keeps posting record profits…
The art market is now clearly moving online, despite strong resistance from the traditional gallery sector. The obvious, but the unanswered question, is whether history will repeat itself, and whether galleries and art dealers can do anything to avoid the fate of brick and mortar shops in other sectors.
They have one advantage though: they see what happened to others. Therefore, they can take action now to at least favour some online models that are less threatening than others. But even if they manage to do this, they will have to be careful not to favour any dominant player, no matter how “friendly” its model is.
Four basic types of online art selling platforms have emerged in the art sector:
“Online Only” Galleries - The first platform to emerge is that of a traditional gallery, which simply does not have a brick and mortar location, it exists completely online. They are referred to as “online only galleries”. This model is represented by dealers like IdeelArt.com(*), Artistics.com, Ffoto.com and many others, which represent a carefully selected group of artists like a traditional gallery, but the gallery mostly operates and distributes its inventory online. Those models are not that different from traditional brick and mortar galleries, as long as their content and curation process is robust enough to add value to online visitors. Some of them combine, in addition to an active e-commerce platform, some physical presence (pop-ups or presence at art fairs), and a strong presence on other marketplaces such as some of those described below. It was necessary to mention them in this article mostly to avoid confusion between them and proper “marketplaces” since I truly do not think that they represent any material threat to the traditional sector. I will explain why later.
“Cut The Middleman” Marketplaces - The second platform type is represented by companies like SaatchiArt and Artfinder. This model cuts out art galleries entirely (the intermediary is replaced by the platform) and simply connects artists directly to buyers through an online portal. This is like eBay for art. Any artist can open up a “virtual store” on these platforms. Buyers can shop all stores at once through the website’s central interface. When a buyer makes a purchase, the online marketplace takes a percentage of the sale and the artist keeps typically about 70% of the revenue. This model offers a massive variety of work for sale by artists who are, typically, not represented by traditional galleries. Whilst young and emerging artists mostly use them today, they could well become the dominant model for all things about art in the future, representing a material threat to the traditional gallery sector.
“Top of Value Chain” Marketplaces - Companies such as 1stdibs, Artsper and Artspace represent the third type of platforms. They sit at the top of the value chain: they have direct contacts with leads and clients, they manage the entire sale process, and they usually do not share some very valuable information with their gallery partners: the details (name and email) of the buyers and leads. Some of them (like 1stDibs) do not even show the name of the dealer on the artworks listing… They allow previously vetted sellers to offer art for sale through a presentation of their artwork inventory on the site. The website manages the transaction, and makes money by charging a transaction fee which varies from 10 to 20%, often in addition to a monthly subscription fee.
“Facilitators” Marketplaces - The fourth, and I believe most equitable platform type, is represented by companies like Widewalls(*), or Artnet. To me, this model is the most “gallery-friendly” of all, and the one that provides the best combined value to buyers, sellers, and artists: it is based on providing high-quality information on the art world free of charge to everyone while also connecting interested art buyers directly and transparently with art dealers so that a private transaction can occur off-site. These companies typically do not take a percentage of the sale, and more importantly do not deal directly with collectors. They make their money by renting store space to sellers. By vetting the sellers ahead of time, they ensure only reputable dealers are allowed to participate, which raises the quality of the artworks represented on the site and provides increased security for buyers. They gather a qualified audience and help provide online visibility and leads to the sellers, nothing more.
It is undeniable that every one of these models offers some obvious benefit to online art buyers. As a gallerist myself, the question I ask is which model could dominate the market in the future, and make the most sense for traditional art galleries to support. Traditional galleries are the backbone of the art market, so it is vital that we develop a model that supports their efforts in the long term.
This question is of paramount importance to the traditional art gallery sector, as it will likely determine to which extent they will survive in the future.
And as I already hinted, curated online-only galleries do not represent, I would think, any serious threat to traditional galleries, since brick and mortar galleries can very well develop similar online activities, by just adding online representation and sales in their marketing mix. Peter Blake, or Bel Air Fine Art, just to name two highly reputed galleries, efficiently combine physical and online sales.
“Top of Value Chain” sites take a huge cut of the deal, thus either driving prices up for buyers or cutting into the profits of dealers and artists. If a gallery is already splitting revenues 50/50 with an artist, why would it want to lose a material part of its cut to an online marketplace? And for what long-term benefit, knowing that they can not market their inventory to the platform clients (other than through the platform itself), and can not build their roster of potential clients by collecting emails of interested collectors?
In the Antiques and Design sector, 1stdibs (which initially only presented antiques and design products) is the very example of what could happen to the traditional gallery sector if it blindly supports this model: indeed, in the US, being an antique dealer without having a presence on 1stdibs has become very challenging. And 1stdibs have therefore recently started to, in my view, abuse their dominant position by removing the name of the sellers from the platform (stating that this would “level the playing field” for smaller dealers…). They are one step away from starting to squeeze further dealers’ margins. Last time I checked, 1stdibs was not profitable. How will they be able to pay their shareholders back?
Whilst traditional galleries can make use of these platforms to complement their sales, they must do it with their eyes wide open, making sure that this model never manages to dominate the market.
There is little to do, I think, against “Cut the Middleman” marketplaces - which represent the most disruptive and dangerous model for the traditional gallery sector - other than providing a better service than those marketplaces(s), with the hope that the internal curation tools used by those platforms do not manage to replace, in the long run, the gallery curatorial and advisory services.
But in my view, those marketplaces will never be able to replace a proper gallery: not because of the service offered to buyers, but because of the service offered to artists. Artists are creative people, not salesmen (some are, but they will always be the exception.) I could expand on this, but this is due to the nature of their reptile brain and the type of comportment it favours in them. In short, they are happy to create, not to sell. They thus need an intermediary who helps them manage it for them. Whilst younger artists cannot avoid doing the job themselves, for obvious budgetary reasons, and will be attracted by platforms such as SaatchiArt, they will always prefer having a proper gallery (or more) handling the commercial aspects of their activity as soon as it will become possible for them.
So, in the end, and as I will have already hinted above, the most obvious model for galleries to support is the model represented by companies like Widewalls, Artsy, and Artnet: the “Facilitators”. For a small (well, not always so small, I will get back to this later) and predictable fee the dealers may expose the market to the work of all of the artists they represent. Dealers control the message about their gallery and have the chance to tell the complete story of the artists, including exhibition history, CV, and a detailed, bespoke explanation of the work. In addition, these websites provide a vast assortment of other services that attract daily viewers who are interested in more than commerce. They publish informative articles and provide consolidated information on market performance, while also connecting artists and movements and styles according to medium, historical relevance, and a variety of other factors.
Essentially, sites like these function in the same capacity as traditional art magazines once did. They offer journalistic content about art and detailed analyses of the art market, while also offering serious sellers a platform on which to advertise the work they represent to buyers. The platform is transparent, unassuming, informative, and friendly. No hard sell is ever perpetrated on buyers, and sellers are allowed complete control over their branding. Best of all, galleries collect all of the proceeds from every sale.
There are currently approximately 20.000 art galleries in the world, and, if I exclude Online Only galleries, which are basically just another type of art gallery, there are only 10 to 15 credible marketplaces dominating the market today. I do not think any significant consolidation can happen in the gallery sector itself, which is extremely fragmented today and will likely remain so in the future. But the likelihood of consolidation, and therefore of creation of a dangerous dominant player, is much higher in the online marketplace sector… Think about it, 10 years from now, 20.000 galleries with a very limited buying power, and only one dominant player. How will that feel? To me: sheep to the wolf…
Indeed, even if the “Facilitator“ model wins the competition amongst marketplaces, the traditional gallery sector will probably not be totally safe still: Artnet is profitable, but not much. Artsy, I believe, is not, and have invested more than $100 million in their platform; It is said that their value was $275 million when they last raised capital. If any of those platforms was dominating the market, it would be easy for them to increase their already quite hefty monthly subscription fee to become profitable and remunerate their shareholders in line with their valuation levels...
Widewalls, which have a very lean management structure, provide similar services for less, and (I would say that of course…) should get the support of the gallery sector as an efficient complement or alternative to other more expensive marketplaces, keeping the others honest and providing a platform accessible to any gallery with a good program. But they (well, I should probably say “we”) would no doubt be tempted also to raise their tariffs if they were dominating the market!
And so, the art galleries that use these services must consider the following: If they all gravitate towards a single service provider, that provider can set whatever economic terms will best suit its own bottom line. Ultimately this will result in lower margins for dealers or higher prices for buyers. Or both.
This phenomenon has already played out in all kinds of sectors, where one giant player emerges to establish dominance and then manipulates the price structure for the entire market.
The best way forward for the traditional art gallery sector is to try to maintain a thriving online market where a range of different players will compete with each other for attention. That is what will keep the system equitable for dealers, buyers and artists alike.
(*) the writer of these lines is the CEO and majority shareholder of Widewalls.ch, an online magazine and marketplace dedicated to modern and contemporary art, and the co-founder of Ideelart.com, an online-only gallery dedicated to contemporary abstract art.
Featured image: Banksy - Pulp Fiction. Courtesy Puccio Fine Art.