Gallery sales dropped by over a third in the first six months of 2020 as the majority of galleries remained shut. The drop in spending mirrors much of what the luxury goods market is facing and comes aside other sobering assessments in Art Basel/UBS’s mid-year report.

A study of the global art market shows that sales sank in the first half of this year as the vast majority of galleries closed down because of the pandemic, although online sales helped alleviate some of the pain, according to new figures.

The Impact of COVID-19 on the Gallery Sector report by cultural economist Dr Clare McAndrew surveys how the pandemic has affected 795 galleries representing 60 markets across all levels of turnover over the last six months. A surge in online sales and younger interest has provided some bright spots. The study that includes a separate UBS/Art Basel look at HNW spending in three of the largest markets is “a first attempt to better understand the full impact of the present crisis, the strategies taken in response to it, and the changes it will bring to the sector,” McAndrew said.

Sales shrank by an average of 36 per cent in the first half of 2020 as nearly all galleries (93 per cent) closed their doors between January and July. A third of galleries downsized, losing an average of four employees, with around half of these being full-time. Online sales accounted for 37 per cent of total sales for the period, up from 10 per cent in 2019. Three quarters of these were made by regular gallery clients, and around a third of them had bought offline in the past and were new to buying online.

Much has been pinned on attracting new audiences into the fine art world through online viewing spaces that offer more transparent pricing and a more inclusive feel in a market that is notoriously known for being “exclusive".

Millennial moment
This study certainly shows Millennial buyers coming into the fray. The demographic made up the largest share of high spenders, with 17 per cent spending over $1 million in the six-month period (versus just 4 per cent of Boomers). The survey found that all Millennial collectors and most Gen X collectors (94 per cent) reported working with galleries during the crisis.

Collectors also appreciated greater pricing transparency. It was one of the most highly valued features of galleries having to mount digital shows, with four in five collectors calling it “important” or “essential” to have prices posted when browsing works for sale.

Other bright spots in a difficult six months found that collectors were still very active, especially at the high end. A separate high net worth survey by UBS of the large US, UK, and Hong Kong SAR (China) markets found that 92 per cent of collectors had purchased work in the first six months and spending had stayed relatively high across the three markets. Some 40 per cent said they had made a purchase digitally.

“Digital platforms can increase price transparency and broaden the base of new buyers at different price levels. Strengthening this digital community globally may be essential for the health of the market in the future,” Christl Novakovic, head of wealth management in Europe for UBS said.

Another concern has been permanently lower price exchanges for art in the absence of physical auctions and all the deal-making and networking big global art fairs generate as annual fixtures in ultra-wealthy calendars.

The survey largely supports the fear, finding that collectors are very much wedded to their physical connection with art. Many gallery owners also said that their online efforts did not come close to replicating the experience of actual fairs. Collectors agreed. Over two-thirds said they preferred to view art for sale in person and placed a high or very-high value on the sense of discovery and the opportunities for social contact and discussion that these physical marquee events provide.

Hard realities
The report's author said that despite finding ways to maintain sales online, the pandemic will continue to profoundly affect the sector.

“Some galleries have already closed permanently, others have furloughed or laid off significant numbers of employees, and the effect on those that remain open is still unfolding. Along with these negative effects, crises can also be unique times of restructuring and innovation within markets," McAndrew said.

This news service reported last month on the effects suffered by the UK art market.  And reported on the overall investment picture.

Buying behaviour over the last six months showed that a majority (56 per cent) of collectors spent over $100,000 in the period, including 16 per cent spending over $1 million. However, a third chose only to buy already familiar artists or artists whose work they have bought previously. If this trend continues, the report warned, it could deliver a blow to diversity, making it harder for younger artists and newer galleries to establish themselves.

The vast majority of gallery owners said they expected to see sales drop off further in the second half of the year. And few saw any great optimism for 2021.

Growth and opportunity
The report does suggest that young wealthier collectors are the market's new flag bearers. They registered as being the most involved in working with galleries through the crisis, they are putting their money into boosting sales, and are the most optimistic about how the market will perform in the next six and 12 months (60 per cent versus 24 per cent for Boomers). HNW collectors too are more positive, with 59 per cent feeling the pandemic had increased their interest in collecting; again a sentiment felt most keenly among younge HNW collectors.

Noah Horowitz, Art Basel’s Americas director, also struck a positive tone. “These findings reflect the many and significant challenges our industry has faced through the first half of 2020, yet what is equally clear… is the shared sense of engagement, purpose, and community that continues to define so much of the art market and remains vitally important to our future.”