Art Basel and UBS today published Resilience in the Dealer Sector: A Mid-Year Review 2021, written by renowned cultural economist and Founder of Arts Economics, Dr. Clare McAndrew. The survey presents an analysis of the global dealer sector in the first half of 2021 amidst the continued challenges of the COVID-19 pandemic, focusing on the employment structures and sales. The analysis is based on responses from over 700 dealers operating in art and antiques markets in 54 regions or countries. The report also presents the results of a survey of high-net-worth (HNW) collectors across five major art markets the US, UK, Hong Kong SAR (China), Germany, and Switzerland conducted by Arts Economics and UBS Investor Watch. The survey focuses on HNW collectors interactions with dealers and galleries in 2021. The full Mid-Year report is free to download on the Art Basel and UBS websites.
Key findings of Resilience in the Dealer Sector: A Mid-Year Review 2021 include:
Employment: The effects of the pandemic on employment was a major concern for businesses over the last year. However, there were promising signs that some of the job losses incurred during 2020 were recouped in 2021, with the average number of those employed in the sector (seven) returning to 2019 levels after a dip in 2020. 23% of businesses downsized their workforce in 2020; however, in the first half of 2021, the share of dealers hiring (25%) exceeded those losing staff (13%). In 2021, 52% of dealers reported having some employees working remotely, with 27% doing so occasionally and 25% more regularly. 54% of those businesses with remote work had introduced it in response to the COVID-19 pandemic. In 2021, the sector continued to support gender-balanced, knowledge-based jobs. In the primary market, 52% had a female founder, and women made up the majority of employees at partner level (61%) and 76% of sales and commercial directors.
Gallery Sales: 51% of dealers reported an increase in sales in the first half of 2021 compared to the same period in 2020, versus 45% reporting a decline and the remaining 4% at a stable level. Sales in the sector, as a whole, increased by 10%. All segments of the market in excess of $1 million, saw improvements in sales, with dealers with over $10 million in turnover reporting the highest average change in sales (21%). Dealers with turnover less than $250,000 saw sales dip marginally below H1-2020, and mid-sized dealers in the $500,000 to $1 million turnover segment saw values decrease by 3% on average. Asian dealers reported the biggest improvement in sales in the first half of 2021 with an average 18% increase over 12 months dealers in Europe reported the poorest performance, with a 7% decline on average.
Online Sales: The shift to online sales was by no means transient; the share of online sales for dealers at all levels remained more than double the level of 2019 and this channel accounted for 33% of all sales (or 37%, including art fair Online Viewing Rooms). While still a minority share in the first half of 2021, online sales to new buyers expanded, accounting for 38% of all online sales by value. A further 25% were to existing clients buying online for the first time from dealers in 2021. While potentially indicative of the success of digital strategies in expanding the base of buyers, figures demonstrate the difficulties in retaining repeat business online.
Digital Art: While digital, film, and video art remained a relatively smaller proportion (16%) of HNWIs collections, 48% of HNW collectors reported an interest in purchasing digital art works over the next 12 months. Digital art accounted for 12% of the aggregate median spending by collectors in 2021, with the highest expenditure by millennials averaging $20,000 in the first half of 2021. However, the dealer survey showed that digital art sales accounted for less than 0.5% of the value of sales in the primary market in 2021, indicating a significant portion of the activity in sales of NFTs related to digital art occurred outside of the traditional gallery framework.
Global Wealth and Art Buyers: Despite the crisis, the median expenditure by HNW collectors rose 10% year-on-year in 2020, and the first half of 2021 saw a further increase of 42% on average (to $242,000, higher than either 2019 or 2020 in just six months), illustrating the impact of HNW collectors on market recovery. The advance was driven by millennial collectors, who had the highest spending overall ($378,000) more than three times the level of their older peers. In the first half of 2021, spending by female HNW collectors increased by just over one-third to $410,000, more than double the level of their male counterparts, whose spending grew by just 9%. Dealers and galleries were the most used channel for purchasing, with 82% of collectors having purchased through a dealer in the first half of 2021. When presented the choice of buying works through a dealer or gallery versus an online marketplace, 80% of collectors preferred dealers. Despite ongoing concerns and setbacks, HNW collectors planned to attend, in total, 40 events in 2021 only one less than the average reported in 2019. Across all collectors, online platforms were used by over one-third of the sample and 32% had bought directly using Instagram.
Dealers Role in Artists Careers: Exhibition data from Wondeur AI on the careers of a sample of 2,700 top-tier artists whose exhibition journey began after 1985 illustrated the importance of commercial galleries throughout the artists careers. For emerging artists, commercial galleries accounted for an equal share of the number of exhibitions as non-profit centers (36%). As artists careers developed, museums played a larger role; however, even at the star stage, when artists had reached the top 2% status, galleries accounted for 26% of all exhibitions. The analysis also showed that although the gallery sector is highly top-heavy in terms of sales, focusing on exhibitions and the support of artists careers reveals a very distributed system: in the emerging phase of their careers, there were 4,060 commercial galleries and 84 art fairs exhibiting the works of artists; these for-profit institutions accounted for close to half of those involved in running exhibitions by artists, with museums making up 20%.
Looking Ahead: Overall, 91% of dealers estimated that their sales would either increase or remain stable over the next 12 months, with 9% predicting a decline. 37% of dealers predicted greater net profitability in 2021 compared to 2020, with a further third predicting their profits would be stable. The majority of dealers (78%) predicted their employment numbers would remain stable, with 4% estimating they would be downsizing further and 18% looking to hire more employees. 64% predicted their online sales would continue to increase over the next 12 months, with only 5% predicting a decline through this channel. 66% also predicted an increase in art fair sales, with 13% predicting declines. 69% of dealers reported maintaining relationships with existing collectors as their top priority in 2021, followed by online sales and exhibitions (50%) and art fair participation (41%).
Clare McAndrew, Founder, Arts Economics said: While art sales have been relatively resilient during the crisis, some of the biggest fears for dealer sector have centered on employment. This research has uncovered some promising signs that some job losses have been recouped in 2021, along with indications of transformations within the industry that will continue to affect working practices in the future. While some aspects of work are changing, a constant in the sector is the dominance of high knowledge, gender balanced employment. The research showed that, alongside the quality of the work and artists they offered, dealers are valued by collectors most for their knowledge and expertise as well as the long-term focus and trust built into their relationships. As more art is sold online and outside the traditional gallery framework, their critical role in establishing and managing the careers of artists has also been highlighted.
Marc Spiegler, Global Director, Art Basel, said: Arriving during one of the most challenging and potentially transformative periods ever experienced by the global art market, our Mid-Year Review by Clare McAndrew provides crucial insights into the resilience and rapid adaptations that galleries across all sectors have shown especially in terms of deploying the digital strategies devised last year. Clare's report details the remarkably robust and continued interest in collecting driving the art market's recovery, and confirms that collectors remain eager to buy art in person.
Christl Novakovic, CEO UBS Europe SE and Head Wealth Management Europe and Chair of The UBS Art Board said: UBS believes in the power of art to connect people for a better world. Out of crisis springs innovation and drive for change. The fallout from the pandemic offers us a unique opportunity to take a fresh look at markets, the evolving role of gallerists and dealers and help rebuild them in a more sustainable manner. Our findings demonstrate that digital acceleration continues apace, bringing with it evolutions and challenges to traditional market structures, along with new business opportunities.
Resilience in the Dealer Sector: A Mid-Year Review 2021 is accessible here
free of charge.