Can Technology Help Art Dealers with Their Greatest Challenge?
The use of technology by art dealers to share and trade art virtually provided a lifeline during the pandemic, but it’s real long-term value lies in helping dealers to attract a new generation of buyers.
Like many other industries, the art trade has taken a technological leap forward in recent years, and the online market for art has blossomed. The unexpected emergence of the global pandemic in 2020 caused further disruption to longstanding art market conventions and precipitated a new set of demands and expectations among art galleries, collectors, and dealers for viable alternatives. To a large extent, the market has reacted to those new demands and expectations by shifting sales online and making larger investments in digital offerings and virtual experiences.
For some observers, this shift signified the maturation of an existing trend. Even before the pandemic, in percentage terms, the broader art market experienced a 6.5% growth rate from 2013 to 2018, while figures for the online art and antique market over the same period showed a dramatic rise — 5.5% growth rate.
After a significant drop-off in 2020, the global art market returned to pre-pandemic levels in 2021, generating $65.1 billion, according to an annual survey The Art Market 2022. Art Basel and UBS Report, up by 29% from 2020. The boost in online art sales as a result of Covid-induced shutdowns and social distancing measures resulted in a tremendous rise in sales from $6.8 billion in the first half of 2021 to an estimated $13.5 billion by the end of 2021, according to the Hiscox online art trade report 2021. NFT sales also bolstered the market in a big way in 2021, and proved to be a huge hit for the auction sector. For instance, Christie’s NFT auction sales peaked at $150 million and their arch rival, Sotheby’s, reached $80 million worth of NFT sales in 2021.
For art dealers in particular, the success of online art sales and the rise of digital art NFTs brought with it an important ancillary benefit: a huge influx of new buyers to the market in 2021. Survey data from Art Basel and Hiscox shows that dealers consistently rank the quest for new buyers as a major hurdle, so connecting with this new influx of collectors offers dealers a great opportunity to address one of their biggest challenges.
The Great Demographic Shift
In order to best tackle this challenge, art dealers should be in tune with the demographic changes affecting the art market in recent years. As the market has globalized and digitized, the age profile of aspiring art collectors has been trending younger, and the traditional dominance of the male collector is waning.
First, millennials are now the fastest-growing segment of collectors, purchasing and spending more than any other segment in the market. According to a study undertaken by the US Trust, millennials are not afraid to sell artworks. They are twice more likely than boomers to consider art as a financial asset, blurring the line between collectors and investors. The 2022 Art Basel report also notes that millennial collectors are more active and transactional than others. Specifically, a small number of young collectors spent significant amounts on digital art, with 5% of Gen Z and 4% of millennial collectors having spent over $1 million. Besides, as the global spend for the digital art in 2022 is growing, millennial collectors are taking the highest share of it (61%). This trend is noticed by top auction houses: at Christie’s, a third of their new buyers in 2021 were millennials.
Second, even though expenditure by male collectors was higher in most markets, in Singapore and notably in the US, female collectors spent over 45% more than men. Also, according to the 2021 Hiscox report, while more men bought NFTs in 2021 compared to women (22% vs. 16%), the report sees a higher proportion of female buyers (27%) as likely to buy NFTs in 2022, closing the gap with respective male buyers (28%).
Therefore, given the changing demographics among art collectors in favor of millennials and women, it seems reasonable to expect many potential future buyers to emerge from those quarters and prudent for art dealers to focus on these audiences in their quest for new customers.
Enter Technology
Given the habits and behaviors that broadly characterize how these collectors pursue their passion for art, dealers who best understand how to use modern technologies to create opportunities to connect with these buyers stand a better chance of success. Moreover, the 2020 health crisis created a window of opportunity for restructuring and innovation in the art sector as traditional sales models floundered due to widespread social distancing measures. Many art galleries, fairs and auction houses were forced to adapt by embracing new technologies, launching new digital offerings and leveraging online sales channels to survive.
Digital Art and NFTs
Participation in the art market for NFTs quickly accelerated through 2021, attracting young technology upstarts as well as traditional players. Two of the top ten most expensive NFTs were sold through traditional auction houses, demonstrating that even with demographic changes reshaping the art market landscape, the credibility and brand value of storied art institutions still resonates with many collectors.
Prevailing trends demand a continued focus on digital art and NFTs for art dealers looking to expand their reach with collectors. According to the Art Basel and UBS report 2022, the most prominent art-market trend of the past year was the NFT boom. Based on the report, it appears that many collectors bought into that trend.
Nearly three-quarters of the collectors surveyed had purchased art-related NFTs in 2021, and NFT sales via online platforms accounted for $2.6 billion. More than half of the collectors surveyed reported an interest in acquiring digital artworks in the next year, with millennials accounting for the majority.
According to Hiscox, “We are likely to see an increasing convergence between the traditional art market and parts of the NFT market.”
The report goes on to state that: “There are no signs that the interest in NFTs will abate in 2022. 88% of HNW collectors said they were interested in purchasing NFT-based artworks in future.”
Invest in Digital Transformation
To adapt to the changing world and the digital awakening brought about by COVID-19, investment in custom technology solutions can empower art businesses to innovate and draw in the next generation of art collectors who are more prone to browse and buy artworks virtually than in the traditional physical setting of an art gallery or fair.
Although the COVID-19 health crisis has to a large extent subsided and in-person art experiences have resumed, the reliance on online sales channels engendered by the crisis is likely to remain a permanent trend. This is best illustrated with the reported breakthrough in online sales records of arts and antiques. After a substantial dip of 23% in 2020, the volume of sales recovered in 2021, increasing by 17% to an estimated 36.7 million transactions in the auction and dealer sectors.
In order to expand sales as well as their customer base in today’s market, art dealers can look to transformative, innovative digital strategies, including online auctions, distributing superb media content to collectors via different media channels, broadcasting live-streamed performances online, and 3D virtual viewing rooms. Art dealers should also strive to incorporate mobile devices into their digital offerings, such as iPhones, smartphones, and tablets, since they have become an essential means of researching and buying art today. These devices can be a highly effective way to increase sales and lock in millennial buyers because they provide the convenience aspect prized by these types of collectors and are better suited to the shorter attention spans typical of the younger demographic.
Attracting a new generation of art buyers is not a trivial thing, but exploring and investing in the right technology solutions for this task can offer a way forward.
Author: Doron Fagelson,
Vice President of Media and Entertainment Practice at DataArt
Originally published on https://www.dataart.com/blog.
