Much attention to the pandemic’s effects on the art ecosystem has focused on museums and other nonprofit institutions, public entities whose data is often more visible and accessible. A recent survey, however, shows that the coronavirus has also taken a substantial toll on art galleries — leading to furloughs and layoffs that have greatly impacted its workers.
Every year, Art Basel and UBS release its joint Art Market Report, a macro-level analysis that takes the commercial sector’s temperature on general growth, private sales, auction performance, and other key areas. The COVID-19 impact report, conducted by cultural economist Dr. Clare McAndrew and sociologist Taylor Whitten Brown of Duke University, is more narrowly focused, drawing from surveys of nearly 800 modern and contemporary galleries during the first half of 2020 — spanning the coronavirus’s initial outbreak and ongoing spread.
Many of the findings echo the financial havoc wreaked across industries: lockdowns, travel bans, and a destabilized supply chain have rocked the gallery sector, shrinking profits. Compared with the first six months of 2019, sales fell by 36% on average during the same period in 2020. Smaller galleries, defined as having an annual turnover of less than $500,000, reported the largest declines in sales. A mere 21% of dealers surveyed expect an uptick in sales in the second half of the year, and only 45% foresee a better panorama in 2021. (Online sales, meanwhile, present a slightly more optimistic picture, rising from 10% of total sales in 2019 to 37%.)
Staff cuts haven’t just hit museums: one-third of dealers surveyed reported downsizing (defined as a combination of layoffs and furloughs). Perhaps most notably, 37% of galleries with turnover in excess of $10 million downsized their staff. (This tier of the business also enjoyed the greatest growth in online sales, which rose almost fivefold by 38%.)
The survey notes that the vast majority of galleries are small businesses with very few staff; those with a turnover of between $250,000 and $500,000, which had only five employees on average at the beginning of the year, implemented the greatest staff cuts, downsizing by 38%. That subset of galleries also experiences the greatest drop in sales.
Art fairs represent a fundamental source of income for galleries — 46% of all sales on average in 2019 — as well as a crucial opportunity to foster new relationships with collectors. They are also a significant expense, making up the single largest component of total costs for galleries (29% on average in 2019, higher than rent or payroll.)
Unsurprisingly, then, the cancelation of most major art fairs this year — beginning with Art Basel Hong Kong in February and, more recently, the fair’s Miami Beach event last week — has had devastating effects on sales. According to the report, gallery sales via art fairs were reduced to just 16% in the first half of the year. Interestingly, the abrupt pause to the jet-set lifestyle imposed by the international art fair circuit allowed galleries to reduce travel costs by over one third, sometimes compensating for other shortfalls.
The report also dedicates a section to the activities of “high net-worth” collectors, reporting the results of a survey of 360 art buyers in the US, UK, and Hong Kong SAR (China) conducted in July 2020 by Arts Economics and UBS. Among its key findings, most collectors reported remaining active in the market, with 92% having purchased a work of art in the first six months of the year; more than half of those surveyed — 56% — had already spent over $100,000 in the art market in 2020. Unbelievably, 59% of them responded that the COVID-19 pandemic had “increased their interest in collecting.”
How have gallery priorities shifted? According to the report, many went from focusing on art fairs and widening the geographical scope of their client base in 2019 to boosting online sales, cutting costs, and keeping existing collector relationships afloat — seen as critical to their survival.