As the COVID-19 virus spreads across the globe, stock markets are proving to be mired in volatility, as is the state of retail, which is seeing an ever-growing number of multi-national brands close up their brick-and-mortar outposts indefinitely in most cases (adding to concerns about declining health of the brick-and-mortar retail economy and the already-rising number of store closures), while others have opted to remained open, thereby, “worrying employees who have to travel to their jobs and then interact with the public,” the New York Times reported on Wednesday.
All the while, nearly all consumer-facing industries – from fashion to food – are being hit hard as COVID-19 is drastically affecting supply chains and disrupting manufacturing around the world. Not exempt from the havoc that is the coronavirus is the art market, which is similarly facing disruptions that are likely to impact the growth and sales of this global industry for the foreseeable future.
A recently released report provides some timely insight into how exactly COVID-19 is expected to alter this market, and at the same time, giving some hints as to how similarly-situated industries – such as the luxury market, or more specifically, high fashion’s houses couture businesses – may be effected, as well. This is particularly relevant given the increasing commonalities between art and haute couture in terms of the structures of and the approaches to these the markets, including the element of rarity that is at play (both for traditional pieces of art and for hand-sewn, one-of-a-kind garments), the practice of collecting, and the fact that a growing amount of couture pieces are being offered up at auction, meaning that collectors and auction records “often establish price benchmarks for pieces,” and thereby, mirroring the art market.
Co-authored by Art Basel and UBS, the Art Market 2020 report suggests that measures to control the spread of coronavirus through government restrictions on travel and large social events are already having a dramatic impact on the international art market, which generated a reported $64.1 billion in sales in 2019, down 5 percent on 2018. This drop reflects a larger decline in global economic growth driven by increasing geopolitical tensions and the trend toward trade protectionism led by the U.S.
In the last six weeks, alone, multiple art fairs have announced either postponement or cancellation, including Jingart Beijing, Art Basel Hong Kong, Miaart Milan, Art Paris, Art Berlin and Art Dubai. And while the European Fine Art Fair in Maastricht went ahead, there was a reported a 27 percent drop in attendance of VIPs at the opening, which is precisely where many major sales are traditionally made.
The removal from the calendar of some of the year’s most prominent art fairs is significant from a bottom line perspective, as almost half of all sales in the dealer sector were made at art fairs in 2019, amounting to $16.5 billion – 26 percent of all sales made in the global art market. This concentration of sales at the top end of the dealer market is perhaps the art market’s Achilles heel when considering potential fallout from the impending COVID-19 pandemic. Dealers in this turnover bracket attended twice as many art fairs as smaller dealers, with international fairs (as opposed to local fairs) contributing to more than half their total art fair sales.
For dealers with turnover of more than $10 million, international art fairs represented a staggering 70 percent of their art fair sales.
Besides the sales generated at art fairs, dealers have become increasingly dependent on fairs for expanding client lists and developing their businesses. The unfolding COVID-19 pandemic represents an immediate threat to this business model. One dealer quoted in the Art Market report noted the undesirable impact disruptions from outside the art world can have on art market demand: “2020 will be a challenging year, but rather than major political dramas having a direct financial impact, their main danger for us is to distract people’s attention. Distractions and anxieties can take people away from buying art, even if the economy is booming and they’re still in a position to spend.”
While this dealer was more likely referring to topical political issues, such as Brexit or trade sanctions, the COVID-19 outbreak has the potential to provide a far greater “distraction” for art buyers. In fact, while the impact of COVID-19 on the long-term health of the art market remains to be seen, it could be particularly detrimental given that art fairs have already been struggling due to multiple economic headwinds in the latter part of 2019, with increasing numbers of retractions and cancellations worldwide.
In 2019, Art Basel Hong Kong featured 242 galleries from 35 countries and was attended by 88,000 visitors over five days. This was a pivotal event on the regional calendar and its loss to the 2020 art market will be sorely felt. The global footprints and nimble business structures of international auction houses may help these businesses weather this storm, as they have done in the past. But the picture is worrying for commercial galleries.
Creative initiatives, such as Art Basel Hong Kong’s online viewing platform, are emerging to help fill the increasingly larger void that is being created as a result of travel bans and social distancing mandates. But with uncertainty about how long it will be until this pandemic is under control, the future health of the global art industry is yet to be determined.
Anita Archer is a Research Coordinator for the ERCC Research Unit at the University of Melbourne. David Challis is a Postdoctoral researcher at the University of Melbourne. Edits courtesy of TFL.