The Impact of COVID-19 on the Gallery Sector

Dr. Clare McAndrew—cultural economist and mastermind behind Art Basel/UBS’s market reports—and her team recently released a special mid-2020 survey on how the COVID pandemic has impacted the gallery sector. Let’s take a look at the data.

As one might expect, “the business model of galleries—based fundamentally on discretionary spending and strongly dependent on travel and in-person contact—is uniquely positioned to struggle in the present realities of the COVID-19 pandemic,” the report states. With lockdowns and travel restrictions in place, in 2020 many art fairs that attract international audiences moved to online viewing rooms, and nearly half of gallery exhibitions were cancelled or postponed.

As a result, comparing the first half of 2020 to the same period in 2019, galleries reported a 36% drop in the value of their sales, with a median of 43% (see fig. 1). Smaller galleries, with a turnover of less than $500,000, reported the largest declines in sales. Asia was hit harder than other parts of the world.

Fig. 1, Change from Total Gallery Sales from First Half of 2019 to First Half of 2020. Courtesy of Art Basel & UBS Market Report, copyright Arts Economics, 2020.

Galleries had to permanently lay off or furlough between 27–38% of their employees in the first six months of the pandemic (fig. 2). Some were able to rehire about  5–9% of their staff. Small and mid-size galleries were already in precarious financial positions before the pandemic hit, unable to keep pace with what Jerry Satlz calls the “Mega Death Star” galleries. And according to the Art Basel/UBS report, some galleries, especially in smaller markets, felt that public or government assistance was harder for them to come by than their peers in larger markets.

Fig. 2, Changes in Gallery Employment in the First Half of 2020. Courtesy of the Art Basel & UBS Art Market Report, copyright Arts Economics, 2020.

Unsurprisingly, in lieu of attending fairs and galleries in person, online sales rose from 10% of total sales in 2019 to 37% of sales in the first half of 2020 (see figs. 3 & 4). Whereas previous data indicated a spending cap of about $100,000 for online sales, according to the new survey, high net worth individuals (HNWI) are now willing to spend seven figures through online sales, as galleries that average $10 million-plus sales reported 38% increase in online sales.

Figs. 3 & 4. Left: Average Share of Sales by Sales Channel in 2019 (Turnover-Weighted); Right: Average Share of Sales by Sales Channel in the First Half of 2020 (Turnover-Weighted). Courtesy of Art Basel & UBS Market Report, copyright Arts Economics, 2020.

Although overall sales were significantly down (fig. 1), a whopping 92% of the surveyed HNWI said they bought a work of art in 2020; 52% said they had paid prices in excess of $100,000 (fig. 5). And despite economic hardship endured across the country, 59% said the pandemic had increased their interest in collecting (31% said “significantly” so). They are certainly taking advantage of the “buyer’s market.”

Fig. 5, Price Range Most Frequently Used for Purchasing Works of Art in the First Half of 2020. Courtesy of the Art Basel & UBS Market Report, copyright Arts Economics, 2020.

As a result of their downward sales, and the apparent eagerness of the HNWI individuals to continue to purchase art through the pandemic, “the majority of galleries also shifted their focus in 2020 from widening their base of buyers to ensuring that they maintained relationships with existing clients who are seen to be critical to their survival,” the report states.

Art Basel/UBS report is unsettling to me, because the art world is a microcosm of the larger gross income inequality of this country. Let us remember that the economy is in a recession due to COVID. Millions of Americans are on unemployment, and according to Feeding America, 54 million Americans face food insecurity in 2020 (including 18 million children). Not only have many Americans gotten poorer, but, remarkably, the wealthiest have continued to grow their wealth in this recession: The Guardian reports that America’s billionaires grew their wealth an extraordinary $637 billion in just a 3 month period, from March to June—that’s equal to three quarters of all Black wealth, and more than all the wealth of our country’s 59 million Latinx people.

Similarly, Dr. McAndrews’s report demonstrates how the devastation of the pandemic impacts those at the bottom of the art world pyramid, so to speak—small galleries, art industry employees, and artists—while the wealthiest Americans remain largely untouched by the economic impact. For decades, the art world has structured itself to cater to the ultra-rich, and the galleries’ own admission in this report that they are focusing their energies on maintaining the relationships of their clients that are “critical to their survival,” underscores how the market is structured to cater to and depend on the ultra-rich.

Most art world professionals are probably relieved to see such healthy spending: after Sotheby’s online sale in June, one art advisor proclaimed to the New York Times that there was “absolute confidence in art as an asset class.” But the truth is, this apparently flourishing market is only benefitting a very, very slim portion of galleries, artists and buyers, as another art advisor noted in The New York Times: “Sales are down across the board, but there’s an incredible amount of wealth chasing the rarest of the rarest…There’s a real disconnect between who’s hurting and who isn’t.”

Eleanor Roosevelt once said, “When it’s better for everyone, it’s better for everyone.” Such a simple but poignant statement. Just like the grander picture of American late stage capitalism that we find ourselves in, we must recognize that this gross income inequality and wealth hoarding is unsustainable. Art is for everyone, and we need to create economic and business structures that support a healthy middle class, small businesses, and the staff and artists who depend on them. It’s simply better for everyone.

To download a free copy of the full Art Basel/UBS report, click here.

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