Art for Sale - A Candid View of the Art Market

The Structure of the Art Market

Commercial Intermediaries

Between the two poles of the art market—the artist and the collector—there is a wide and often fluctuating world of individuals and institutions devoted to both the dissemination and interpretation of art. Although the art market itself is primarily a commercial intermediary, those who deal with the non-commercial contexts of art—what might be called “content-related intermediaries” (→ Content-Related Intermediaries)—also influence the participants in the system and, as a consequence, the market.

Art Dealers

Art dealers can be divided into three categories: art dealers, rare book dealers, and galleries. Around the globe, the differences among them are strong. The first two offer antiques and old art and books, while doing business in sales rooms, at fairs, and via the Internet. The term “gallery” encompasses private dealing in any sort of art, from the works of the Old Masters to multiples and posters. Traditionally speaking, however, a gallery is a firm that buys the work of contemporary artists, generally before they are picked up by museums. Here, the gallery does not just act as the middleman between the work of art and the buyer—it makes the artwork accessible to the public in both a concrete and an intellectual sense. As such, gallerists can be said to mediate the relationship between artist and buyer, often representing artists who have not yet developed a reputation. Even if it is not a precondition, a trusting relationship between the artist and the representative often ensues. After all, the primary market is the first chance that an artist has to gain some idea of the commercial value of his or her work. By carefully selecting the artists they wish to represent, gallerists also have the opportunity to create a program that will distinguish their particular company from the competition. Therefore, these primary galleries are sometimes referred to as “program galleries.”

The gallery is the classic place for artists to have their initial shows and discussion forums; it is where artists expose their work to public critique for the first time. Ideally, the gallery takes on the job of introducing young and unknown artists to the market and thus has a hand in determining the artistic value of a work of art, as well as its market price, market strategy, and value to society. Hence, galleries occupy a key position in the art market, if not also in the process of determining the direction in which art as a whole will develop.

The optimal way for a gallery to make an artist known to the public is to sell his or her works, ideally to the most important museums and private collections. However, that path often entails difficult and expensive work, which is also entangled with high risk, since only a small minority of artists can actually flourish on the market at any given time—a gallery can only succeed by correctly balancing artists whose work sells sluggishly against those who reliably produce strong sales.

Yet another important function of the gallery is to encourage and educate new collectors. A gallery can advise collectors continuously over a longer period of time in a way that any auction house looking for new buyers cannot. Considering the fact that contemporary art increasingly needs explication, the influence of art dealers has grown steadily since the beginning of Modernism. It is obvious that art dealers are becoming progressively responsible for mediating art in society and culture.

The Auction

The auction is an organized way to sell goods to the public by gathering a potential group of buyers, either virtually or in person, at a particular time and under unified guidance. One characteristic of an auction is that the wares are sold at the highest price that can possibly be achieved, by accepting competing bids from interested bidders.

On the auction market, the two leaders are Christie’s and Sotheby’s; they are positioned opposite many other houses, which tend to be nationally based and—even for those that do operate internationally—have significantly fewer items to offer. Altogether, the two large international houses take up more than three quarters of the market. And while it would be difficult to claim a relationship of cause and effect, most of the new developments in this field of business are introduced first by one of these two houses, and their histories are exemplary of how the modern auction house developed. Their degree of fame is an important instrument on the supply side of this market, as well as something that conveys a sense of security to clients, since—due to their dominance of the market—these houses are watched more closely than others.

A Mix of Trade and Auction

One frequently occurring blend of both these businesses comes in the shape of the dealer who also acts as an auctioneer. This kind of combination, however, tends to form inadvertently. An art dealer tries to acquire more clients through a new channel—the auction—while at the same time, she purchases new items for her own dealership from clients who want to sell their objects. Or, an auctioneer buys something through his own auction and thus creates another channel for making a sale, namely by then acting as a dealership. The latter is problematic, since at that point the auction house is no longer a neutral intermediary hoping to achieve maximum profit. Instead, buying in its own auctions, it competes with other dealers who want to purchase items through the auction and are hoping to pay the lowest possible hammer price.

Procuring items for auctions, however, can also be the reason for this kind of double track: owners of smaller auction houses in the provinces, especially, where there are fewer potential clients than there are in the big cities, behave like dealers and buy objects, which they then turn around and sell in their own auctions. As a result, the true character of the acquisition remains hidden, and the auction house is no longer a neutral intermediary (→ Competition for Supply).

Yet another hybrid consists of a dealer and an auction house. One well-known case is that of the Villa Grisebach auction house—the most important house for prewar Modern art in Germany today. The “Villa,” originally the house of architect Hans Grisebach on Fasanenstrasse in Berlin, was founded in 1986 by art dealer Bernd Schultz and four other colleagues. The dealers operate their galleries as well as an auction house.

However, if an auction house buys a share of a gallery in order to gain access to their client list and, above all, to have a discreet place to offer works not sold at auction, then this is an attempt to use the gallery as another sales conduit (→ New Distribution Channels).

Consultants, Experts, Detectives

Consultants play an important role in the art market. During the acquisition process or in carrying out individual projects, they provide support to collectors or museums with their knowledge of art history, tax law, or business. Consultants are particularly important to corporate collections. To the extent that a company regards its collection as a publicity tool and a way to motivate employees, the private preferences of individual managers are set aside in favor of expertise, which can often only be provided by a professional consultant.

Individual contracts define the field of duties performed by art consultants. A consultant is obligated to provide correct, complete information in a conscientious manner, and to investigate information provided by third parties. Representatives of this profession like to consider themselves objective, and—if they have no financial interest in a business—as neutral mediators. Other types are still rare; only very large private collections have permanent, salaried curators who are not dependent on their commissions. Inversely, galleries now have departments that offer consultation apart from their daily business, so that the boundaries between gallery deals and art consulting are becoming increasingly blurred. Artists who want to be engaged in the process of selling their own work also employ the services of art consultants.

In a few countries, consulting is carefully regulated. Independent art experts in Germany are certified by the Chamber of Industry and Commerce (or, in France, by the Auctioneers Council), and must be publicly appointed and sworn in. The job of these experts is to establish the authenticity and value of artworks, and to act as advisors for insurance purposes and in court. In order to be appointed, a consultant has to have a previous knowledge of art history, several years of professional experience in the art market, and be at least thirty years old. The institutions that appoint them publish lists of approved experts.

Architects and interior decorators also occupy important positions in the art market, since they advise their clients in matters revolving around interior décor. In cases when art and artisanal furnishings are bought simply to enhance a living environment, the advice of this group of professionals cannot be underestimated. In the United States, above all, wealthy clients might well order all of their furnishings, including works of art and antiques, from their interior decorators; in New York, up to eighty percent of antiques buyers are interior...