An overview of the online art market
Having reached a total of $3.75 billion in 2016, online art market sales are up 15% from 2015. Although this growth rate is significantly higher than that of the global art market (up 1,7% in 2016 according to TEFAF 2017), there has been a slowdown in online sales, a trend that can be perceived through the evolution of the overall art market’s share in the online sector :
- In 2012, online art sales reached an estimated $870 million;
- In 2013, $1.57 billion (+80%), 4 % of the overall art market;
- In 2014, $2.64 billion (+68%), 6% of the overall art market (+2 points) ;
- In 2015, $3.27 billion (+25%, 43 points less compared to 2014, and 10 points more in relation to 2016), representing 7,4% of the overall art market (+1,4 points) ;
- In 2016, the online sector comprised 8.4% of the overall art market, an estimated $45 billion according to TEFAF 2017. Although some might not consider it a relevant figure, it is actually equivalent to the share occupied by e-commerce in total retail sales (8.3% according to the U.S. Department of Commerce).
Hiscox has downgraded its annual projections : last year it had estimated the online art market to be worth $9.58 billion in 2020, however, the latest report reevaluated this calculation, predicting the market to be worth $9.14 billion in 2022. This trend reflects the difficulties online sellers have encountered when trying to attract new buyers. According to the report, 51% of art buyers say they have never bought art directly online, a proportion that has not changed in the past two years.
This double-digit growth is largely due to the price range of the works that are sold online : 79% were below $5,000 in 2016, up from 78% in 2015 and 67% in 2014. The most popular type of mediums bought online are prints (75%) and paintings (72%), followed by photographs (57%), drawings (44%), sculptures (26%) and new media art - video/digital - (17%). It should also be noted that 85% of buyers acquire between one and five artworks over the course of the year.
Social media (Instagram and Facebook) have become powerful tools for promotion, communication and influence. According to the report’s surveys, Instagram is the preferred social media channel, 57% of buyers consider it their most frequent platform used in 2017 (48% in 2016 and 34% in 2015). Facebook is falling behind, 49% of buyers said it was their preferred social media platform in 2017, down from 54% in 2016.
Christie’s and Sotheby’s : the dominant brands
Despite a relatively slow adaptation to online opportunities (we can recall Sotheby’s failed partnerships with Amazon in 1999 and Ebay in 2000), traditional auction houses have developed their online sales strategy in order to increase their presence in the online market; mainly through major investments in online-only auctions, a highly competitive sector.
In addition to online sales that take place during live auctions :
- In 2016 Christie’s grew its online sales by 34% from $162 million in 2015 to $217 million, with 118 exclusively online auctions.
- On the same year, Sotheby’s online sales grew 19% to $155 million, with 16 exclusively online auctions.
It is worth noticing that these significant increases have taken place in a context where auctions have decreased 19% globally (2016) ; indeed, Christie’s and Sotheby’s “physical” auction sales fell 22% and 29% respectively.
Considering that Heritage Auctions’ online activities generated $348.5 million (up 1.3% from 2015), if we add this figure to the other two auction houses’ online sales they account for 19% of the online art market.
Another manifestation of this trend can be found in the Hiscox report, where four traditional auction houses are now part of the Top 10 Online Art Sales Platform Ranking, among 25 other platforms. Christie’s and Sotheby’s occupy the top two positions while Phillips Auction and Bonhams (which were not included in the previous Top 10) are in 6th and 9th place respectively. The only French platform present in the ranking, Drouot Live, holds the 21st place.
Mergers and acquisitions structure new opportunities in the online landscape
The online market is becoming increasingly competitive, particularly the auction sector, which is pushing its players to collaborate through mergers/acquisitions.
Among the most outstanding ones, the merger between Auctionata AG and Paddle8 in may 2016, gathered around 800.000 users, achieving combined annual sales of $150 million. The collaboration was intended to increase their presence on the middle segment of the global art market, including collectibles and vintage luxury products. However, the merger could not overcome the German firm’s structural problems and Auctionata closed its doors in march 2017.
In December 2016, the venture capital firm NextStage AM invested $2 million euros in Drouot Digital, a group that gathered 110.000 users from Drouot Live platforms (specialized in retransmitting auctions online) and Drouot Online (specialized in online auction sales) and 80.000 members from the Expertissim society.
Most online actors’ development strategies have prioritized multi-channel experiences. Traditional auction houses are acquiring their own digital platform or subcontracting their online activities to auction aggregators such as LiveAuctioneer, Invaluable or The-Saleroom; while purely digital platforms are progressively establishing a physical base (29% according to the report).
Online platforms and traditional actors share a common interest in the art market’s big data. In October 2016, Sotheby’s acquired Mei Moses Art Indices, an important auctions sales database, which became Sotheby’s Mei Moses. Artnet followed a similar strategy, acquiring Tutela Capital CA in November 2016, a firm specializing in quantitative art market analysis, intelligent algorithms, and high-frequency price indices.
The HISCOX report’s limitations
The abundant indices and studies that aim to evaluate the global art market have a common issue : they are all based on imperfect information; a statement that is also valid for the online sales segment.
TEFAF 2017, which estimates that sales in the world art market reached $45 billion in 2016, adopts the Hiscox report’s conclusions without putting forward a precise figure on the value of the online sales segment. According to the UBS/Art Basel report 2017, which estimated the world art market to be worth $56,6 billion (-11% compared with 2015), the online market reached $4,9 billion in 2016. These considerable variations can be explained by the differences between counting methodologies, which principles are as opaque as the market they intend to study.
Finally, despite the relevance of the annual report published by ArtTactic and Hiscox, it remains limited to a Western approach to the online sales segment. In its 2017 edition, 80% of the 758 surveyed collectors were North American or Western European (one point less than the previous edition). The under-representation of the Asian continent (10%) and the Chinese actors’ lack of transparency can only result in a partial evaluation. According to the China Association of Auctioneers the country’s online art market reached $3,2 billion in 2014.