WetCanvas!: Articles: Scott Burkett: The Online Art Market: A New Revolution

A Quick Introduction

This article is the first in a three-part series designed to provide an in-depth overview of the current state of the art & collectibles market online, and where it is heading. This first installment focuses on the overall state of the market, and specifically, what problems exist. The second installment, will provide an in-depth overview of how current efforts to provide solutions in this market stack up. The third, and final installment will illustrate for you, our loyal viewers, why ArtistNation.com, soon to be powered by Art-Ex's new exchange technology, will provide a much more cohesive solution for the practicing artist.

The Artist and the Internet
To launch a career in art is an enormous task for many young artists. It is estimated that emerging artists spend 60% of their time on promotion and 40% on production. The Internet has proven itself to be an ideal and cost effective forum for artwork promotion.

As it provides a level playing field, artists have embraced the web by setting up numerous informational sites showing their artwork. A simple search on one popular search engine for "artist" reveals over 8 million web pages. However, the vast majority of artist websites are not e-commerce enabled, primarily due to the cost associated with development and ongoing maintenance of such a platform. Artists are more likely to outsource for an e-commerce solution so that their resources can be directed toward producing quality art. Hence, our own service located at ArtistNation.com, which was launched last year in an effort to provide a such a solution.

The Global Art Market: Some Quick Stats

Before we go any further, let's chat a bit about this little thing called the art market. For starters, the art and collectibles market, worldwide, hovers at around $100B annually. Not shabby. This covers an estimated 50 million so-called "decorating households", serving up art purchased from some 60,000+ traditional, "brick and mortar" galleries, 3,000+ publishers, all of whom pull their art from a pool of over 2 million artists, just here in the United States alone. Unfortunately, it's a highly fragmented market that hasn't seen a cohesive solution to address all aspects of the so-called "fine art" supply chain. Until now, that is.

Fact #1: An artist with a stand-alone site has very little chance of being found in a search, unless the collector or gallery knows their name. Solution? Get plugged in. In the upcoming third installment in this series, we'll discuss, in more detail, how the ArtistNation.com solution, powered by Art-Ex's revolutionary new exchange system, will change the way you manage your art, your career, and your business.

Issues Prevalent in Today's Online Art Market

There are a variety of issues confronting the modern artist. Let's examine the facts:

Highly Fragmented Market

The art market itself is extremely fragmented in both the online and traditional marketplace. It is comprised mostly of small and micro businesses lacking the skills and resources to full take advantage of the Internet. What does this mean in layman terms? Simply put, the bulk of art transactions still occur at the local level. Furthermore, there is ...

No Centralized System of Exchange

Unlike other commodities and securities markets, the art and collectibles market is comprised of segmented and specialized auction houses, retail galleries, emerging online portals and gallery websites, wholesale and art publishing companies, self represented artist and collectors. As a result, art market research on trends, market health, consumer education and industry representation is minimal. Our earlier market surveys and focus groups have consistently shown that the fine art and collectibles market would substantially expand if buyers and sellers where provided with effective networks for distribution and inventory management, resulting in verifiable liquidity of tangible assets in the market.

What does this mean in layman terms? Artists would sell a lot more art if there were a way to effectively network buyers and sellers. At this point, some of you may be saying "but Scott, that's already been done!". No, it hasn't. Sure, there are loads of e-tail sites online which offer art to consumers (see below), but this represents an incredibly small fraction of the total market. Read on.

Fact #2: Even with the lack of a centralized exchange venue, fragmented efforts from the art marketplace have resulted in sales through the Internet in 1999 of approximately four percent, or $4 billion, according to Unity marketing. Thus demonstrating the perceived "touch and feel" barriers to buying art and collectibles online are continuing to fade.

Buyers and Sellers Experiencing a Crowded Market

Over the last eighteen months, numerous online art selling venues have been created, including such names as iTheo.com, nextMonet.com, Onview, ArtMecca.com, PaintingsDirect.com, Artnet.com, and even our own Art-Agent.com. Several online auction sites have cropped up, including icollector.com, guild.com, and Sotheby's. In most cases, these venues are direct competitors to traditional venues of procuring fine art (i.e. brick and mortar galleries, publishing networks, etc.). With such a proliferation of over 100,000 art-related web sites, both buyers and sellers are struggling with the choice of where and how to shop and sell art assets.

The problem in layman's terms? It is not only difficult for a buyer to locate art, it's becoming increasingly difficult for the artist to promote his or her work effectively, given the sheer number of potential venues.

The Inevitable Accounting Woes

With so many venues competing with each other, the real content providers (the artists), their buyers and the online venues are all left with a variety of posting methods, low standards, and excessive cost in the inventory management of content and posting. At best, many sellers are left with "cut and paste" solutions to post items for sale online. "Double-entry" with accounting and inventory has created inefficiencies in the effective use of the Internet as a delivery vehicle.

Consider this: an artists posts a new painting on 10 different gallery sites. The art sells on one of the sites, or perhaps in a local offline art show. Now, the artist is faced with the undaunting task of updating or removing the posting from 10 different places.

As another example, consider Ron English, an emerging contemporary artist, who recently reported having the same painting sold by five different competing venues on the same day! "But Scott, that's great! Ron sold a painting - good for him!". Yes, and no. Yes, it is good that Ron pulled in revenue, but, now he has four unhappy would-be customers.

Fact #3: Just as NASDAQ was created to provide standards and efficiencies in the stock market as a transparent facilitator, tangible asset markets, such as fine art, require an easy open management system to allow the market to take advantage of the Internet e-commerce phenomenon.