Value vs price - why discounting is a curse on the art world
Imagine you were starting the global art industry today.
In the primary market*, sellers offer new and special works from artists, each creation unique in the world. For buyers, a completely discretionary purchase, one that ignites their passion, inspires them to think and feel more creatively, and believe they are part of something bigger. Buying art says something about who you are, in many cases becoming an integral part of your identity and lifestyle.
Why would anyone offering that powerful emotional experience, that special feeling, that one-off unique piece in the world, sell at a discount?
Yet this is the epidemic that has spread throughout the art world today - where it is an open secret that discounts can be asked for, and should be expected by, collectors.
I believe that attitude is a curse on the art world. Here’s why.
Fundamentally, it doesn’t actually help anyone. In fact I’d argue it hurts everyone, even the collector receiving the discount.
In all markets, pricing is about creating a value proposition - cheapest, best value, exclusivity… For discretionary purchases** such as art, pricing is a reflection of quality, scarcity and value. Luxury brands understand this well.
Discounting kills the value proposition. It’s not needed by the collector and is rarely the difference in getting to yes. Even having achieved a discount, the collector’s inevitable post purchase thought is what might have been left on the table - the hint of regret that perhaps they could have negotiated more. That’s because the transaction is no longer about value, but about price. And the relationship is no longer about trust, but about how much one party can take from the other.
On the other hand, for the artist and the gallery, the unnecessary discount and loss of income is very meaningful in their attempt to build a sustainable practice or business. In my view supporting artists to create, and galleries to have a sustainable business - in other words nurturing a sustainable creative economy - feeds directly into a more creative, diverse and inclusive society.
It is possible… the David Hockney prints on sale at Frieze NY 2018 by Pace come to mind - a sellout booth with a no discount policy (my understanding is this is the case with all Hockney’s work, at the direction of the artist).
Of course not all works for sale in the primary market have the imprimatur of a Hockney, and yes, to change the habits of a generation will require collective will from the industry. But why not start now? Change the ‘accepted’ yet destructive practice of training every client, and the next generation of collectors, to ask for a discount every time they walk through the door. That the price on the work is not really what it says, is not really good value, it’s an invitation to barter. The whole thing is a charade anyway, as the discount is almost always pre-built into the price.
I do feel collectors need to take some shared responsibility. I see a discomforting irony amongst many high end collectors in particular (COIN’s?), who vocally espouse support for artists and choose to position themselves as an important part of the art world, yet at the very moment they can contribute, choose to minimise their contribution by haggling over price or terms.
I certainly don’t blame galleries exclusively for existing market practice - until now the only default sales tools they have had, have been a discount or a payment plan. The very top galleries have solved this problem through developing their own mega brands, an example of value creation which allows them to sell at appropriate prices rather than resort to the blunt instrument of price cutting. Witness how an artist moving to a top tier gallery is able to immediately command increased prices. The point here is not whether mega-galleries have more money or ‘better’ artists, but that they have worked hard to build their brand and related value proposition, so are less reliant on discounting as a sales driver. In the secondary market we have seen sophisticated sales tools introduced - third party guarantees being an example (for better or worse). Some galleries do have a no discount policy- and I applaud their courage and leadership. The policy seems all too rare though (or perhaps I’ve just spent too much time in the US market recently).
It’s also worth noting that two of contemporary art’s most sought after new audiences - millennials and the tech world, value ‘consistency and transparency in pricing… to reinforce trust and authenticity’ above all else.
Now I’m not so naive as to think people don’t want something from a deal, even (especially?) in the art world. Also that negotiating price is hard-baked into some cultures, for example Chinese culture. That doesn’t change my view, even if I have been called an idealist by some.
In the interests of looking for solutions, rather than describing problems, here are some practical ways, hardly radical, to provide value that I believe are much better than discounting, and support rather than diminish the value proposition:
- free shipping/framing/installation
- artist studio visits/lunch/dinner/events with the artist
- a complementary print, or artist book
- first on waiting list for new work
- VIP art fair hospitality and high levels of personal service
- I’m sure there are many more (and I’d love to hear them)
I’ll say it again, in my view the existing sales culture of knee-jerk or automatic discounting is a blight on the art world that in the long term helps neither collector, nor artist, nor gallery. It’s not sustainable, not smart, and not necessary.
As an industry I think we can do better, and we may as well start now.
Notes:
- *In this post I’m talking about the primary market, where works are sold on behalf of artists, generally through galleries or platforms, onto the market for the first time.
- **I prefer to talk about art as a discretionary purchase — rather than a luxury good. This is deliberate - in my view art is better understood as a high value discretionary purchase - I think that’s more accurate for the majority of the art market than a ‘luxury good’ analogy. I’d not argue too hard against categorising art bought above, say, $100,000 as a ‘luxury good’ purchase, however the surprising reality is that sales in this bracket are only ~15% by volume of total art market sales (Art Basel/UBS Report data).
- As Founder & CEO of Art Money, some might say I’m being hypocritical about discounting. After all, our business model is built around a 10% commission from galleries enabling interest free credit for buyers. In response I would say that whilst the immediate financial result for a gallery is the same, Art Money adds to the value proposition and creates a win win for all. The buyer is empowered to say yes, both psychologically and financially, and enjoys their work immediately. In return for the commission Art Money pays galleries straight away, so the artist can get paid immediately. Art Money takes the risk on the client repayments. The value proposition is enhanced for all parties. It’s very different from a straight discount which is informed by habit, rarely converts sales, doesn’t facilitate purchases at higher budgets, diminishes trust between collector and gallery, and devalues the work of the artist.
