What new normal for a global art market rocked by the coronavirus pandemic?

British art auctions

The marquee auctions held during the “May season” normally serve as a bellwether of the international art market.

Last May, for example, saw some $2.1 billion spent in a single week at Sotheby’s, Christie’s and Phillips.

Monet’s Meules soared past estimates to become the most expensive Impressionist artwork ever sold over the auction block. Jeff Koons’s silver Rabbit, meanwhile, set a new record ($91.1 million) for a work by a living artist after a lengthy bidding war at Christie’s.

Koons isn’t likely to lose his crown this year. The ongoing coronavirus pandemic has shuttered galleries and auction houses from Basel to Beijing, while the plunging stock markets have taken a chunk out of even the fattest wallets. One analyst estimated that on the sales side of the art market, “prospects for the future are perhaps more uncertain than they’ve ever been”, while a gallerist despaired that “people are just not buying”.

London rivals Christie’s and Phillips are now hoping to hold their big London and New York sales at the end of June, though it’s unclear whether either city will permit large gatherings by then. Sotheby’s, meanwhile, is attempting to fill the void from its postponed “gigaweek” sales by holding two online auctions from May 4th to 14th.

Online sales a short-term saviour

Robbed of the chance to make both headlines and profits during the glitzy spring sales, Sotheby’s and other art purveyors have been left with no choice but to embrace the digital sphere they once shunned. As Giles Peppiatt, contemporary African art director at Bonhams, noted: “When online sales first started, all the auctioneers thought it would suck the life out of the auctions. But […] the thing we feared most at the time is probably going to be our saviour”.

The results so far from the abrupt shift online, however, have been less than thrilling. Auctioneers have trumpeted modest online successes—a Tiffany chandelier which sold for $300,000, some 20 times over its high estimate. The virtual viewing rooms which replaced Art Basel Hong Kong, however, yielded lacklustre sales, and dealers admitted that they approached the digital fair more as an opportunity to stay in touch with the art community than a venue to sell their prized works.

Tight relationships with clients: the bedrock of the art market

3D virtual showrooms and online auctions are patching the hole which the pandemic has punched in art sellers’ ledgers. They’re nevertheless a poor substitute for the sales and connections which would have been made at in-person fairs and auctions. For one thing, finding new clients and building relationships with them—the very thing which art dealers identified in a recent report as their biggest challenge—is particularly difficult from a distance.

These relationships are as valuable as they are unique. Art collectors come to trust their long-time dealers to build an intuitive sense of their tastes and to represent their interests on the market. Dealers, meanwhile, rely on their long-term clients for a significant portion of their sales, particularly for big-ticket items. In 2019, for example, long-term buyers made up 43% of total sales to dealers with an annual turnover of more than $10 million.

Dealers and auctioneers will have to find innovative ways to find new clients and to craft close-knit relationships with them, since the disruption which the coronavirus has wrought in the market is likely to linger long after countries relax quarantine restrictions. As one collector highlighted, “ The activity in the art market will not return before years to the level of six months ago, and the prices of a month ago are not the prices of today.”

Dealers’ deceptions

Clients, meanwhile, will need to take extra caution to ensure that they are not being taken advantage of by unscrupulous players desperate to pad their ailing coffers. In most industries, consumers are well-protected from fraudulent sellers. The art market’s remarkable lack of regulation—its “self-built society without law enforcement” has been compared to the Wild West, has left it open to elaborate swindles like the so-called “Bouvier Affair” – the biggest art scandal in recent memory.

In a saga which has captivated the art world, Russian billionaire collector Dmitry Rybolovlev, known the the public for his costly divorce, has launched a legal crusade against his former art dealer, Yves Bouvier, for allegedly masterminding “the largest art fraud in history”. Swiss entrepreneur Yves Bouvier has consistently denied that there was anything improper about the $1 billion in hidden commissions he had earned on the 38 works he sold to his wealthy client, insisting that he was merely using “commercial arguments” to make the highest possible profits.

These “commercial arguments” apparently included extensive fabricated negotiations with the “sellers” of paintings which Bouvier already owned. From summer 2014 until he was arrested in February 2015, for example, the Swiss dealer gave the Russian collector’s representatives a blow-by-blow report of his tough bargaining with the owners of the Rothko masterpiece No. 6 (Violet, Green and Red). It later came out that this haggling was merely a fantasy crafted in order to entice Rybolovlev to fork over $140 million for the Rothko. There was no seller for Yves Bouvier to wine and dine—he himself had bought the painting in August 2014.

A reinvented art world?

Yves Bouvier was often away from his native Switzerland—for what Swiss authorities suspect may have been tax evasion reasons. The fact that he frequently communicated with his clients via emails and text messages, together with the art world’s general opacity, made it easy for him to conceal which paintings he himself owned—and how much he had paid for them.

Fears of falling prey to similar scams will prove a major barrier to recruiting new buyers online. Art collectors have slowly become comfortable purchasing works based on PDF images—but mostly from galleries or dealers which they have come to trust over the course of a long-term relationship.

Art dealers and auction houses have long protected murky practises, from concealed buyers to manipulated auctions, which will complicate efforts to breathe life into the stagnating market. The pandemic’s greatest effect on the art world may not be a definitive shift towards online sales, as some are predicting, but rather the death knell for the veil of secrecy which has left buyers at a disadvantage.