China’s art market is booming. Chinese consumer spending came of age with the internet. Will China marry the art market with the internet for a digital revolution?
China is now the second largest market for contemporary art in the world. As this market comes of age in tandem with e-commerce, it only makes sense that Chinese gallerists, auction houses, and collectors would have a different way of doing things. But the global art market – the highest tier of luxury retail – has been slow to embrace the digital revolution worldwide due to its traditional institutions and the social connections on which it relies. Can China be the market disruptor that launches the global art market into the 21st century? According to Robert Reed, Head of Art and Private Clients for Hiscox, “For those who say the online art market has had its day – it hasn’t even had its morning yet, it’s still waking up.”
Hiscox released its annual Online Art Trade Report this month showing growth in the online art market with plenty great potential. Online art market sales in 2017 reached an estimated $3.75 billion in 2016, up 15% from 2015. This gives the online art market an 8.4% share of the overall art market, up from 7.4% in 2015. The vast majority of the Chinese online art market is also excluded from this figure, which according to the China Association of Auctioneers generated $3.2 billion in total online auction sales in 2014 – a number it’s safe to assume will continue to grow.
China surpasses the UK as the second largest art market in the world
So just how big is mainland China’s art market? Art Basel and UBS released their second annual Art Market Report – a comprehensive analysis of the global art economy. If there was some suspicion about the validity of the Chinese art market, this report officially wipes it away. After two years of decreasing sales, the global art market estimated US$63.7 billion in 2017, an increase of 12% on 2016. Growth in the Chinese market surpassed the market as a whole – China overtook the U.K. to be the world’s second-largest market for fine art (21% of total sales) after the United States (42% of sales). The United Kingdom trailed closely behind, accounting for 20% of sales.
A few characteristics make the Chinese art market unique. According to an online specialist, Artnet, a significant amount of the market is made up of high-end sales (29%), or lots valued higher than ten million yuan. That figure is double what it was two years ago. This purchase behavior suggests that Chinese art collectors are using the art market for large-scale, long-term financial investment and wealth security. Non-payment is a symptom of the high-end market in worldwide, but even more so in mainland China, affecting 51% of sales in 2016. While the Western economies were in decline, between 2009 and 2011 the Chinese economy experienced unprecedented growth, which the art market reflected at a 500% increase during that period. As the growth of the Chinese economy has slowed, its investors are less likely to make speculative investments slowing the growth of the art market as well.
Online art attracts new buyers through social commerce, brick-and-click, and blockchain
Given the vast sums of money changing hands in the Chinese art market, could online sales act as a market disruptor, or even fuel growth? According to Hiscox, online sales are a key method for accessing new buyers – dealers report that 45% of their online buyers were new to their businesses in 2017. As the younger generation of mainland Chinese accumulates capital, the online market could prove to be vital to targeting their demographic and familiarizing them with fine art as a tool of investment.
Online sales of art are happening in the Asia region as well as worldwide thanks to a handful of renegade companies. One such company is Artsy. Founded in 2009, the site raised US$50 million in Series D funding last July. Artsy blends online and offline experience offering users the opportunity to consign a bid online that they can inspect in person at a later date. Artsy ranked third for online sales behind Christie’s and Sotheby’s. To target mainland Chinese collectors directly, Artsy is set to roll out a WeChat channel in China and is in the process of finalizing details of a subsidiary in Shanghai.
Similar to the consumer-to-consumer e-commerce retail industry, a defining characteristic of the online art market is a larger volume of transactions of smaller size. Hiscox reports the majority of transactions take place below US$10,000. To tap into the high-end market in China, online platforms are honing in on the obstacles that make buyers more likely to purchase small ticket items over the internet. To grow, the online market has to increase the conversion rate of hesitant buyers worried about the work’s condition, the seller’s reputation, and the ability to physically inspect the piece before purchase. The first company to address this concern was Verisart, which uses blockchain to digitally certify editioned prints.
ePaiLive, Hihey.com, and Artshare are among the top names in online sales in China
While exact figures surrounding online sales of art in China are difficult to come by, a handful of players are actively engaging the market. Beijing-based online auction aggregator ePaiLive connects international auction houses, galleries, and dealers to the community of mainland Chinese buyers and provides secure payment transactions. In 2016 it founded ePaiLive Research to provide data on prices, trends, and the market. Hihey.com is a Shenzhen based click-and-buy art platform offering exhibitions, auctions, and art financing to artists, individual and corporate collectors.
While ePaiLive and Hihey.com are majority backed by mainland Chinese investors and offer collectors high-priced goods as investment opportunities regardless of geographic origin, Artshare.com is a leading platform dedicated to Chinese contemporary art. The platform enjoys an international group of investors including Hong Kong’s K11 Art Foundation, Shanghai’s Pearl Lam Galleries, and Sylvian Levy, owner of a rare contemporary art collection in France.
Profiled by LarryList, ArtJeff WeChat Auction offers yet another opportunity to purchase art albeit in a more social, casual online setting. Leveraging the WeChat media brand ArtJeff, Hu Hu created the ArtJeff Day and Evening Sale, a WeChat auction group that sells quality contemporary artworks from Chinese, Japanese and Western artists. As of 2015, ArtJeff’s annual turnover was 10.45 million yuan, making it a modest but forward-thinking endeavor making use of WeChat’s Official Accounts and Moments function.
Unlike the staid institutions of the global art market, it’s art world players like ArtJeff Director Hu Hu -a millennial science fiction fan that understands the potential of social commerce – who will bring the digital revolution to art. As the younger generation gains spending power, online sales will continue to grow and analog institutions may be forced to reform to keep up.
MORE ON THIS TOPIC