Technology transforms the close-knit and often opaque world of Art Collecting, creating new opportunities for savvy connoisseurs. Baby boomers and previous generations relied on a close relationship with one dealer who provided information and access to the inner circles of the art world. Art aficionados without good connections or serious purchasing power were not welcome in this gentlemen's network.
Flash forward to the 2000's: the art market is firmly placed within the public domain. Mainstream media frequently report on noteworthy events such as record prices achieved at auction:art values gained exponentially over the past 50 years while traditional asset classes struggled. Collectors increasingly view artworks as financial assets rather than purchases of passion. Asian investors are used to keeping substantial amounts of their wealth in art, jewelry and other collectibles. Western collectors are warming up to the idea of art as an inflation-buster. However particular characteristics of the art market impact such an investment decision.
- Art is an illiquid asset,
- subject to high transaction and ownership costs,
- does not provide an income,
- depends on subjective valuation methods and
- trades in an opaque market in which insider knowledge is essential to obtain a good deal.
Transaction costs are high in an inefficient market because the asymmetry of information allows intermediaries to exploit buyers. Technology reduces this advantage (and thus transaction costs) by providing buyers with information and direct access to sellers. As the sophistication, security and privacy of art websites has evolved, collectors are more comfortable with buying from such sart websites. Auction houses, galleries and art advisory firms must adapt their business models in order to compete with their online competitors. Online resources include:
Browsing, Buying and Collecting
www.vipartfair.com
www.paddle8.com
www.art.sy.com
www.riseart.com
Art Information Sources
www.artnet.com
www.artprice.com
www.artinfo.com
Art markets will never be completely transparent,but today's collector has advantages his or her parents could only dream of. As in other consumer-facing industries, tech-savvy collectors are more in charge of the buying process because they have access to better information. They are more likely to be aware of issues that may come up when purchasing art (authenticity, valuation, title claims and conflicts of interest) as these have become relatively well-known in recent years.
Online indices and databases provide price information and advisors' and dealers' associations publicize best practice guidelines for their members. Books, courses and events provide novices with all kinds of tips on how to establish an art collection. A collector can use these resources to make a reasonably informed decision on the quality of the art, the prices quoted and the art market professionals he is considering working with.
Participation in the art scene is an important part of the buying process and much of this interaction will move online too. Not only will collectors form connections because of their geographical location but also through social media groups and forums in which like-minded art lovers share mutual interests.
As in any unregulated market the potential for loss is as large as the potential for gain - except for the well-informed!
