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Thursday, March 17, 2005

Limits to Accessibility and the Art Market’s Value Chain

Using a value chain framework to look at today’s art market provides interesting insight into the market’s current state. It also points to where the real money may be in two to three years, if the whole thing doesn’t blow apart first.

The concept of the value chain is defined like this: “The value chain categorizes the generic value-adding activities of an organization. The ‘primary activities’ include: inbound logistics, production, outbound logistics, sales and marketing, maintenance.”

Granted, the creation of fine art differs from the manufacture of widgets, but the framework still provides an interesting way of looking at market dynamics. The mapping between links along the value chain and art market functions is completely straightforward:

When undue pressure gets exerted on one link, ripples of impact are typically felt up and down the value chain. In details that came out in the recent lawsuit and judgment against The Project, we’ve seen how the sales and marketing link in the chain has become seriously stressed. The correlation between the supply of quality, desirable, high value product and the demand for it is so unbalanced that the normal principles of free market economics no longer hold at this point on the chain.

It’s clear to anyone who follows the art world that this aberration from the norm is causing stress up the chain. Gallerists have taken a strategy from NBA teams. They are drafting students who are still in school and are launching them into the major league earlier than ever. Columbia and Hunter open studio events, for example, are mobbed by hungry dealers and collectors looking to identify the next new thing. Students are getting solo shows before they finish their degree programs or immediately after.

The pressure on artists to be discovered early is, in turn, stressing the production link in the chain. Work today is being made fast and released early. Much of what’s being shown in smaller New York galleries has the feel of student work—what would, until a few years ago, never have been shown outside an MFA exhibition.

These dynamics have been noted elsewhere. People who follow the market are well aware of them.

Yesterday, though, I got my first indication that ripples of impact are being felt down the chain as well.

In the past I’ve worked with an excellent framer who specializes in fine art work. I found him five or six years ago when I bought my first piece of art—a print from a 57th St. dealer. The gallerist asked me if I wanted to have the artist’s framer frame the piece for me. When I said that I did, she replied in a tone implying a value judgment, “OK, but you’ll have to make arrangements to have the work delivered to you when it’s ready. The framer is waaaay downtown.”

His studio, it turns out, is two blocks from my apartment.

This week I bought a couple drawings that need to be framed. Yesterday I happened to walk by the framer’s building, so I stopped and rang his buzzer to ask when I could drop them off. I was surprised when he told me that he’s not doing retail work anymore. He’s too busy, he said.

Being slightly shocked, I found myself starting to do the dance more typically done for a gallerist showing work by a desirable artist. “But I’ve given you business in the past. I’ve even given you referrals. You’re the best around. You do such great work that I can’t imagine going anywhere else. Can’t you please make an exception for me and let me buy your services. Please? Please? Please?”

Finally, he relented. But he required me to schedule an appointment to drop the work off at an inconvenient time in the middle of the day. The wife brought the work to him today. He was nice enough, she said, but the best date he could estimate for delivery is a little over three weeks away—and even that isn’t a firm commitment. The art market has gotten so active now that unless you’re someone special it’s difficult to get a master framer to do work for you.

There’s now only one unstrained link left on the chain: inbound logistics. What does this say to the business strategist in me? Either the whole chain is about to blow apart, or it’s just a matter of time until demand exceeds supply at that point as well.

Assuming that we’re not going to see a disruptive production and distribution model emerge in the next two years and that the market isn’t going to undergo a radical correction, it’s prime time, folks, to get into the art supplies business. There’s going to be serious money to be made there soon. You heard it here first.




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