The Re-Pricing Question : Open Thread
I've looked for it, but can't find it...kind of groggy this morning...but a few posts back someone had asked about the re-pricing question. More or less the commenter asked, what are the rules ITE (in this economy) about reducing the prices of one's art to adjust for the new normal?
This question has come up a lot recently, not surprisingly, and there seems to be two general trains of thought. The first was best illustrated by a collector who's been buying art for over 30 years, and seen a few cycles come and go, who said (I paraphrase) that collectors shouldn't be upset if the price of work by an artist they bought last year is lower this year. He noted, for comparison, that if the price of IBM stock was $50 last year and it's only $10 this year, there's no point in getting upset. You couldn't have bought it for less than $50 last year and you can snap it up for $10 this year. I asked this collector if he personally would be upset to learn that a comparable piece to that for which he paid a higher price just a few years ago could be had for much less now, and he said no...he would understand that that's the new price (he comes from the financial industry, though, which may give him a more objective point of view on such matters than other collectors).
The second line of reasoning is submitted more by artists in the primary market than anyone else I know, but understandably so, as they are the owners of their art. It follows more along the lines of how many home owners wishing to sell think about pricing. If the market won't return what you invested in a house you own or what you feel it's worth, then don't sell now. Wait until the market comes back up again and sell then. In other words, if no one is buying your paintings for $20,000 ITE, don't lower the prices to $10,000...hang onto that work until the art market swings back up again.
The second logic would seem to make sense if you can afford to do so (for both houses and artwork), of course, but more and more I think the first line of reasoning makes more sense for the long run. Part of the reason I think that is based on history. We could list dozens of artists who were selling at top dollar during the previous boom (late 1980's) whose markets evaporated and never really recovered even after the good times returned, suggesting it's more important to maintain some level of momentum in your market than to hang onto works you feel can only sell at your top prices.
Furthermore, once news spreads that no one is buying an artist's work anymore, the perception seems to morph into a a sense that it's a judgment on quality, whether that's the true cause of the market slowing down or not. This is obviously unfair, but fairness doesn't seem to have any real role in the equation, so there's no point in clinging to it.
Hindsight affords us, once again, a soapbox on which to bark that the best way to protect one's market is to never let prices get ahead of value in the first place, but the heady days of the boom years always seem to drown out that time-proven advice.
Personally, I'd be curious to see what happens should some previously well-selling artist bravely take the plunge and announce, even via press release, that they're adjusting their prices for the new economy (being among the dealers who religiously encourages our artists to keep prices where I feel they offer true value, I'm not in a good position to really facilitate this within our program, but...). I suspect there might be some initial muffled gasps, but I also suspect this brave artist might see their stalled market lunge forward again. It's hard to say for sure.
Consider this an open thread on the perils or possible advantages of readjusting one's prices for this economy.
This question has come up a lot recently, not surprisingly, and there seems to be two general trains of thought. The first was best illustrated by a collector who's been buying art for over 30 years, and seen a few cycles come and go, who said (I paraphrase) that collectors shouldn't be upset if the price of work by an artist they bought last year is lower this year. He noted, for comparison, that if the price of IBM stock was $50 last year and it's only $10 this year, there's no point in getting upset. You couldn't have bought it for less than $50 last year and you can snap it up for $10 this year. I asked this collector if he personally would be upset to learn that a comparable piece to that for which he paid a higher price just a few years ago could be had for much less now, and he said no...he would understand that that's the new price (he comes from the financial industry, though, which may give him a more objective point of view on such matters than other collectors).
The second line of reasoning is submitted more by artists in the primary market than anyone else I know, but understandably so, as they are the owners of their art. It follows more along the lines of how many home owners wishing to sell think about pricing. If the market won't return what you invested in a house you own or what you feel it's worth, then don't sell now. Wait until the market comes back up again and sell then. In other words, if no one is buying your paintings for $20,000 ITE, don't lower the prices to $10,000...hang onto that work until the art market swings back up again.
The second logic would seem to make sense if you can afford to do so (for both houses and artwork), of course, but more and more I think the first line of reasoning makes more sense for the long run. Part of the reason I think that is based on history. We could list dozens of artists who were selling at top dollar during the previous boom (late 1980's) whose markets evaporated and never really recovered even after the good times returned, suggesting it's more important to maintain some level of momentum in your market than to hang onto works you feel can only sell at your top prices.
Furthermore, once news spreads that no one is buying an artist's work anymore, the perception seems to morph into a a sense that it's a judgment on quality, whether that's the true cause of the market slowing down or not. This is obviously unfair, but fairness doesn't seem to have any real role in the equation, so there's no point in clinging to it.
Hindsight affords us, once again, a soapbox on which to bark that the best way to protect one's market is to never let prices get ahead of value in the first place, but the heady days of the boom years always seem to drown out that time-proven advice.
Personally, I'd be curious to see what happens should some previously well-selling artist bravely take the plunge and announce, even via press release, that they're adjusting their prices for the new economy (being among the dealers who religiously encourages our artists to keep prices where I feel they offer true value, I'm not in a good position to really facilitate this within our program, but...). I suspect there might be some initial muffled gasps, but I also suspect this brave artist might see their stalled market lunge forward again. It's hard to say for sure.
Consider this an open thread on the perils or possible advantages of readjusting one's prices for this economy.
Labels: art market, pricing
posted by Edward_ at
7:48 AM
15 Comments:
Ed,
Your suggestion about making a re-pricing announcement via press release is going to make for a really great drawing. Thanks!
-w
...that they're adjusting their prices for the new economy.
I would be careful here in making far reaching assumptions about this economy, the various pundits seem to be split between the "it's a end of the world depression" and "the economy is slowly recovering" scenarios.
We can rule out a depression, it's just not going to happen for reasons more political than economic.
We can rule out either, further deflation (falling prices) and hyper-inflation, which is the current scare scenario, for the moment neither economic distortion is showing up in the numbers.
In other words, the current economic condition is more or less similar to the ones in the past and the art market will be slow for a bit longer but the "crash" part is over. This means that a pricing panic here is equivalent to "selling at the bottom," and amateurish.
The psychological affect of falling prices reduces demand. Reducing prices by say 20% means you have to sell 5 widgets instead of 4 to generate the same income. If volumes contract as well, then the problem is multiplied.
At a recent NADA panel discussion on art and the economy, a young gallerists who exhibited "beginning artists" priced very affordably (<$1k), was complaining that pressure for "discounts" was a serious problem for her and her artists. I looked for her after the meeting broke up, but couldn't find her.
What I wanted to tell her was that she should raise prices at least enough to cover "the discount" and maybe a tad more, just to let people know her artists were in demand. Remembering, that in her price ranges, a 20% increase in prices, is less than what a collector will pay for a cocktails and a dinner.
In a weak market, this might not generate more sales, but it won't reduce sales either, and when the market picks up both she and her artists will be better off.
Artists with prices which were arbitrarily inflated during the bubble may have to face the reality that their artworks are overpriced relative to others in the marketplace and may need adjustment (or a size reduction).
Ed's remark that he encourages our artists to keep prices where I feel they offer true value... is a good approach.
Wouldn't it be nice if there were a completely objective, automated pricing machine? Scan your work, scan your resume and get a price...
There is an economic term for the second approach you describe:
Shadow inventory.
And there is much debate, in real estate in particular, regarding how the size of shadow inventory can extend the length of a downturn. Most property holders have a limit. Maybe one year, maybe two, maybe three. But at a certain point, many reach a point where they simply MUST sell. They maybe have burned through too many resources maintaining an investment that is underwater or extenuating life circumstances have advanced to where they need to be free of their property. This brings us back to approach one: that of the wealthy investor who can outlast the middle or upper middle class property holder. Historically, these folks make a killing when there is blood in the street.
I'd imagine the same goes for art. Same dance, different tune.
On a related note, this is a very serious downturn in the larger aggregate economy. There are still more problems working through the intestines that won't be coming out the other end till 2011-2013. Additionally, there are rumblings that when we do normalize, it will be "new normal." We may be witnessing the inevitable death of one way of life that has dominated America for between 40 and 100 years depending upon who tells the story. No idea what this means for the art world in particular. And at the moment, kinda don't care. Life's too short. In fact, kinda hard not to see some potential for creative destruction amidst these days as much of what we once treasured becomes relegated as garbage. The nihilist on my shoulder reminds me that is the third approach to our present now: a semi-blissful, semi-willful indulgent ignorance and resignation that it ain't about the money or the celebrity, so profit be damned.
What I wanted to tell her was that she should raise prices at least enough to cover "the discount" and maybe a tad more, just to let people know her artists were in demand.
If the only measure collectors used to gauge demand was price, this might work. But they also use word of mouth and, quite frankly, seeing the artwork in the homes of friends who also collect. In other words, trying to suggest an artist is in demand via inflated prices can seriously backfire if there is nothing else to back it up.
I'd go so far as to suggest it could only really work during the feeding frenzy of a boom, when collectors are buying up work to ensure they get one before they're all gone. Today, they'll check around first.
Either way, I don't think it's honest. Collectors should be able to trust that a dealer isn't padding prices to cover for anticipated discount demands. Either give a discount or don't.
Remembering, that in her price ranges, a 20% increase in prices, is less than what a collector will pay for a cocktails and a dinner.
Remember also, though, that collectors don't need art, like they do dinner (and, some of us would argue, cocktails). In other words, even though the slump may have bottomed out, the return to the volume of art consumption we saw during the boom may take years. This means that it's not good advice, in my opinion, to encourage artists to think we'll see the return any time soon to where they can assume these sorts of strategies will work and so their pricing strategies need to account for keeping the momentum going to compensate for the potential quality judgment I've mentioned.
Ed, I disagree somewhat. Please note that I am not suggesting that artists should arbitrarily raise their prices here - that's not what I said. What I am saying is that one shouldn't panic here.
Regarding the young dealer, as I recall her pricing was below $1000, the question here is whether or not she stays in business. The amounts of money involved is essentially insignificant, and within the noise level of her pricing. I was not suggesting this approach at higher price points.
Collectors should be able to trust that a dealer isn't padding prices to cover for anticipated discount demands. True, but once a decision is made about the 'discount' I'll bet it gets factored into the base price.
I don't disagree that the volume of art consumption (units) will take awhile to recover but this is less dependent on pricing than people think. Collectors are not going to flock to artist A because he/she's on sale at a discount. They will flock to artist A if he/she's selected to be in a biannual, etc.
I'll stick with my position that 'rising prices increase demand' but add as clarification that there has to be some demand there to start. It doesn't require a boom, just a reasonably functioning marketplace. This is a question of establishing 'value,' of establishing what an artwork is worth (in the primary market)
I'm glad George talked about a dealer who is selling work for under $1000. Too often the discussion about prices focuses on those $4 million paintings, which leaves 99.999% of us out of range of the topic.
My work sells for between $1500 and $25,000. I haven't raised prices, nor have I lowered them, nor will I lower them because the prices of paint, panels, brushes, studio expenses, shipping, health insurance, etc. have not gone down. However my dealers have my blessing to sell work with a discount up to 20%. I hate it, but I'd rather take that loss than not make the sale.
Recently a gallery sold four paintings and two drawings of mine to a good coroporate collection for 25% off the retail price (after discussing it with me). It killed me, but it's a good collection, and the dealer and I both needed the sale, so I agreed.
Bottom line: For artists whose work is not in the stratosphere, lowering the price--and THEN being asked to extend a discount is an impossible double whammy. Because you know that whatever your price is, the collector will ask for a discount.
What I am saying is that one shouldn't panic here.
I think this skews the conversation somewhat George. It's always good advice to "not panic."
Say, however, you have an artist who up until August was selling consistently, but hasn't sold anything to speak of since then. The response she gets when she ask what's going on from her dealer is that collectors are consistently saying that they don't trust the price quoted is "the real price," despite continuous reassurances.
At this point, you're talking about 9 months with no sales and a risk of letting a real market evaporate.
For such artists, whether to lower their prices or not isn't a matter of panicking...it's a matter of simply strategizing.
Too often the discussion about prices focuses on those $4 million paintings, which leaves 99.999% of us out of range of the topic.
What if we focus on those selling $12,000 paintings?
Whether every one reading can relate to that situation doesn't make it any less worth discussing here, in my opinion. Careers are more or less hanging in the balance in some quarters and such artists are as entitled to discuss their situations as anyone else here.
Great discussion going on here - too often, people won't even talk about pricing in a serious way.
I'm with anonymous in the 99.999% whose work sells for less than $4million; today, I got an inquiry for a piece (I'm not represented by a gallery) and went ahead and offered it for about 1/3 off the retail price without being asked for a discount, because I wanted to be sure the sale would happen.
I would not have done that in a better economy, and I don't care if the buyer would have paid more - I figure we're both happier now than we were before the deal came up, and that's a good thing. For me, this is part of "the new normal": we have lower expectations but still can reap high rewards by a different measure than we used to have.
I'll be glad if the weak economy helps to cull out some of the worst artists - am I unreasonably optimistic?
I remember coming across a website some years ago for real estate professionals I think and there was mention of a strategy which I believe is quite famous and is sometimes practiced to great success in the property markets and it goes like this: if it doesn't sell raise the price. If it still doesn't sell go higher and follow that formula until you hit the right price and you know that because then it will sell.
That's a strategy which would take a lot of balls, especially at the moment.
Personally I think there is too much weight placed on the idea that in the art world prices should never come down. As an artist I feel that this has been hammered into me both by gallerists and also other artists. It feels quite naïve in a business sense. But then I guess that if we wanted to be in a logical business then we wouldn’t be in the art world.
I would love to see a major artist coming out with a press release to readjust their prices downwards to meet the current market trends and economic climate. It might help eventually to turn the market into a market.
So up or down, I don’t know…
As a small scale, but long experienced, collector I would note that the art market is one of the few that has such a problem with the notion that prices can go down as well as up. Not so long ago I dumped a bunch of auction catalogs from the late 80's and 90's. The record prices of that era ( e.g. great Richter 'photo' painting for 7-800K) are still a fraction of some of today's 'depressed' prices. A couple of years ago I purchased an editioned work by one of my favorite artists. The publisher has recently offered it (and other works) for 20-30% less. I think that is entirely fair, and better than the publisher 'supporting' their old prices and going out of business.
i think edward's analogy to securities and stocks makes a lot of sense.
does nobody else find it bizarre that the market is expected only to push prices higher. ultimately one assumes that inventory will reach a terminal point, the artist dies and no more work can be made. so in theory everything that has been produced leading up to that moment creates a foundation, a basis for the final works. whereas a corporation often lives on after the founder has passed.
sure i understand that dealers live in fear of their artists works first not selling from the gallery. then maybe being undersold or not at all at auction, and before too long a career is jeopardy, prices are being reduced, and there's the fear, collectors who paid X will be annoyed that the work is now offered for Y. But just like the stock market that was the price then. THe price today might be determined by a different set of variables a different set of circumstances.
after all this is one of the really interesting parts of the artist career, pricing is linked to demand which in turn is linked to museum shows, placement in good collections, bienniales etc etc, all these events drive the price point higher and higher.
but what of an artist who misses a few years. who isn't around for a while? does the price go down? and does this create even more pressure on the artist to be continually pumping out more and more work to sustain the appearance of demand even?
from what little i understand of the financial industry i think there are a lot of parallels to the art market. after all a good deal of pricing of stocks and shares depends on buyers enthusiasm for the securities in question which despite reams of financial info often comes down to gut reactions of whether they like the company in question or not. whether they feel like the ticker price will go up or not. not unlike buying art. obviously there are some huge differences in terms of why people buy art versus stocks. and some interesting thoughts regarding art as investment, speculating on art. in terms of the financial industry now is a great time to buy, if you have anything to buy with and have a sense of which companies are making money and who will emerge out of this slump a winner. perhaps the same question could be addressed to the art world, ---who is under valued right now and stands to win when the wave comes back?
Thanks, Ed, for addressing my question. I wonder if some of the issue with artists is pride. We attach, in spite of our protestations, so much value to the prices of our work. It is a marker (among many) of our success.
My attitude is that I would rather have the work seen than in storage. If art is a form of communication, what good is a discourse in the closet?
But it is good to hear that collectors have a "long view" of pricing.
The practice of the assumed discount kills me. I am a dealer, and I work with artists to price everything fairly, probably erring on the side of too little. As such, I do not offer discounts unless a collector buys more than one piece. My regular buyers know this and appreciate my candor.
Unfortunately, it seems that many other galleries offer a discount as easily as breathing. Hence, new collectors feel that I am being rude by not offering a discount.
I was recently asked by a new collector, with a medium profile collection, for a 20% discount on a piece by an artist who produces very little. (I have a grand total of only five pieces in inventory.)
I explained the situation to said collector, to which he responded that every other gallery gave him 20% no questions asked and that if I didn't understand this, then he would not be doing business with me.
After speaking to the artist, I held my ground, and it looks like another buyer has been found. (Crossed fingers.) But how does one tactfully break collectors of bad habits?
... is that collectors are consistently saying that they don't trust the price quoted is "the real price," despite continuous reassurances.
A couple of possibilities, the first is that the market is very weak (the case) and the demand has just dried up for awhile. The second would actually concern pricing, are the artworks overpriced relative to other artists artworks? Or, are the collectors just confused about the pricing in general?
*** A gallery is not a stock broker
One point I would make is that there is a difference between the primary market (gallery) and the secondary market (resale/auction) in terms of pricing.
Prices in the auction market do go up and down. Factoring in inflation, I can think of highly acclaimed artists from say 40 years age who sell for less at auction than they originally did in the gallery. The auction market factors in all the economic, critical and psychological factors to arrive at a price.
The primary market, the galleries, function differently and it is in their best interest to maintain stable prices. While art may be an acceptable investment, this should not the primary reason for its sale. It was speculation during the 2002-2006 bubble period which caused price distortion in the auction markets which was then transferred into the primary markets (galleries)
I'm not a gallery insider but I recall 3-4 years ago a lot of talk revolving around the idea of "working" prices in the auction market in order to validate increasing prices in the gallery. I believe this is the root of the "pricing problem"
During the bubble period auction prices were higher than one would normally expect, frenzied buying inflated prices across the board, not on just a few selected art works which may have deserved the higher valuations. It is quite possible that this exuberance created a situation where prices were raised indiscriminately. As noted, the auction market will adjust for these distortions but in the gallery excessive price changes will cause confusion.
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