The Re-Pricing Question : Part II

The collector whom I mentioned last week in the initial thread on this topic was kind enough to email me with some additional thoughts and clarifications on the topic. Please keep in mind that this is someone who has been buying art steadily for a few decades now and is unquestionably among the class of collector I would categorize as a true friend of emerging art.

In the last post I mentioned the...

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).

Although not many join in the comment threads, I do know (because they tell me) that quite a few collectors read this blog, as has this one, who again was kind enough to email me with the following clarifications on the topic:

There were two pricing issues: reflection of the end of the art bubble and the integrity of dealer pricing.

As you know, with the recession, collectors have a lot less to spend, so how do you continue to collect? The answer is to either buy less or buy less expensively priced work (or both). This response by collectors has caused an economic dislocation for dealers with their mostly fixed overheads. This has resulted in layoffs, going green on mailers (a/k/a reducing expenses), and being much more flexible in pricing.

In the past 9 months we have been offered/accepted/asked for the few purchases we have made "discounts" ranging from 20%-45%. Many dealers just upon asking the price of a work of art immediately state that the price may be high and they have flexibility. Additionally we make our own judgments as to what the prices "should" be. At issue is what is the "real price" and how can a collector have confidence in the initial dealer pricing. Would it not be better if a dealer recognized that the world has changed and reflect this upfront rather than having the collector negotiate very hard or feel somehow they paid too much? [EW: emphasis mine.]

You should know however, we are starting to see some dealers recognize this reality. Additionally, there are some artist (very few) whose prices have held/increased as the demand still exceeds supply.

Evidence of the penultimate statement there ("we are starting to see some dealers recognize this reality") comes back in the reports from the art fairs in Basel last week. From The Art Newspaper:

With some buyers looking to haggle, dealers had to decide whether to negotiate or not. “I’m sticking to my guns,” said Steve Sacks of Bitforms Gallery, New York (G12). “People are coming here looking for a 20% to 30% discount, but I’ve already priced the works to take the economic climate into account,” he said.

And in another article on The Art Newspaper:

Zurich and London dealer Iwan Wirth of Hauser & Wirth (2.0/D1) also adjusted prices. “We don’t have 2007-2008 prices: it is a different atmosphere,” says Wirth. “The days when art was sold when it was still in packing crates in artists’ studios is over.”

As I noted in the first part of this topic, the thing I fear most for any artist who had managed to build a "market" for their work during the boom is the creeping perception among collectors that "maybe the work just wasn't that good" because they don't hear of anyone buying it anymore, when in fact the art simply stopped moving because no one trusted its prices. Despite speculation among artists that they can raise their prices and somehow fool collectors through that into thinking their work is still widely in demand, they should understand that collectors compare notes all the time. They visit each others' homes and see what they have recently acquired. They ask around and build networks so information flows back to them. In other words, they make it their business to learn what's really in demand, and so efforts to fool them can seriously backfire.

Add to that what the collector above noted (and I put in bold)...that collectors who feel they're having to work too hard to get a dealer to offer them the "right price" will simply stop trusting that dealer...and it really can end up costing the artist, the artist's dealer, and thus all the other artists in that gallery program if the perception spreads that the work there is being priced too high.

When this topic comes up, someone is always insightful enough to mention that, under a certain price point, it's ridiculous to assume you should consider lowering your prices, even during a recession. I would agree with that. Because the question is one in which collectors want to know that the work is priced correctly (not that they're getting a steal, per se), work priced at the emerging art baseline (i.e., work priced at what you would expect any similar work by an unknown fine artist to be priced at) is OK to leave there IMO.

That doesn't mean it will automatically sell in a recession though. Competition for collectors' dollars is stiff. Indeed, much of the baseline-priced work that flew out the doors during the boom did so on speculation and impulse buying, both of which are casualties of the recession (and rightly so, but that's another thread...). What will sell at the emerging art baseline is only the most compelling work on the market...which means it's up to artists to keep quality high or, let's face it, to push themselves beyond what they've done so far and make their work even more amazing, and up to their dealers to do whatever it takes to get people in the door or to their booths at the fairs to see that more amazing work.