Navigating the secondary art market
The secondary market involves the resale of artworks, either through private sales or auction houses. Many of secondary market dealers have little contact with artists, and they rarely sell a work at a lower price with the hopes of developing an artist’s career. This environment presents a unique set of challenges and opportunities for artists and for art collectors, says Rayah Levy, director of fine art investment company ArteQuesta.
“High prices are the end game for an auction house, and this is accomplished through an inventory of very expensive work,” she says. “Sales in this market tend to exclude many people from participating because the prices are so inflated.”
Though secondary market sales are generally perceived as the entirety of the art market, they only comprise a small percentage of total art sales. A sale in the secondary market occurs when the original buyer decides to put the work for sale a second time. This sale is most often initiated by a collector seeking to sell the work.
“If a gallery chooses to put the work on the secondary market, unfortunately for the artist, this means the gallery has too much inventory and too little demand for the work,” says Levy.
“The highly publicized venues for secondary art market sales generally occur in auction houses like Christie’s and Sotheby’s, though the market ranges all the way down to eBay.”
Levy says there are three significant dangers for an artist’s career that lie within in the auction system. First, if a price becomes inflated too quickly at auction, it will alert collectors who recognize overpriced works not to buy.
“This can easily prevent an artist’s work from being placed in an important collection,” says Levy.
“Secondly, it upsets the artist’s sales in the primary market. Having an artist’s piece flipped at auction can unravel a primary dealer’s work to have the piece placed in a museum because the price jumped out of their range.
“Finally, and most unfortunately, an overpriced piece at auction can halt or stall an artist’s career, especially if it doesn’t sell.
Levy says it is important to research both the primary and secondary markets for your personal investment goals.
“It is helpful to visit both primary and secondary art galleries, talk to dealers, and watch art auctions online to gain a broad perspective of both markets. Working with an art market expert in either market is invaluable, and will help you navigate the sometime unpredictable markets to ensure your investment is fruitful.”