Q&A with Fox Business News
Before my live TV interview with Fox Business and anchorman Ashley Webster, I was asked a few questions about Amazon’s new Fine Art department. The Q&A below reveals a more in-depth look into buying art for investment, on or offline.
FOX: Amazon has dramatically changed the way business is done for brick and mortar retailers. Do you see an impact for large auction houses like Sotheby’s?
HLK: Sotheby’s and Christie’s are among the foremost authorities in the art world and have had great success with their online auctions. Their demographic, product and brand are completely different from Amazon’s so I don’t see their businesses being significantly impacted in terms of sales but it will definitely help change the public’s perception of buying (or selling) art online. With over 300 art e-commerce sites today, we’re witnessing an increase in confidence among online buyers and galleries who, in particular are embracing the internet as a potential revenue driver. Galleries are starting to realize it can be their greatest asset when utilized well from e-commerce to social media. Many galleries are run like small businesses and lack tech savvy but all that’s changing.
Approximately 30% of buyers at auction are art dealers looking for inventory and I can see how they might become potentially big buyers on Amazon. Most art dealers don’t care where the art is actually being sold as much as they do about the quality of the piece anyway.
FOX: You recommend holding off online purchases until the prospective buyer “knows” the artist. What is your investment process? How do you separate collectibles / artwork that will appreciate in value from simple forays into what people like?
HLK: My clients buy art for many different reasons and I listen to what their goals are first and then ask questions to help me understand what their taste is before I start source for the art. It’s up to the client on whether they want to find art they like versus art that appreciates in value, or both. While there are definitely ways to try to speculate the potential appreciation of an artwork there are no guarantees. It’s a risky game with uncertain returns.
There are several factors involved when evaluating a work of art, and the same due diligence process applies to a $200 print or a $2m painting. More work is involved with higher ticketed items, of course especially if the artist is no longer living or if the work is being sold on the secondary market. The most important factors to consider are condition, provenance and authenticity. Condition reports, previous ownership and signature markings should all be reviewed or discussed beforehand.
FOX: Given HD capabilities, zoom, and presumably a guarantee of authenticity from Amazon what is missing in an online experience?
HLK: At first glance, I was overwhelmed by the range of artists and styles being presented all together although navigating the site was easy and intuitive. I would present the art in a more curated way and engage more art experts to ensure the quality of the art being sold. Several pieces lack full catalog information so I would make that more consistent and add full artist bios. I’d also add images of the back of the artwork and a close-up image of a detail or at least enable visitors to click on the image to enlarge. Some images are quite flat and are lacking. Also, Amazon’s site is still under beta testing so they list ‘Fine Art’ under ‘Home, Garden and Pets’ on the home page which may mislead art collectors.
FOX: You reference 100k as a starting point for investment pieces. How much does the starting price point matter? ‘
HLK: I believe it’s relative! It all depends on the artist, size, and quality. When you look at Christie’s auction sales results, for example you will see dozens of artists being sold for low 6 figures and resold a few years later for much higher sums buying art for investment is a game of speculation. Only a very small number of artists experience huge increases in prices like Raqib Shaw whose paintings were selling for between $100,000 and $800,000 and a monumental work ended up selling for $5.5 m at Sotheby’s London in 2007–a record for the artist.
FOX: What is the typical rate of return for a piece of artwork?
HLK: Since all markets are cyclical, prices of art are constantly changing and while I’m aware of the statistics pointing to the exponential appreciation of the contemporary art market there is no standard formula for determining an ROI.
That said, there will always be a demand for top quality paintings by blue chip artists (which incidentally, tend to do better at auction in the short-term) and buying art by emerging artists is seen to be a good way to hedge bets because their markets are yet to be made. It’s interesting to note that emerging artists have outperformed blue chip and mid-career artists over the years but they only account for 3% of all artists at auction! It’s very hard to identify those artists.