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Finarta Digitizes The High-End Art Market

The Luxembourg-based startup is targeting the cream of the world’s modern and contemporary art galleries ready to join the digital movement.

Photo: Gauthier de Vanssay, CEO of Finarta / Credits © Finarta

In recent years, the sale of collectibles via the Internet no longer seems to be popular. “Since 2015, we’ve seen a steady decline in market growth rates, which for online sales has gone from 24.1% in 2015 to 9.8% in 2018,” recalls Hiscox, the insurer specializing in art objects and valuable heritage. “In 2019, this same market experienced a moderate growth of 4% in 2019, to around 4.82 billion dollars”.

This stagnation would be mainly explained by the reluctance of major galleries and art dealers for transactions via the Internet. However, in 2020, the health crisis seems to have changed the situation and reboosted the business model, despite a sharp slowdown in the global art market.

A trend confirmed by Hiscox, who writes: “the impact of Covid 19 has accelerated sales via the Internet. Christie’s, Sotheby’s and Phillips generated $370 million via digital commerce in the first half of 2020, 436% more than the same period in 2019.

As a result of this digital switchover, these auction giants have not only saved on the costs of organizing a physical sale and the services of an auctioneer; they have also gained a new, younger customer base.

Surfing on these new web opportunities, art platforms are now counting on an increase in online transactions.

Betting on digitalization

One of them, the Luxembourg-based startup Finarta, is betting on increased digitalization of the sector. Since 2016, it has been operating a B2B site for matching buyers and sellers.

In concrete terms, a gallery looking for a specific painting or sculpture posts its request on the platform; the network member who owns the property contacts the gallery; the two then negotiate the terms of the transaction and organize the sale between them. The works are revealed only after the request is made and before the purchase is concluded.

Finarta specializes only in modern and contemporary art, and is a closed club, exclusively reserved for the high-end art market. To attract these dealers and galleries into its network, the nine-person startup has set up sales offices in Paris, London, Berlin and New York.

An average transaction is between 1.2 and 2 million euros maximum. The startup is financed both through subscriptions (2,500 euros per member per year) and a 3% commission from the seller and the same from the buyer.

Relatively modest fees, according to its founder and CEO Gauthier de Vanssay, compared to the 20% that sellers and buyers respectively have to pay in private sales, and the 6% received in public sales.

The very high-end segment now has an annual turnover of 60 billion dollars. The market is shared by 500,000 art galleries, with auction houses holding the remaining 45%.

The godsend of the top of the range

A windfall for the startup, which targets the 500 largest galleries, which alone represent 23% of the global art market. It already has 280 galleries in its network, and hopes to capture 120 more in the coming years.

Covid could well accelerate the movement. According to de Vanssay indeed, the health crisis has brought about a radical change among gallery owners. “With the cancellation of the major modern and contemporary art fairs (such as the FIAC in Paris and Basel or the TEFAF in Maastricht), exchanges between collectors have come to a net halt, generating about 40% of lost revenue for galleries,” notes Finarta’s CEO. “Since then, the major art galleries have been moving towards increased digitalization of their activities, in order to keep in touch with each other, with dealers and collectors.

According to Hiscox, this new trend should lead to a consolidation of the market: “67% of platforms believe that the online sales market will be dominated by a handful of global players in the next five years,” he writes. “Around 63% expect existing art market operators, such as galleries, to become the main online players, while 48% expect an outsider (startup or technology giant) to disrupt the market”. Finarta should definitely have a few good days ahead.

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