Berlin galleries report on digitalization and future prospects

Digital budgets, NFTs, hybrid fair formats, the Corona pandemic: the art world is undergoing a process of digitalization. Adaptation and change are essential to continue to be successful in the market. The Project Future of the Berlin Senate Department for Economics, Energy and Operations has now published the results of its survey of Berlin art galleries on digitalization. This overview is intended to guide Berlin's art scene representatives and politicians in the future in maintaining the city's exemplary character as an international art market location. The survey was conducted between September and November 2021 with 107 Berlin galleries (response rate 36 percent), one auction house and two fair organizers.

Galleries have been increasingly developing digital presentation and sales plans for two years. At the same time, they are taking into account collectors' desire for direct contact, which continues to be of enormous importance when making purchasing decisions. Around 60% of Berlin galleries use platforms developed specifically for galleries for online sales, primarily Artsy, Artnet and Artland. In addition, social media channels play a significant role: 93 % of the galleries surveyed use Instagram, 69 % Facebook. Every fourth gallery relies (additionally) on Linkedin, other channels are in the single-digit percentage range. One fifth of the galleries employ their own digital managers.

The price communication for online sales is interesting. While almost all galleries use Instagram for presentation, only a few display the prices of the artworks there. For newsletters, there is a similar trend. Price information, which for most Berlin galleries is in the mid-range segment around 10,000 euros, is mainly found on the special sales platforms mentioned above or in their own online viewing rooms.

It is known from other studies that potential buyers expect price quotations. A customer-oriented online presence is becoming increasingly important; the majority of Berlin galleries expect an increase in online sales. NFTs are promising objects for sale, which are currently bought mostly as capital investments by people from the investment and finance sector, rather than by customers interested in the content. From this experience, it seems advisable to price them on non-art-specific platforms such as Instagram.

However, the economic opportunities are also countered by points of criticism: The relevance of NFTs in terms of content is doubted by some gallery operators. Whether individual works will still be relevant in a few years' time remains to be seen. The virtual presentation of artworks can be evaluated in a more differentiated way: Although customers can examine the works from anywhere, a decision is reduced to visual stimuli alone. Not all works of art are given a fair evaluation in this way. In most cases, online viewing does not involve a deeper examination of the content.

The younger and subsequent generation of art collectors are digital natives who mainly expect online sales. Turning away from this practice is out of the question for the economic success of a gallery. Social media channels also promise a broader, more diverse audience than the previous exclusive group of buyers. About half of the galleries have recorded a share of digital sales of less than 10% so far. The same number of galleries expects digital to account for between 20% and over 50% of sales in the future.

Digitalization is also highly relevant for art galleries − and it is unlikely to become less important in the coming years. However, the possibilities for implementing digitization plans are limited: Almost two-thirds of Berlin's galleries are small businesses with two to five employees, and almost another third are one-person galleries. Drastic revenue losses due to the 2020 pandemic put additional financial obstacles in the way: 45% of galleries reported lower revenues than in 2019, half of them between 21% and 40%. For about 5% of all galleries, the decline was between 81% and 100%. For example, digital budgets were below €5,000 for 2020 for two-thirds of respondents, with just over half expecting higher spending in 2021. Large, international galleries are superior in terms of financial resources and expertise. Too high costs and also a lack of time prevent smaller galleries from expanding digitally.

A watertight e-commerce strategy is essential to succeed in the art market. It now remains to be seen how Berlin's traditional art galleries, half of which have been active in the market for more than 15 years, will recover from these cuts and master future challenges. Together with experts, Berlin galleries confirm the high potential of a joint platform under the brand "Berlin Galleries". This platform can increase the reach and external perception of the Berlin art market internationally and nationally and thus strengthen Berlin as a (cultural) location.