To Market, To Market: Exploring Primary Vs. Secondary
A previous blog post, Collaboration is Key: Art Galleries and Consultants hashed out the differences and similarities between galleries and art consultants and how the two work together within the art market. This post dives a bit deeper and distinguishes differences between the primary and secondary art market.
What the Market can “Bear”
Jaime and Julia perusing an art fair booth.
Some may be more familiar with the terms “primary” and “secondary" in regards to financial markets. In the financial sector, securities that are purchased directly from an issuer are known to be sold through the primary market. Securities that are then re-sold between investors through an intermediary—like the Stock Exchange—are done so through the secondary market. While primary market prices are fixed, prices on the secondary market can fluctuate due to supply and demand
This is also how the primary and secondary markets operate for artwork. The artist, and in most cases, the dealer or gallerist is the “issuer.” Artwork that is purchased directly from the artist or the dealer without having been owned by any other party prior is a primary market sale. An artwork sale on the primary market might go to a private or corporate collector, art consultant, institution, or foundation. The dealer sets the retail price for the artwork which is based on numerous factors like size, medium, the cost to produce, and the artist’s experience. Of course, the supply and demand for an artist's work will further affect the primary, retail price.
Second Nature
When artwork is sold on the secondary market, it is being resold by the party that owns it. A collector, corporation, or institution may want to part with artwork from their collection for numerous reasons. Some may feel the artwork doesn’t fit their ever-evolving collection, while others may need to deaccession their collection for financial reasons, or they may be interested in the monetary gains of “selling to buy up”.
Jaime at a local art gallery
Secondary market sales can be facilitated by art consultants or dealers who privately find interested buyers for the artwork on behalf of the current owner. Alternatively, owners interested in selling can also consign the artwork to an auction house. The auction house almost exclusively works on the secondary market. On some occasions, artists and galleries will donate artwork to be included in benefit auctions in which case the artwork has never been owned before and is thus the primary market. However, far more often than not, the auction house is selling artwork that has been owned prior and has a special interest in artists with a strong secondary market.
Strong Like Bull
The retail price—the set price at which an artwork enters the primary market for—in comparison to the artist’s auction sale records, is used to determine whether or not an artist’s secondary market is strong. Typically, an artist whose work consistently sells for 1.5–3x their primary retail price would be known to have a strong secondary market.
Each artist has their distinct market trends and evolution. When deciding to buy or sell on the primary or secondary market, having an expert in the art field can help ensure you make the best decisions for your collection as a whole. Ultimately, buying artwork that you love and that resonates with your personal values and interests is the best investment. Whenever you’re in doubt, contact your local art consultant for guidance.
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