Craft the Investment Appeal of Art Items

Who is the richest artist in the world?
     Bloomberg Businessweek says it’s Damien Hirst, and that the skilled retailing of Mr. Hirst’s artwork by dealers and then unskilled retailing by Mr. Hirst himself have greatly influenced the extent and limitations of his wealth.
     This BBW analysis of the fine art market yields tips for a range of retailers.
     Consumer researchers distinguish between arts and crafts. We value a craft product because of the beauty with which it performs some function, such as protecting the tabletop or holding the toilet paper. The value to the shopper of an art object arises solely from the emotional reaction generated by experiencing the object itself. The emotion might be joy or grief, but to meet the consumer researcher’s strict definition, the joy or grief would need to arise from more than thinking about how the art object will appreciate in value over the next five years or how little it’s worth now that it was damaged by last night’s house fire.
     In the real world, however, many consumers buy fine art as a financial investment. The BBW article reports that during the decade of the 2000s, the annual rate of return for contemporary art was about 13%. For the same period, the Standard and Poor’s 500-stock index dropped about 6% per year, on average.
     Here are seemingly opposite ways fine art can improve your profitability:

• Buy and sell scarce art objects, gaining a commission on each sale. It’s not unusual for a dealer to keep half the proceeds of a sale of fine art, although Mr. Hirst’s popularity in top demand years allowed his agent to negotiate the dealer’s cut down to as little as 10%. Tips for dealers include carefully tracking trends, learning to identify quality in each product category you carry, and negotiating sharply with suppliers. Those tips apply to retailing items well beyond fine art, don’t they? 
• Sell quantities of abundant fine art. Mr. Hirst maintains a factory to produce versions of his fine art works. This served him well in 2008 when at a Sotheby’s auction, he had 223 lots on the block. But in more recent years, there’s been a dramatic drop in the resale prices of Mr. Hirst’s work. BBW attributes it to flooding the market. As in other retailing endeavors, the key skill is maintaining the right level of abundance, which is a matter of timing. 

For your profitability: Sell Well: What Really Moves Your Shoppers

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