Gallery Prices and Discounts

The Wall Street Journal just ran an interesting article by Daniel Grant on the gallery asking prices of art, and discounts.  The article is a good resource point when valuing art and deciding weather to use a listing price or discount.  It reveals that galleriest discount differently, and offer different discounts to different clients.  Well worth reading and keeping as a resource.

The Wall Street Journal reports (I have posted the complete article as sometime AW readers cant access the WSJ article due to a pay wall, the source is link is listed below)

When it comes to fine art sold in galleries, there’s the asking price.

And then there’s the price most people pay.

In fact, haggling is not only allowed, it is expected, a fact not widely advertised. The size of the discount can depend on a range of conditions—and there are certain ways of doing things—but many gallery owners say they are more than willing to negotiate.

“Galleries never have sales, it’s considered bad taste,” says Manhattan contemporary art gallery owner Renato Danese. Still most art sold by him, and other dealers, he says, goes for something less than the stated price.

There is a certain etiquette to the conversation. “A client comes in and says, ‘I’m interested in this painting,’ ” Mr. Denato says, “and I say, ‘I’m glad that you respond to it positively.’ The client asks, ‘What is the price?’ I tell him the price. He says, ‘Can you help me out with that?’ and I may offer 10%.”

Debra Force, a New York City-based dealer in American art, agrees. “Every work is discounted,” she says. “I can’t think of an instance in a long time where someone paid the asking price.”

Things weren’t always this way. In the 1970s and ’80s, only museums received discounts on art, Ms. Force says. Museums continue to receive discounts, and big ones, too—sometimes as much as 40%, largely due to the prestige that being part of a museum collection conveys on a work, and the potential boost in prices for the artist’s other works.

In the meantime, though, nearly everyone else in the art market has started getting discounts, too. The state of the economy has played a big role. The recent recession saw the prices for certain artists drop, and the use of discounts rise as galleries scrambled to generate sales. But now that the recession has ended and the art market has revived, buyers have continued to expect (and demand) discounts on everything, and large discounts at that.

A discount’s size depends on the circumstances of the sale, and each gallery handles the matter differently. A new buyer that a gallery would like to turn into a regular customer will generally get 5% to 10% off; a discount for a long-term buyer to encourage their continuing patronage will likely start at 10%; collectors who purchase more than one work at a time can sometimes receive a sort of volume discount of perhaps 10% to 20%.

Other incentives to buyers can include a break on the costs of framing, crating, shipping and insurance as the work is transported to the buyer’s home. (New York City galleries customarily cover shipping costs for buyers in Manhattan but not for those living outside of the city.)

Eric Brown, co-owner of Manhattan’s Tibor de Nagy Gallery, says that the shipping costs can be considerable, from $200 to $1,000 on average, and that relieving buyers of that expense can help “sweeten the deal.”

John Cheim, co-owner of New York’s Cheim & Read gallery, says that in his business, works by younger and less-established artists may be discounted 10% to 15% in order to encourage sales, while breaks on more-established artists are more in the 5% to 10% range.

There are times, however, when a gallery selling a work on another party’s behalf can be restricted in the price it offers. Cheim & Reid, for example, represents the estate of renowned painter Joan Mitchell, and “we tend to stay with the given price” unless the foundation in her name “agrees to a special price for a museum or public placement,” Mr. Cheim says.

Dealers may prove less amenable to providing discounts for artworks that are modestly priced to begin with, for instance, a $500 print.

Supply and demand plays a role, too, of course. Some artists’ work is so sought-after that there is a waiting list for new pieces; collectors who spend too much time dickering over the price will be passed over for the next buyer on the list. Sought-after works from deceased artists may be less subject to discounting as well.

There is the occasional dealer who won’t negotiate. “We’re not discount-oriented,” says Louis Newman, director of New York’s David Findlay Jr. Fine Art, adding that the gallery has “lost sales because we haven’t budged on price. Some collectors absolutely have to have a discount.”

Mr. Newman says part of his job is explaining to buyers the prices are reasonable. Sometimes prospective buyers become confused and back away from making purchases when they don’t know what something actually is worth, he says. “Discounting is a dangerous game to play,” he says, because it makes the stated price look like just a starting point for negotiations, and it suggests that certain buyers will get special treatment.

“When you start giving discounts to friends and relatives,” Mr. Newman says, “you find everyone becomes a friend or relative.”

Source: The Wall Street Journal