The Role of Art & Antique Dealers An Added Value CHAPTER 4. DEALERS’ BUSINESSES
Unlike their more diversified auction houses counterparts, a dealer’s business model is often built around specialising in a few highly defined fields where they have a high level of expertise. Dealers often develop a strong vertical presence within one specific designation (similar to an academic researcher), building personal and institutional knowledge in this area. Due to their specialised nature, the business model for individual dealerships is often highly dependent on the success of a small number of disciplines, and hence subject at times to considerable risks, given that their one sector of the market could experience a downfall.
Dealers do have a number of other distinct competitive advantages that have helped them to survive over time: they can set their own mark-ups; unlike auction houses, dealers do not charge any commission or premium to the buyer; they exert ultimate control over the price and other features surrounding a sale; and can control the supply of works on to the market. They can also maintain confidentiality on all details of their transactions. Because dealers essentially make a living from coordinating supply and demand in a market where information is at a premium, dealers are prone to keeping things as confidential as possible to protect the privacy of their clients (both suppliers of works for sale and buyers) as well as to protect their businesses.
4.1 Risk and Specialisation Dealer specialisation is increasing over time and in larger art markets.
There are indications that, despite the risks it entails, dealers have tended to become more specialised over time. Specialisation can be a highly financially successful strategy but is a much higher risk business model as success is dependent on the success of a small number of disciplines compared to a general focus on several sectors such as that taken by auction houses. It can also make it more difficult to expand a business, as the revenue model relies on one sector performing well. Some dealers commented that the increased concentration in the market has caused some polarisation or industry shake out, particularly within geographical markets as individuals attempt to stake their corner.
There is also some evidence of greater specialisation in older, more saturated markets. For example in the Czech Republic, where the commercial art trade is only 20 years old, dealers tend to be generalists working across a number of genres and even conducting their own auctions. In older markets such as the US and UK on the other hand, dealers are much more specialised by genre, category and price level. There is also evidence of smaller markets having less specialisation; for example, some smaller cities in the US were reported as having less specialised dealers than New York.
24 Historical & Future Perspectives
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