1. Company Profile
1.1. Mission
promote Latin American art in Taiwan and China. The company chose Taiwan’s art market as a prime location for launch given its mature state with a size valued second in Asia, behind the art market of Mainland China. Being launched in Taiwan brings abundant opportunities and strategic advantages to reach Taiwanese collectors as well as other Asian art collectors such as Chinese,Japanese, Hongkonese and westerners living in Asia.
In this growth, foreign artists (referring to those located outside Asia) are playing an important role because local and international dealers are promoting them to differentiate themselves in the eyes of Taiwanese and Asian collectors. This trend is sustained in creating an ability to serve changing demands of art based on the increasing number of emerging art collectors more open to western values and western ideas.
In this process, it stands out that Latin American artists are specially under-represented in the market. This does not reflect the general trend of Latin America art as it continues receiving gain in reputation and collection within the international art community. With its increased standing and the stage of the art market in Taiwan, introducing Latin American Art will happen in the middle to long run, which will not only allow collectors to solidify their collections but also allow Latin America artists to expand their careers through market expansion.
In this scenario there are several opportunities provided for art companies specializing in promoting Latin American art willing to come into the market and alleviate some needs within the art market.
1.1. Mission
Sello de Agua Art（洋璽藝術) mission is to be a respected, professional, and innovative art channel to bring to our clients, located in Taiwan and Asia Pacific, unique and valuable Latin American contemporary visual art, increasing the value in their appreciation of art and in their art collections, and expand markets for successful Latin American artists, through a extremely knowledgeable and professional process.
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Taiwan and Mexico the ownership of the corporation will be shared among the shareholders.
Sello de Agua Art（洋璽藝術) will operate with offices in both Mexico City and Taipei. This will help the company to be able to gain operative efficiencies, adaptability and competitive advantage. Mexico office will negotiate and look for artists in Mexico and in neighbor countries in Latin America.
In Taiwan the company will develop the connections with the local market and with the markets of Mainland China, as will be Beijing, Shanghai, and Hong Kong art markets. In Taipei the company will have the main office and the warehouse and will concentrate in the operation, promotion efforts and implementation of the sales strategy in Taiwan and Asia Pacific markets. From Taipei the company will also organize the planning of fair participation locally and internationally and will develop the partnerships with local dealers and agents in Taiwan, Mainland China and other markets in the region.
The fact of being in Taiwan will be leveraged to be able to introduce the artists into the market of Mainland China. Taiwan is close geographically and culturally to Mainland China, as well as has an important impact in the trends settled in China. Usually, artists that are successful in Taiwan can be so in China, as Chinese collectors are aware and give value of what is ocurring in Taiwan, as Taiwanese art colectors are recognized in China as knowledeable and wise. The experience accumulated in Taiwan facing local collectors can be transferible to dealing with Mainland Chinese collectors.
1.4. Objectives of The Business
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In the first year of operation:
1. Consolidate a diverse and valuable group of 8 represented artists from Mexico/Latin America to be promoted in Taiwan and in China through traditional channels and through the web site and social media.
2. Promote at least 5 artists through partnering with local dealers and fair participation in Taiwan and China tackling the initial barriers of entry. In this process organize at least 4 art exhibitions in Taiwan and 3 co-joint exhibitions in China.
Figure 1 Objectives of the business.
Figure 2 Yearly goals for the company
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5. Create links with at least 10 to 15 key local, art foundations directors, directors of local art fairs, directors of cultural institutions and museums both in Taiwan and in China.
6. Participate in 4 local Art Fair in Taiwan and one international Art Fair in China.
7. Serve as a valuable and professional channel for promotion and advise for emerging to consolidated artists, from Latin America, willing to be promoted in Asia.
1.5. Financial Goals
1 year
Achieve the promotion of at least 77 works in Taiwan of the represented artists, and 24 works in Mainland China, with a successful selling rate of 20%, achieving a sale of 21 works. With averages prices of US$4,500 (NT$135,000) this figure will represent a revenue of US$ 77,000 (NT$2.1 million). In China 12 works will be sold with a revenue of 27,000 US (NT$810,000).
Year 2
Increase the exhibitions organized in Taiwan and in China and the fair participation promoting more works. Thanks to a better understanding of the markets double the works sold both in Taiwan and China, reaching a revenue of US$226,800 (NT6.8 million)
After year 3 the company will focus to continue increasing the organization of exhibitions in both Taiwan and China and fair participation. The company will focus strongly in increasing the successful rate both in Taiwan and China markets, based in more knowledge about collectors preferences and building a market more educated
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to receive Latin American Art and better positioning and brand awareness with our collectors/partners.
After year 5 the goal is to the organize 10 exhibitions yearly (6 in Taiwan and 4 in China) and participate in 9 art fairs (4 in Taiwan and 5 in China and Asia Pacific).
The number of exhibitions will be increased year by year to reach 14 in year 10 (7 in Taiwan and 7 in China), and a participation in 11 art fairs (4 in Taiwan and 7 in China and Asia Pacific).
The increase of the successful rate will also continue to be a key goal, increasing it year on year to end with a 50% in year 10 both in Taiwan and China. The average price of the works will also increase as bigger works will be promoted based in a stronger client base. The average price sold for the company will end in US$9,745
This will give the company a revenue in year 10 of US$1.7 million annually (NT$51 million).
1.6. Start Up Funding
The company initial investment will be US$250,000 (NT$4,500,000) which will be allocated into different areas. Capital investment will be equal to US$100,000 (NT 3 million) and the rest for working capital for the first years of operation. Part of the resources will come from the founders and part from investors and loans. Some resources will be used for working capital to develop the relation with the artists, and produce marketing materials as catalogs, paying salaries, fees for curators, and bare the costs of operation as is rent. Another resources will be used mainly for the organization of the exhibitions and fair participation.
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Nevertheless, Taiwan’s art market still faces pains to market actors. The first is the market remains relatively closed selling mainly local and regional artist. In this sense Asian artists have still advantages, as most of the dealers promotes and sells mainly Taiwanese and Asian artists. This market behavior diminishes the possibility of some diversification for local collectors and has shaped a market were local artists enjoy relatively high prices due to the lack of competition, making collectors over-pay overall diminishing the effectiveness of their investment.2
1 Today more than 120 art galleries are in operation in Taiwan and relevant art fairs takes place each year in several cities as Taipei, Taichung, Tainan, Kaohsiung. Art Taipei being one of the oldest art fair in Asia. As well, several art auctions houses, local and foreign, participate in the Taiwan market. Private dealers and public initiatives are also all playing a strong role consolidating a mature and developed art market in Asia, just second in value behind Mainland China art market. Taiwanese art collectors have also become one of the main forces in Asia Pacific art circles, being know because of their purchase power, taste and knowledge about art.
2 The closeness of the market is not a consequence of trade barriers or non-tariff barriers to trade, as regulations, or special permits, but is the result of the preferences of art collectors, dealers and the weak of developed networks with other art realities.
Figure 3 Pains in the Taiwan and China art markets
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known as emerging to mature, important pains are still observed. In terms of the value of these artists and their art, questions and doubts arise. Some are coming to the market without an extremely strong internal and external value, but are promoted and sold as if they were artists with high internal and external value.3 Some of these artists enjoy a position in a relatively good price bracket compared to their real value, taking advantage of the higher prices available in the market. Taiwanese collectors are also overpaying for this art diminishing their investment, economic returns and enjoyment in the future.An extremely high concentration of western artists from Europe and the US is the third pain. This is happening because they are easier to promote and to leverage the positive perception of their value taking advantage of a positive “Country Brand Effect.” Local emerging novice collectors and art lovers are emotionally pushed to invest in these artists.4 This closes opportunities to valuable foreign artists from other regions.
In this arena, Latin American, African and Middle Eastern art and artists are especially under-represented. This fact opens as well big questions. In the case of Latin American art is seen in high end art circles as a flourishing art, extremely strong, unique and creative, still underpaid and sometimes undervalued, being an excellent investment opportunity causing increase in collection.5
This trend in collecting Latin American art, nevertheless, is not occurring in Taiwan, which is a pain to collectors. 6 Finally, there is the pain for Latin American artists. For
3 According to research in the economies of the art sector, internal value of an artist is measured based in his/her special personality, creativity and originality in producing works of art. External value is measured in the development of the artist’s network of partners, supporters and colleagues, see Magnus Bruno Frederik Resch, Management of Art Galleries-Business Models. Dissertation, University of St.Gallen, School of Management, Economics, Law, Social Sciences and International Affairs, 2011.
4 This is pushed also because collectors have the perception that the art collected comes from “places were art must be valuable and is a safer investment” rather than based the artist value. According to Thompson (2008), in London and New York there are around 40,000 artists in each city. From that amount (80,000) 40% are vanity artists with no gallery representation and 41.5% are considered “poor dogs” selling thanks to their own promotion, without a gallery representation or supporters. This means that in the 2 most developed art sectors in the world 81% of all artists are considered with a low internal and external value. Some of these type of artists can be coming to Asia and Taiwan.
The pain though comes that some are being promoted as if they were successful artists, being able to do it, based in the “positive country brand effect” and a lack of knowledge from some emerging collectors or art lovers and the marketing used by local or International dealers.
5 Relevant galleries in London and NY, as Gagosian and White Cube, have increased their efforts promoting Latin America artists and international power collectors, as the Deutsche Bank Art Foundation, are pushing Latin America art as one of their main areas to develop into the future based on their soundness and investment expected returns.
This under-representation is the result of a complex scenario. On one hand in Taiwan there is the “Low brand effect of Latin America” as a whole as the knowledge about Latin America is still poor. This make that artists or art from this region has to compete with the “High brand effect of Europe and United States (US)” which is has not been easy.
Collectors perceive US and European art to be more valuable and a safer investment so dealers also concentrate in this part of the market. Another cause is that there are higher barriers to introduce this artists, based also in weak
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connections between Latin American artists and Asian dealers and the lack of knowledge of Latin America artists and dealers on how to approach Asian collectors.
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3. Launching the Company to Help Eliminate the Pain
Given the aforementioned market of challenges and pains, Sello de Agua Art（洋璽藝 術) main value is to enter the market and promote in Taiwan and in China valuable visual contemporary art and successful artists coming from Latin America.
This will help increase the value of Taiwanese art collections, the enjoyment of collectors, and serve as new investment opportunities in the art sector. It will also open a growing market for Latin America art through an effective and trustful channel of promotion.
The type of artists that will be promoted by Sello de Agua Art（洋璽藝術) will be the key point in the value proposition and a solvent to collectors actual pains. Sello de Agua Art（洋璽藝術) will promote mature and emerging artists chosen with a high internal value and a developed external value. For Latin American artist the company will solve their lack of connections and knowledge about this growing art markets, helping them to expand their markets and enhancing their art careers.
Figure 4 Solution given by the company entering the market.
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emerging art markets in the East, such as Mainland China, Taiwan, Hong Kong, Korea and Singapore.
Chinese and Taiwanese art markets exemplifies this trend perfectly. Mainland China has become the fastest growing art market in the world and in 2013 became the second in worldwide share in value. Taiwan is the fifth contemporary art market worldwide concentrating more than 1% share in overall turnover of contemporary art in 2012.
Considering this figures, being launched in Taiwan art market will allow access to the fifth contemporary art market in the world and simultaneously makes reachable the access to Mainland China’s art market thanks to the near and convenient geographical location between Taiwan and Mainland China, in addition to cultural similarities and current strong connections between Taiwanese and Chinese consumers.
The shift to East is also accompanied by a wider international development in these markets thanks to the introduction of foreign art. In the case of Mainland China 2013 imports of foreign art accounted for US$ 1 billion, two times the exports of art, indicating Mainland China has become a relevant buyer of art. Comparatively, Taiwan imports of drawings have grown 12% annually from 2002 to date.7
7 A relevant prove of this shift to the East is the strong strategy in China developed in recent years by Sotheby’s, one of the oldest art auction houses in the world. Sotheby’s has implemented a regional marketing initiatives such as the publishing of Hong Kong sales catalogues in Chinese, the launching of a Chinese language website that includes e-catalogues for sales of Asian Art and Sotheby's major Impressionist and Contemporary sales, and the hosting of innovative private selling exhibitions. They have continued investing in staff with the requisite skills to service Asian clients at Sotheby's Hong Kong, New York, and London locations, as well as to support the growth of the Chinese art market. In Hong Kong Sotheby’s added a state-of-the-art gallery with over 15,000 square feet for selling and exhibition space. Sotheby's Beijing was established in 2012 to provide Sotheby’s a platform for art-related auctions and private selling exhibitions in the art capital of China. See Sotheby’s form 10-K, 2013.
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The second is that the sector In Taiwan and China is in a maturity and diversification stage pushed by foreign art as local dealers and international dealers are bringing art from the outside permanently or by participation in art fairs. This is a trend occurring in Taiwan and in China since the beginning of the XXI century. Thanks to it Taiwanese and Chinese art collectors and art lovers are becoming more sophisticated and knowledgeable, demanding larger amount and more valuable foreign art in their own country. Following this trend and demand behavior marks the right moment to enter the market offering valuable foreign art and new artists.
A third factor is as we have noted already, Latin American art is under-represented in Taiwan, even though has received special attention and is being collected in high-end art circles worldwide, a trend not occurring yet in Taiwan. In this sense, Taiwan art market is behind other art markets in the world, even Asian art markets such as Mainland China, Hong Kong, Korea and Singapore, were Latin American Art is already being promoted.
Coming into the Taiwanese market offering valuable Latin American art in this moment serves a need not yet served and will create a first mover advantage, being able to develop brand awareness with Taiwanese collectors (public and private), art institutions, and gain a special place in the Taiwanese market providing future leverage. It will also provide leverage with artist selection, being able to bring valuable artists much of which are not being promoted seriously and in a permanent basis in Taiwan and in Asia.
Figure 5 Reasons to launch the company
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are located in Japan (1.9 m), Mainland China (643,000), Australia (207,000), Hong Kong (114,000), South Korea (160,000), Taiwan (95k) and Thailand (73,000).8 In Taiwan the HNWI population has increased at a 13% annual compound rate since 2008 with HNWI are expected to increase to 120,000 by 2015, a 26% increase from 2012. In Mainland China this class grew by 14% in 2012 and is expected to continue growing.9
Finally, investments in passion items, is a big trend in wealthy Asia-Pacific individuals.
According to the consumer attitude of HNWI, luxury good consumption in this group is increasing year on year. In 2014 is expected that consumption in luxury goods in this group worldwide will increase in 36%. Inside the consumption of luxury goods, investments in passion items is a growing area of HNWI spending activity, were 44%
of HNWI are becoming more interested in collecting art.
In Mainland China, according to art economics, HNWI individuals are allocating 17%
of their total investments to passion items, as is art. In Taiwan this figure should be transferable according to similar behaviors between both communities. In this sense, the markets where the company will operate, are increasing its fondness to collect and
of their total investments to passion items, as is art. In Taiwan this figure should be transferable according to similar behaviors between both communities. In this sense, the markets where the company will operate, are increasing its fondness to collect and