5. The Market and Target Audience: Taiwan, China and Asia Pacific Art
6.8. Business Model of Art in Taiwan
The development of local art, as seen through the art in ink movement, also implies a large pool of local artists for collectors to curate which results in some tapering of interest from the curators on foreign artists and their corresponding works.
This high entry barriers is a characteristic not only in place in Taiwan but also in other relevant Asian markets.53 But these high barriers also mean higher profits. Via market research we can conclude that some artists sold by foreign dealers, not extremely well known artists in the international art world, enjoy medium to high prices.
6.8. Business Model of Art in Taiwan
It is true that art dealers in Taiwan are differentiated according to their position (Beta, Gamma, Vanity), but is also true that in terms of business models the differentiation is not as obvious as there is not a clear business model differentiation.
According to the business model in place there are several characteristics in Taiwan.
The first is that a lot of dealers work with similar approaches to the market, which means there is not a clear business model differentiation. This is not different from other art markets where in Europe this is also a norm.
In their main value proposition galleries concentrate merely in the organization of regular exhibitions, which are open to the public, with exhibited for sale. There are no other services or value included in their offerings.
Nevertheless, there is some differentiation based on the positioning in the market and strategy. Taiwanese galleries can be selling in the primary market as well as in the secondary market by reselling works of famous and master artists. This attitude in the value proposition should be considerer relevant and different from what happens in other places, as Europe, where usually, just the Alpha or Beta galleries participate in the secondary market. In Taipei different dealers, without considered as Beta, can be in the primary and in the secondary market.
53 According to information gathered during the 2013 Art Forum, “Asian Value”, some foreigner dealers established in Asia (Hong Kong), with the aim to promote foreign artists, commented the difficulty of attracting Asian collectors to foreign art. In some cases we could feel some frustration. These high entry barriers has modified the strategy for some of the foreign dealers. They underwent change and today promote both local as well as foreign artists to be more appealing to collectors taste, but nevertheless, their most important collectors base are still foreigners and expats living in Asia.
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almost all the galleries not only a combination of modern and contemporary art, but also a combination of means, such as painting, sculpture and in some cases photography.
At the moment the clearer inclination to differentiate the offer in galleries will be as expected, the level of recognition of the artist, defined by the place the galleries are filling, such as Beta, Gamma or Delta galleries.
Nationality of the artist is increasingly becoming a differentiation driver in the value proposition, a main strategy for some and a market positioning. This is particularly seen in the case of promoting Asian artists. There is a big emphasis and rivalry in the promotion of Chinese, Japanese and Korean artists as a good amount of galleries in Taipei have decided to include an increasing number of Asian artists trying to find some differentiation. This is particular the case for Beta dealers.54
Inside this positioning there are also some segmentation. There are examples of concentration in niche parts of the Asian artist market, as some dealers promote mainly emerging Chinese artists55, other promoting famous Chinese artists only in print56, and other selling works in traditional ink, calligraphy or Chinese super stars working in contemporary art or traditional in oil.57 The same happens with Japanese artist.
The concept galleries, that can be found, as a value proposition, are into contemporary art and emerging artists.58 Others are concentrated in promoting digital visual arts and photography.59
54 Such as Lin Lin, Soka Art, Imavision Gallery, and Gama dealers such as Pata Gallery or MOTART.
55 Pata Gallery 56 Savoir Gallery
57 Gloria Art Center or Xihitang Gallery.
58 As is the case of Aki Gallery.
59 TIVAC and 1839 Contemporary Gallery.
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Another aspect of the value proposition in the business model in the sector is offering more or less artists, rather than aggregated services. The international norms in some galleries is promoting between 5 to 25 artists. In the case of some Taiwanese dealers artists advertised in their web page can go to 50 or even to 200 or 300 artists, which is a very high number for the art market.60 In general is surprising how many artists can be found on the web page of some galleries.
This exemplifies a Long Tail business model where dealers are trying to receive more revenue without supporting their business too seriously in a limited amount of artists expecting blockbuster sales, but prefer selling a lot of artists in small quantities each.
This indicates in some cases a behavior of more of a decorative sector than a promotion of real pieces of fine art (original, special, valuable), and that some galleries function as art platforms.
In terms of clients and customer relations, most of galleries act in a similar way, were they will base their business, as noted before, in art collectors of specific taste (traditional art, contemporary art) but mainly defined by their very close family, friend and business relations, more than a clear segmentation of the types of collectors they want to reach.
The main channel for most of the dealers are their own spaces and recently a important participation in local art fairs, at least 6 or 7 every year. Most of the Beta and Gama galleries also participate regularly in art fairs in Taiwan, mainly in he big cities, as Art Taipei, Art Taizhong, Art Kaohsiung and Art Tainan. Also some hotel fairs are gaining importance, as is Young Art Taipei. Going to important fairs outside Taiwan in the West is not extremely commonly seen as part of the business model but some galleries are doing it more and more.
But there is a growing trend to connect better in regional markets, such as Mainland China. Important examples of Taiwanese galleries that have decided to venture and open branches in Mainland China are increasing.61 This connection opens up big opportunities for these galleries to build relations with both Chinese collectors and also
60 One example is Caves Gallery, which has a very large amount of artists in their web page.
61 The Gallery 99 Art Center located in Taipei boasts 2 locations in Shanghai and is mainly dedicated to promoting Taiwanese artists in China. The gallery Soka Art Center is another example with a gallery in Beijing as well as in Taipei, Tainan and Taichung. Pata Gallery is another example of a Taiwanese gallery with branches and connections in China.
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China compared with Hongkonease galleries doing the same.
In Mainland China the interest in Taiwanese artists has also grow importantly helping this expansion. This fact is explained because Taiwanese artists still have prices that are affordable compared to the boom in Chinese artists. Since 20 years ago a notable amount of Taiwanese artists have moved to China because of the expansion in the demand and also in the supply were more artists have emerged.
The Internet is not yet an important channel for the art in Taiwan, surprisingly, based in the high penetration and usage of e-commerce in Taiwan. This is so because the main buyers (collectors) are still used to buy through traditional means.
In their main activities galleries find artists and make shows. In Taiwan galleries acquaint themselves with artists through their personal connections via curators, university professors, friends or by visiting art fairs. Related to foreign artists, visiting international fairs and research through the internet are the most used channels to acquire new artists.
In securing the artists, art galleries compete each other mainly by offering better spaces, collectors’ reach, marketing as catalogs, and prices to the artist. Commission is not a common competitive force, as most of the commission is a standard of 50%. Galleries also resell works of collectors or buy from foreign artists to resell. Usually foreign art is resold. For agents the normal commission paid is around 20%.
62 The Lipen Gallery exhibits at least 1 time in China, in either Shanghai or Beijing every year.
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Marketing as a key activity is not as important as we would expect coming from the art sector. This is an important difference from other markets, mainly in the West, where the art sector has a strongly connection today with a celebrity type marketing approach.
In Taiwan this is not the case. There is a low profile approach as is one characteristic in the traditional Chinese business culture, were to much attention from outsiders is not wanted. The art sector in this sense does not use marketing as strongly. Also marketing tools effect in the revenue should be very limited as collectors relations with the gallery owners are much more important as explained before. Openings in Taipei are a proof of this fact, as they are usually small and do not bring to many people, are done without doing to much noise and usually without media participation.63 Nevertheless, more and more marketing tools are being used as Taiwan galleries tend to participate more in ART fairs to be directly connected to collectors.
About key resources, artist as expected, is one of the main key resource for the galleries business model. The pool of artist defines the place of the gallery in the market.
Collectors base is also a key resource, as they will also push the reputation of the artist and that of the gallery. Owners and their reputation is also a key resource, as their personality, connections and knowledge determine the artist pool and collectors base of the gallery. Gallery owners should not be under-valued as is a key factor in the business model of art in any market, and so is in Taiwan.
Location is also an important key part of the business model of art. In Taipei, at least, is not the exception. The more than 70 galleries in the market in Taipei, for example, are located in 12 different areas of the city in small clusters of galleries relatively close to each other. High-end neighborhoods as Neihu, Daan, Zhongshan, Zhong zheng and Tianmu concentrate the majority, mainly in relevant high-end commercial streets as Renai, Dunghua and Fuxing.
Infrastructure is also a key resource. Street levels are the norm for the Beta type galleries and some Gamma, but some are also located in basements and inside buildings
63 Art market is known as a gray area in the market, so also there should be incentives not to appear to much not to bare attention of government, tax authority, etc.
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expected, Beta has the biggest spaces and the better infrastructure for display.
In terms of professionalization in the staff is not a big resource as a competitive force in Taiwan. The number of employees is small. Galleries employ preferably women, usually a manager and their assistants. Not all the employees in the galleries studied art but some come from related fields, such as theater, literature, or other types of expression related to art. In general the staff knowledge of art is not outstanding.
Usually this is a consequence that rotation in staff is big, as galleries pay low salary per hour to some of their employees, and in some cases they prefer to hire on a part time job basis. Is also a consequence that hierarchy is relevant as the owner or the general manager will probably make the sale.
In the key partnerships, the cooperation between dealers is a factor seen and should be taken into consideration as critical to the sector. Art dealers in the Taiwan market function as a unified group were almost all are part of the Taiwan Gallery Association, which has more than 80 members, being the strongest organization in the sector. The association president rotates from all the members and dictates the main strategy for the sector organizing forums, art fairs and guidelines for the operation. The Association was created in the 1990s with the main objective to control the speculative behavior of some actors and today serves also to control the entrance of new players that can disrupt the market. This is also a expected business practice in the Chinese cultural way of doing business, where competition and collaboration is just 2 sides of the same coin.
Competitors are also collaborators in an atmosphere where the general situation of all the actors is first than the situation of a single case.
64 As Daan, Dazhi, Neihu and Zhongshan. Renai Rd, Dunhua Rd, ZhongXiao Xinsheng, Zhong Xiao Fuxing, or Zhong Shan Rd.
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advocating greatly to get more participation, increasing the rivalry among groups. The Art Revolution Taipei, held in April, is a good example of another group different from the Taiwan Gallery Association. This Art fair is organized by the Taiwan International Contemporary Artists Association another group pushing to enter the market.In the revenue model, galleries work mainly by the commission/royalty model, where almost all work taking a 50% stake of the value of the art works. Apart from the commission/royalty, revenue model will depend in the main strategy. In Taiwan dealers have developed a revenue model that can be stronger than in Europe, because dealers have more revenue drivers as usually a lot of them participate in the primary and secondary markets as we have noted. Dealers can sell both in the primary as the secondary based on their good clients base and trust. The commission model, usually resells instead of the case of foreign art.
The emphasis and main strategy will define the revenue model. Concentrating in blockbuster sales through local and foreign Asian superstars is one approach or by a more long tail revenue business model approach. Also the channels are a component of the revenue model, as revenue is made mainly in gallery spaces, through fairs, locally, internationally markets, internet or visiting collectors.
Another important aspect of the revenue model is the revaluation of the works purchased by some dealers, as they gain in the value appreciation of the works collected by them. The cost structure in the market is relatively flat and controlled, where rent and utilities, and warehouse is the most important component in the operation, followed by art fair participation and then by staff salaries.
In the case of galleries with several locations in and outside Taiwan the cost structure can be more complex with higher fixed costs and variable costs as transportation and insurance. Transportation and installation are also important components but will depend who pays for them.
The main characteristic then is a cost structure with very important overhead expenses, controlled manufacturing expenses (50% commission to artist), and very low inventory expenses based that galleries usually do not buy the works they sell.
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He promoted from small to big works for public art. One of their main target clients are companies. This gallery established in Taipei after being successful in Mainland China, with galleries in Shanghai and Beijing. The dealer is located in Nei Hu district in Taipei.
His investment is considerable based on the size and the pieces exhibited.
Philipp Staib Gallery is mainly promoting American and European artists, considered in some cases established but not able to be promoted by international Alpha or Beta galleries. One example is the American scultpturer Peter Woytuk. The gallery has several pieces from him and his wife. Another example is the French sculptor Val, who is not extremely known in the international art circles but has been very successful in Taiwan. Val lives in Thailand and has become one of the strongest artists displayed and promoted by Phillip Staib Gallery in Taipei. She was displayed in “Art Taipei 2012”
and “Art Taipei 2013” as well as “Solo Taipei 2014”.
Phillip Staib Gallery enjoys a special place in the market as it contains a unique offer of artists not readily seen in other galleries. His business model is to sell directly in their space in Neihu and has a strong participation in fairs with big space exhibited.
The rivalry in this sector is increasing, as more Taiwanese dealers are displaying Western artists. This is mostly happening by Beta galleries. One example is Nou Gallery, which in august of 2013, brought to Taipei three pieces of the British artist Tony Cragg and two works from the Belgium artist Wim Delvoye. Similar pieces of Cragg were sold in Europe in 2006 for US$200,000 and US$800,000. The investment in these 3 pieces should have been in around US$1.3 M. Talking with the dealer we know he bought them and brought them to Taipei to resell them.
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The Han Art Space in Tainan is another example of a Taiwanese gallery exclusively focused on foreign artists. Its owner, Ms. Metra Lin is bringing to Taiwan mainly eastern European and Japanese artists in the emerging field, focused on painting.
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Sello de Agua Art（洋璽藝術）main product will be Latin American art in the field of painting, photography, sculpture, video, installation and electronic art. This art will come from emerging to middle mature artists with a high internal and external value.
The art will be offered following curatorial excellency and high standards of professionalism. In this task the company will also focus to deliver and create cultural projects to connect communities, engage customers as art talks, seminars and workshops.
Figure 22 Product offered.
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Images for illustration porposes, all rights reserved to Claudia Perez Pavon, Monica Espinosa, Omar Rodrigues Graham, Taka Fernandez, Daniela Edburg, Alex Dorfsman, Mariela Sancari, Victor del Moral.
The market positioning for our product is to reach art lovers, new emerging art collectors and dealers, who want more diversification and a new type of art not seeing yet in the market. In this sense we will be positioned offerring a new product category in the market that provides diversification to collectors and a new source for investment.
Our product will be different from competitors bringing foreign art.
Figure 23 Sello de Agua Art（洋璽藝術) product
Figure 24 Marketing positioning.
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to build brand awareness within the Taiwanese and Chinese community and collectors base. The approach developed will need to be based in how to engage an elite class of
to build brand awareness within the Taiwanese and Chinese community and collectors base. The approach developed will need to be based in how to engage an elite class of