Date of Award

2018

Document Type

MA Project - Open Access

Project Type

MA Project - Business Plan

Degree Name

Master of Arts (MA)

Department

Art Business

First Advisor

Roxanna Zarnegar

Abstract

In a world increasingly dominated by mega-Galleries like Zwirner and Gagosian with outposts in several continents, an international presence seems almost required for success. The rising cost of real estate in art capitals like London or New York is harming the gallery ecosystem, with less than half of the galleries reporting profitability. Smaller galleries, if they continue to run the current course, will never be able to compete with the likes of Hauser & Wirth or David Zwirner.

Art fairs are an expensive alternative to providing international reach, as they provide a small yet impersonal space in a different place for a few days, but unfortunately, the price is often exorbitant and the returns unclear. The explosion of art e-commerce sites like Artsy.com, which offer access to an international customer digitally, is another testament to the fact that everyone wants to be everywhere.

Independent galleries must come together if they want to continue to be able to attract top artist talent. Gallery Swap is one potential answer. Galleries with a space in New York, for example, should be able to share a part of their space for a period of time with a compatible gallery in Paris or London. Eight countries account for 95% of the global market: the United States, China, the United Kingdom, France, Switzerland, Germany, Italy, and Japan, and major cities in each of those would be Gallery Swap’s target areas.

As a two-sided platform, like Airbnb, Uber or Etsy, Gallery Swap would need to please two key stakeholders in order to be successful: the host galleries and the visiting galleries. Even though it is the visiting gallery that pays Gallery Swap a fee to engage the host gallery, having a wide offering of different host galleries in attractive geographies is core to the company’s value proposition, much like availability of host apartments is to Airbnb. The surveys I carried out to test galleries’ appetite for this concept demonstrate that a critical mass 2 of host galleries available on the platform is essential to getting the growth engine started; nobody likes to take the first step when few others have registered. However, all galleries expressed that accessing a wider network of buyers and creating buzz locally by hosting overseas partners would add value to their businesses.

My projections contemplate ramping up the platform to host over 1,000 swaps per year after 5 years, generating $1.4 million in revenue and $0.6 million in EBITDA while capturing only 3% of the global number of art galleries. Given a relatively low initial invested capital of almost $100k, Gallery Swap seems like a commercially compelling endeavor to pursue after graduation, although not without its risks. The most important risks to the model are: (1) the target customer is an independent gallery in a major city, and reports show these galleries are struggling financially, with closures outnumbering new openings; and (2) generating enough trust in the community to support deeper collaborations between galleries in far-away cities.

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