The Dreaded Discount Don’t Sell Yourself Short — You Could Lose More in the End
Early on in Barbara Ernst Prey’s career, a man approached her where she was selling her paintings. “He looked me straight in the face and said he would pay me $1,000 less than the listed price,” she said. “I said no, and he said to me, ‘So, you’re going to walk away from a sale?’”
As it turned out, Prey eventually sold that painting for the full price, but the situation she faced is one many other artists and art dealers encounter — a buyer who wants and expects a discount.
Bargain hunters exist in the art world, as they do elsewhere, and the phenomenon is not new. Algur H. Meadows, a Texas oilman who gained renown for buying a vast number of old master fakes, boasted of his ability to get artwork at half or less of the going price.
He once told a newspaper reporter in the 1960s, “They’d come down here with a Modigliani for $100,000, which I knew was the selling price anywhere. The next day, they asked $75,000, and I told them to take it away. ... Two or three weeks would go by. They kept telling me they had to leave town. Well, I said, I haven’t asked you to stay. If you want to sell it to me, I’ll give you $45,000. They took it,” Meadows said.
In 1965, Meadows donated the bulk of his collection to a museum at Southern Methodist University. There, more expert eyes discovered most of the El Greco and Francisco Goya pieces Meadows had purchased — not to mention the works by André Derain, Raoul Dufy, Amedeo Modigliani, and others that lined the walls of his Dallas home — were fakes.
Getting something for less is well established in the art trade, with dealers regularly offering 5%-10% discounts to prospective buyers as an inducement to take a work. The practice of discounting prices has become institutionalized.
Certain dealers provide specific price breaks to different collectors (e.g., 5% for a first-time buyer, 10% for a long-term collector, and 20% for significant private or public collections). The late Komei Wachi, who was the director of Gallery K in Washington, D.C., would go up to 15% when buyers purchased three or four pieces at the same time.
Paul Gray, managing partner of the Richard Gray Gallery in Chicago, said the gallery once knocked 20% off the price for a buyer in the case of a “young, emerging artist, because we thought the discount would make the sale happen and help place his work in an important collection.”
Other dealers provide up to half off when major museums are in the market, and in those instances, some dealers simply swallow their commission to raise the stature — and thereby the prices — of the artists.
How Discounts Affect Value
Discounts, however helpful they are in generating sales, have a drawback: They blur the question of the actual price and value of the work involved and can make those who pay full price feel like chumps. “It’s a psychological thing for collectors to get a discount,” Gray said. “If they don’t get one, they feel they haven’t been treated well.”
On occasion, the process of selling artwork can regrettably be likened to car buying, where dickering and mistrust take on a greater importance than the item being sold. More and more, collectors from all buying levels are taking the view that the stated price is not the real price, so they begin haggling.
Barbara Krakow, a dealer in Boston, said many galleries “raise prices for works in order to accommodate requests for discounts,” adding that “it all becomes a game. Some people seem more interested in the discount than in the artwork. Some people ask for discounts because their friend got one. The discount seems to have a meaning in itself.”
The game is hard to avoid. Gray said, “Our policy is that we don’t discount,” modifying that to claim they “only discount in special circumstances.” However, special circumstances seem to occur quite often at the gallery, perhaps half the time in the secondary market and 10%-15% in the primary market. “A lot of our colleagues give discounts, which exacerbates the problem,” he said, but there is not much that can be done about the practice.
Some art galleries at least claim to set limits. As the economy slows and prospective buyers worry more about making mistakes with money, price negotiations and the expectation that buyers deserve a discount will likely continue and probably increase.
In reference to the recession of the early 1990s, Arthur Dion said, “Things seemed to get out of control in terms of buyers’ expectations around discounts.” Dion, director emeritus of Gallery NAGA in Boston, added, “There was a sense of a price behind the price and that the stated prices weren’t real. We decided at that point that we wanted to establish that these were real prices, so we stopped allowing discounts.”
Think Outside the Box
For artists, especially those who sell their work completely or largely outside the gallery system, the decision about whether to lower their prices is fraught. When COVID-19 became widespread in 2020, forcing art galleries and other businesses in the U.S. to shut down and many individuals to stay home, painter Erin Ashley — like many artists around the country — knew sales of her work might be few and far between.
Buyers could not visit her studio or any of the art galleries that were exhibiting and selling her paintings, but she was not going to let a pandemic ruin her career. “You have to think outside of the box,” she said back then.
In an email blast to everyone on her extensive mailing list, she offered a half-off sale on all her smaller paintings — the ones ranging from 6" x 6" to 12" x 12" — through the end of that April.
She titled the sale “The Art of Social Distancing.” Buyers could get artwork normally priced between $150 and $400 for half the price. By mid-April, she had sold around a dozen pieces that way.
“I feel blessed to be able to sell any art, especially in these trying times,” she said at the time. Even though her larger works (ranging in size from 24" x 24" to 5' x 5' and selling for between $700 and $6,500) were not part of the sale, she included a “Make an Offer” option for them on her website. Buyers could either purchase a piece at the price listed or submit an offer to fit their budget. All offers were considered but not guaranteed.
She said the benefits of having periodic sales, during a pandemic or at any time, are that they make an occasion for buying a work of art and are “also a great way to remind people about my work.”
Ashley said she also reduced prices on her work during past times of economic uncertainty, like a recession or stock market panic, and buyers returned to the regular prices after the worst was over. “Even though I cut my prices, I still have to come up with amazing pieces that speak to the buyer. You can have all the sales you want, but it really comes down to the work in the end that gets the sale,” she said.
She was not concerned buyers would assume all her prices are forever negotiable up to 50%. Ashley was also not worried about what gallery owners representing her paintings might think about her price reductions, even when they were not able to actively promote sales of her work.
What Happens After a Crisis?
Other artists might be a bit more worried about the repercussions of lowering the prices of their artwork: Will prospective buyers have less money or feel like they have less to spend on art after a crisis passes? As the economy rebounds, will prospective buyers assume the prices artists put on their work are twice what they will take for pieces?
Then there’s the question about whether lowering prices or offering larger discounts hurts those artists more than it helps buyers, since most art collectors are people who are not facing financial hardship. Freebies for the people who least need them seem counterintuitive.
This has not been the experience for Melissa Lyons, a painter in Beaufort, South Carolina. She found art buyers responded strongly to indications artists needed help when everyone was in lockdown. “My business is doing better than ever,” Lyons said then, noting she let buyers know through Facebook and Instagram that her acrylic paintings were discounted 20%. “One return client bought five of my paintings, just because she wanted me to feel supported,” she said.
Lyons said selling her artwork directly rather than through a commercial art gallery affords her more flexibility in terms of setting prices. “I’m not paying a gallery a 50% commission, so I have up to 50% to play with if I want,” she said. With a 20% discount, she is still doing better than if she had sold her work at full price through a gallery.
Reducing prices is also not a new activity for her. “I have birthday sales and anniversary sales and holiday sales,” she said. They have all resulted in more purchases and more interest from past buyers and newer ones.
Develop a Discount Policy
As with many other choices artists make, there are benefits and drawbacks that need to be thought out before deciding to cut prices or offer discounts. Artists may find it wisest to develop a policy about discounts and stick with it.
Trying to negotiate on the fly with a prospective buyer whose career is negotiating down prices will likely not end well for artists who are generally better versed in art than in business.
An artist might choose not to allow discounts at all (the stated price is the actual price). As an alternative to a price reduction, other incentives may be offered, such as framing, packing, and shipping the artwork, which are costs the collector usually bears. Discounts can even be situational, such as 5% or 10% off for long-time buyers or those who purchase more than one piece at a time; 20% off for important collectors, such as public institutions; and up to 50% off if selling to a dealer. The largest challenge for artists may be to stand their ground, whatever they decide to do.
Believing artists will eventually cave in to demands for lower prices causes many dealers to frown on artists whom they represent also selling their work privately. If an artist sells his or her work for less, what incentive is there for a collector to buy from the dealer? “I don’t necessarily mind if one of my artists sells privately,” Krakow said, “as long as they don’t undercut me. They have to sell at the stated price.”
Gilbert Edelson, former administrative vice president and counsel of the Art Dealers Association of America, said that “artists offering discounts jeopardizes their relationship with their dealers, even if the discount and the final price is the same as what the collector would get at the gallery. Collectors talk to each other, ‘Don’t buy from the dealer. You’ll get a better price from the artist’ — this hurts the dealer and eventually the artist after the dealer decides he no longer wants to handle the artist because the artist has become his competitor.” In fact, many artists refer collectors to their dealers instead of selling directly.
When they are represented by a gallery, the price of a work of art is set by the artist in conjunction with the dealer; dealers do not tell artists what they will charge. Gray said some of the artists represented by his gallery — including Jim Dine and David Klamen — stipulate that no discounts are permitted.