Abstract
This paper aims to analyse the development of commercialgalleries in the 798 art district in Beijing, and it explains the status of thegalleries in the district. This research includes the quantitative data and explainsthe operating range of the galleries. This paper reveals the internal andexternal problems that hinder the development of commercial galleries to someextent, such as financial issues, operating models, public interest, policyproblems and the impact of foreign galleries.Italso recommends that the galleries could optimize operational model andactively cooperate with the government, large enterprises and universities inorder to addressthe problems.
Keywords:commercial gallery, the 798art district, arts management, cultural industry, artist
Introduction
In terms of the reform of the cultural industry system,gallery industry is defined as a core constitution of cultural industry (Cultural and industry related classification,2004). Furthermore, the number of commercial galleries increases significantlysince 2004. However, the development of the galleries encounters a series ofissues. It is internationally accepted that commercial galleries as the primarymarket of artworks, which calculates the economic value of artworks. In amutual beneficial model, commercial galleries are able to sell artworks with ahigh price. Meanwhile, the artists’ reputation could be well promoted in thiscase. Although the number of the galleries is increasing, the educational levelof the buyers who know nothing about contemporary arts is not ideal. It seemsthat the galleries have to pay attention to illustrate the artworks they soldpatiently. To some extent, the galleries in China have the same function incomparison with museums.
Beijing as the capital of China is a place that wasinfluenced and controlled effectively by the central government policy. In manycases, when a new policy is formulated, some local governments may not haveenough resources to practice this policy. Conversely, the practice process inBeijing is less likely to encounter this problem. As a municipal government,Beijing government has more cultural and economic resources to practice thepolicy and the government could negotiate with the central government directlyand effectively. In addition, Beijing as a city becomes a case study ininvestigating the artwork market. In the last 20 years, with the advent of theforeign-invested galleries in Beijing, there also appear a number of thegalleries with international management infrastructure.
This is a field worth investigating because the scale of thegallery industry is huge and problematic. Since the central government allowedthe private capital to invest in cultural industry (2004), some large companiesand individual investors started to invest in this field. In this case, thelarge companies prefer to regard their investment of galleries as the propagandaof their reputation and they are less likely to care about the financialbenefits they make. Correspondingly, the individual investments in galleriesare based on personal interests of arts. The individual investors may not havea long-term strategy and clear objectives in operation.
The case study of the 798 art district could get a glance ofthe development of gallery industry in China to some extent because thegalleries in other regions always copy the mature experience from the district.Furthermore, as a place that has lots of the students from other parts ofChina, the graduates prefer to work in Beijing. In this context, thisinvestigation could explore the situation of young practitioners.
1.0The status of commercial galleries inthe 798 art district
The 798 art district as a typical representation of artistvillage has aroused international attention since late 1990s. It is formed by agroup of professional freelance artists. In terms of a large number of investorsplan to open galleries in this place, it has becomethe
famous gallery areaof contemporary art in Beijing. As the commercialgallery is an important constitution of the 798 art district,the districtis an huge art primary market.Thesegalleries hold various themes of art exhibition that provide a chance todisplay the artworks made by young artists.
According to Beijing Architectural Cultural Week in 2004(Cui, 2004), the 798 art district is listed as the third of ‘Top tenarchitectural culture of Beijing’ and can be regarded as the CBD of art inBeijing. Nowadays, the art district is an accumulation area of studios,galleries, shops and cafes rather than as a gathering place of artists. It is amulti-functional art district of Chinese contemporary art. In addition, thedeveloping model in this area is as a part of cultural tourism industry.
2.0The development of commercialgalleries
2.1 The scale ofcommercial galleries
The 798 art district is located in Chao Yang District, Beijingand covers a construction area of 230,000 square meters. According tothe survey of the 798 art district by Art
Market Research Centre in 2009(Gao 2006), the number of the galleriesreduced from over 250 in 2008 to more than 180 because of the financial crisis.However, there were only 138 commercial galleries in the art district in 2012(Luo 2012). Most of the galleries cover an area between 200-1000 square meters.Thus, the smallest gallery covers 30 square meters and only displays small-scaleartworks. There are 15 galleries over 1000 square meters, which occupies 11% ofall galleries.
In addition, the galleries that employ less than 10 staff occupy90% of the total galleries. Most of the galleries have three to eight staff,and there are only seven galleries having more than 20 employees.
2.2Theoperating range of commercial
galleries
Chinese modern and contemporary art is the mainly operating direction ofthe galleries in the 798 art district. Thus,there are
also ink (Chinese brush work) galleries in recent years. However, with the increaseof reputation and the public attention, the art district is becoming morecommercialized. It seems that the relationship between artistic ecology andecosystem is changing.
3.0The problems of the development ofcommercial galleries
3.1The internal problems of commercialgalleries
3.1.1 Financial issue
Private capital injection is the major source of investment for mostdomestic galleries. In terms of the limited budgets,the objectives and operation model are restricted by this financing model.However, in Western countries, governments encourage large
enterprises to invest in arts and cultural industry through the policy of tax exemption.
Manygalleries oversea cooperate
with large enterprises so as to diversify financing model. Therefore,the financial condition of the investor would
affect the financial condition of the galleries in the 798 art district
directly.
In addition, the main issue of the art district is thatthe increase ofrent feecompelssomegalleries to be closed in the last two years. In the early stages of the art districtin which rental fee is cheap and acceptable, the artists were willing to liveand work here. The rent rose from 0.6 RMB (0.1 AUD) per square metre per day in2002 to 1.5-2.4 RMB (0.3-0.4 AUD) per square metre per day in 2005. However, theaverage price of rent was about 6 RMB (1 AUD) per square metre per in 2007(Liu,2011). As the rental fee is rising rapidly, some artists and galleries areunable to pay for the increasing costs in the 798 art district directly. Forinstance, an area of 300 square metres, Hanmo Art Gallery moved out the artdistrict in August 2012. Lin (Director of Hanmo Art Gallery, 2013) said thatthe gallery had been relatively stable development from the perspective of themanagement on the gallery, but the rising rent fee has brought a pressure tothe gallery. In this context, although the 798 art
district is becoming famous and commercialized, it may not beneficial for the diversificationof the galleries for a long term.
3.1.2The relationship with artists
Chinese
artists prefer to sell their artworks by themselvesand cannot accept business model in which they must give half or evenmore benefits to the galleries, when they signproxy
mechanismwith the galleries. Therefore, they are more likely todirectly trade with the people who are really interested in their artworks. Intheir opinions, this is not only convenient to build trading relationship for along run between the artists and the buyers, butalso
beneficial to maximize their benefits separately. Gao (2013) claims that60 percentages of artworks are traded informally between artists and collectorsin Chinese art market. In this context, it is difficult to promote the artists’reputation. However, the traditional trade model of artworks in the 798 artdistrict has changed to a mature model that the galleries in the district cansigntheexclusive agency agreement with artists andobtain a percentage of selling price. It is an important factor to determinewhether the management of the galleries is mature.The
relationship between the galleries and artists is a formal infrastructure in
this case. Other galleries in other parts of China could learn that to build a
formal relationship with artists is a good method for a long run. Conversely, the
informal relationship between the galleries and artists mayresult inan economic dispute.
3.1.3A lack of operational experience
At the beginning stage of gallery industry, the operational skills andmanagement infrastructure of the galleries are not mature in the 798 artdistrict. They are lack of specific marketing planning and reasonabledevelopment strategy, which hinders the development of the galleries to someextent, such as Bai Ya Xuan Gallery. It was located next to the Art Museum ofChina in Beijing and mainly sells the reproduction of Guanzhong Wu’s prints inearly stage. It established an art centre in the 798 Art District in 2010.However, the unreasonable pricingand blind expansion
of the gallery result in an operating loss, and then the art centre had to
close in 2013. In this case, inappropriate operational model is the main reason
to restrict the profitability of Bai Ya Xuan gallery.Furthermore, some galleries learn the successfulmanagement patterns from foreign galleries, but these business models may not besuitable for Chinese art market. The galleries should consider the differentmarket environment and find the effective development strategy for the market. Thispoint is also essential to be aroused the attention of the galleries.
3.2 The external problemsof commercial galleries
3.2.1Publicinterests
More than 500,000 peoplevisited the 798 art district in 2005 (the proportion of foreign and domesticvisitors is 4:6), then the visitors reached over millions in 2006 (The development research of Beijing cultural
creative industry cluster, 2008). A large number of visitors contribute tothe development of relevant industries, such as catering institutions,bookstores or art shops, which boosts a complete industrial chain for the artdistrict. However, the galleries are in a state of losses in a long term.According toInvestigation Report of the
798 Art District(2012), 75.31% of visitors are visiting the art districtspecially. Because the visitors are more considering about the visitingexperiences rather than the artworks, the managers changed their strategy tooperate the galleries. In this case, the gallery in the district is more like atourism industry rather than primary market.
In addition, students andoffice staff are the main component of the visitors, which occupies 65.43% and41.98%. They range in age between 19 and 35 years old and incomes are not high(71.6% of visitors’ income is below 3000RMB monthly (600 AUD)). Consequently,they prefer to spend money on dining rather than purchasing artworks ingalleries. Selling paintings is the main source of income for the gallery, but moststudents are not potential clients. In this context, although young visitors canpromote the development of peripheral industry of the district, they cannotcontribute to the increase of artwork turnover directly because their limitedconsumption level.
3.2.2 Preferential policies of arts investment
In order to improve awareness and attract more famous galleries or art
institutions, property owners of the 798 art district provided rent
preferential policy few years ago. For example, Ullens Centre for Contemporary
Art occupies a large space, but its rental fee is the most favorable price in
the district. This is an effective method to promote thenumber of well-knowngalleries in the art district in a short time. However, the art district onlyrelies on rent preferential policy without the sponsorship of foundation or taxpreferential policies of arts in a long run, it is verified that giving adiscount of the renting price is not an effective way to attract foreigncapital to invest in the district.
In addition, this policyhinders the development of small galleries with strength and energy in a longrun. Due to huge rent, they have to move out the district. Nevertheless, smallgalleries are a major factor to maintain artistic vitality for the districtbecause of large numbers of small galleries (the study of small galleries inthe 798 art district, 2012). In spite of artworks have the certain brand effect,they differ from ordinary commodities because an unknown artist could alsocreate excellent artworks. Therefore, the managers of the district shouldrecognize that small galleries contribute to the diversity of arts.
3.2.3 Influence fromforeign galleries
Takashi Yamamoto (2008) points out that China is bound tobecome the most important area in Asian art market. It is also the reason whymany famous foreign gallerieschoose to enter the 798
art district. For instance, Tokyo Gallery entered in 2002, Ullens Centerfor Contemporary Art entered in 2007. There was a growing tendency in thenumber of foreign galleries, increased from 27 in 2008 to 43 (Zhao, 2009).However, during the same period, the number of domestic galleries decreased as previousmentioned. Meanwhile, the number of arts institutions has been accounted forabout 15% of the 798 art institutions recently, but these institutions havemore influences in the 798 district. (The entering and leaving of foreigngalleries in the 798 art district, 2012).
Although the entry of foreign galleries makes the districtmore internationalized, they may compete with domestic galleries to some extentas well. The professional operation model and excellent agency system is themajor advantages of foreign galleries, which makes artists prefer to cooperatewith them. Furthermore, foreign galleries can integrate and target into theinternational market more easily. They have enough budgets to publish monthlymagazine, which can effectively promote their artworks for public. In thiscontext, the operational model of domestic gallery has to face the challenges.
4.0 Some advice toaddress the problems in the 798 art district
4.1 Governmental duties
4.1.1 Government supportthrough policy
Beijing MunicipalGovernment already has implemented policies to develop surrounding urbanplanning of the district in 2008, which establishes the municipal culturalcreative industry centralized area (the development model of the 798 artdistrict and its four period of development, 2013). However, the governmentcould not only develop a zone with artistic feature, but also consider itsaccessibility for public. For instance, the government could develop publictransit systems in order to improve convenience for people who visit thedistrict.
In addition, governmentcould encourage the universities to cooperate with the district through thepolicies. For example, the universities could employ the directors of thegalleries in the 798 art district as teachers for a short term so that the artstudents could have the chances to learn more practical experience. On theother hand, these classes could promote the reputation of the galleries andattract students’ attention to visit the 798 art district. In other words, buildinga relationship with the universities could encourage more student visitors tosome extent. Meanwhile, the galleries could provide voluntary serviceopportunities for the selected students. This is not only improving students’hand-on experience, but also getting precious human resources for thegalleries.
4.1.2Management
committee of the 798 art districtcould provide astandard and regulate the market
It is occasionally that the 798 art districtdevelop rapidly (Chen, 2011). Non-cultural industry institutions get morebenefit through sell commodity in a short term, but this may not produce a maturecultural industry in a long run. In this case, the management committee may nothave the detailed plan and strategy to help the development of culturalindustry directly. The committee could make a clear strategy in order to balancethe development of the galleries and peripheral industry because the gallery isthe main cultural industrial part. The committee could specifically stipulate whatpercentage of area should be used in the artistic creation directly and ensurethe artistic quality of the galleries. Moreover, the committee may set uppreferential policies for the galleries with large volume of visitor traffic,such as providing the best location in the 798 art district, propaganda thegalleries on official website.
Furthermore, the committee could cooperatewith the government to deal with the rent issues of the district, which reducesthe pressure of rent for the galleries. Due to commercial purposes, the landlease department of the district want get more benefits from raising the rents.The government could set up the price standard of land lease in order toregulate the market. Thus, the government could provide financial subsidies forthe district in return, which ensures the benefit of the whole art district.
4.2 Operational modelsof commercial galleries
4.2.1 Attract publicattention through new technology
Establishing a well organized website is asocial media platform to understand condition of galleries for public. Maintainaccurate information of galleries, upload decent-quality images of artworks andinclude as much relating to exhibition or artists text as possibility. To buildan online database of the artworks can make the information more accessible andeasy to search. The attention of galleries can be more easily and quicklybrowsed by potential partnership, artists or students through the website. Theartists also are able to obtain through up-to-date information relevant thegalleries, which enhance cooperation opportunities between them. Instead ofdepending on random radio or TV commercials, people can simply browse the websitewhenever they like. In addition, the website is an efficient low-costadvertising.
The galleries could also design smartphoneapps, which is convenient for people to know them. An app may offer enhancedcontent and a different, more interactive engagement with the artworks or theartists of the galleries. The apps could automatic prompt users about therecent exhibitions or information of the galleries, which attracts publicattention to some extent.
4.2.2 Target the publicinterests
The galleries could attract more people tovisit through selling craft, art brochure in order to stimulate the potentialcustomers. In fact, the lack of the knowledge is possibly the main reason ofthat people are not interested in the contemporary art. In this context, thegalleries could print brochures or leaflets relating to their artworks so as toenhance the public understanding of contemporary art.
In addition, the galleries could cooperatewith universities formally as well, which expands the scope of the industry.The cooperation class between the galleries and universities are mutuallybeneficial. The galleries can purchase of students’ artworks from these classesand sell them in the galleries. These artworks with inexpensive price areacceptable. Meanwhile, this is a platform to motivate students learn practicalexperience as an art practitioner. Furthermore, the galleries could commissionsome works to students through the department of universities, such asdesigning art brochure, postcard or stationery. This helps to reduce spendingof the galleries as well.
4.3 Partnership
4.3.1 Strengthen therelationship among commercial galleries
The galleries can establish cooperationprojects with foreign galleries to promote the reputation of galleries.Professional operating model of foreign galleries should be learned by domesticgalleries. The galleries should clearly map their position and look for anappropriate partner. Through cooperating art exhibition or training courseswith foreign galleries, domestic galleries could reform their operating modeldirectly and learn an effective way to train professional management talents. Moreover,to cooperate with well-known foreign galleries could enhance internationalreputation of the galleries.
The Chinese art market can learn from foreign
galleries to establish the gallery industry association. For example, the
official website of Art Dealers Association of America (ADAA) introduces in
more detail about the function of art dealers and the ways of purchase and sell
artworks through gallerists, which provides a reliable and comprehensive
services for potential investors. The sort of this galley association can
supervise andguide the
gallery industry even the whole art market.
4.3.2Commercial galleries can cooperatewith large enterprises
To diversify the financial model could helpthe commercial galleries survive in stressful environment. In fact, thefinancial model of the commercial galleries is very simple. It is the reasonthat some small galleries only exist for a short time. The second reason isthat the large enterprises are main clients of the artworks with high price. Ifthe cooperation system could be founded, it is mutual beneficial for both ofthe galleries and the enterprises. To be specific, the galleries are willing tobe commissioned by their cooperated enterprises to some extent. In addition, itis widely accepted that corporate culture is an essential constitution inpromoting the reputation of the large enterprises. In this case, it seems thatsome enterprises also intend to cooperate with the galleries.
Banking, hotel or club, these industries havedirect necessities of the paintings or sculptures. The commercial galleriescould provide the consultant service for these clients before or after theybuying artworks. The galleries could recommend the artworks which are morelikely to map their cooperates culture for these clients. For instance, thehotel prefers to hang on landscape painting on the wall.
Conclusion
The 798 artdistrict has transformed into a multi-functional cultural industry centralizedarea of Chinese contemporary art, which contains the large number of commercialgalleries. As the primary market, the galleries are the cornerstones of the artmarket. However, the 798 art district has encountered a series of issues duringthe rapid increasing period. The financial issue, the relationship withartists, a lack of the operational skills and management infrastructure are theinternal factors to hinder the development of the galleries. Meanwhile, itseems that public interests, preferential policies of arts investment and foreigngalleries are the external problems to impede the development of the galleries.
In this
context, the article suggests that, firstly, Beijing Municipal Government could
support through policy in order to establish a prefect environment for the
public. Management committee of the 798 art district could regulate the market
through the establishment of standards. In addition, the galleries should enhance
their marketing skills that target the public interests and attract their
attention by new interactive technology. Lastly, the galleries could cooperate
with large enterprises and foreign galleries to develop their reputation
effectively.Asthe famous art district, the
district is comparatively successful that could bring the management experience
for other regions of China. However, it still need to revise their strategy to
adapt the changing environment and borrow experiencesfrom the Westerngalleries based on their circumstance.
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