Seeking International Exposure
Consignment Contract Closed - What shall I do?

Discount Question

Dear Harriete:

Everyone is hurting in this economy with high gas prices and sinking housing prices. I am being pressured by a gallery that exhibits my work to accept "special" customer discounts that bite into both the gallery's retail price and my wholesale price even though our contract spells out that discounts are not allowed, period. I strongly feel that discounting can be a slippery slope but do not want to lose the sales or this gallery as an outlet. What's an artist to do about discounts?

Hurting on the Bottom Line

Dear Hurting on the Bottom Line,

You are right, discounts are a slippery slope. In my opinion, the “On Sale/Discount” price reduction mentality of our consumer society is becoming pervasive. Shoppers are conditioned to buy from “low price” outlets with marked down prices. But it seems to me that a work of art should not be put in the same category as the mass produced goods in K-Mart.

Discounts begin with pricing—and pricing artwork is not a science. The artist and gallery agree on a “retail price.” Usually the “artist’s price” or wholesale is 50% of retail. The wholesale price covers the artist’s costs of production—primarily labor, materials, and overhead. The gallery’s share of the retail price covers the gallery’s costs of doing business—rent, promotion, salaries and insurance. It is the job of both the artist and the gallery to communicate the value of the artist’s work (by virtue of its uniqueness, craftsmanship, reputation, and quality), and this value is reflected in the retail price.

It has become increasingly common for galleries to offer discounts from their retail prices. At one time, the practice of giving discounts applied only to major works of art at very high prices (e.g. at tens of thousands of dollars and higher). Discounts were rarely offered, except to very important collectors. Requests for discounts have increased, and the prices at which buyers request them have dropped. Discounts of up to 10% are not unusual. It seems that increasingly, gallery retail prices are assumed to be negotiable, and some galleries expect artists to share the financial impact. Artwork selling at lower price points, under $250 retail, often has very little profit for the artist. Common sense makes discounting inappropriate for less expensive work.

Another consideration is the importance for an artist to maintain consistent pricing wherever their work is shown: galleries, museums, non-profit exhibition spaces, or even from their studios. Price consistency assures all galleries and retail spaces that they won’t be undercut. Price consistency establishes a predictable expectation of value for an artist’s work. Many collectors travel extensively, and they look at art and craft wherever they go. If collectors find different prices for similar pieces, they may feel cheated, and come to mistrust the artist’s work or the gallery’s prices.

Discounts can create disadvantages for both the artist and the gallery. The “Discounts” document in the Professional Guidelines provides a more thorough discussion. 

Here are two important points about discounts: 1) Discounts create uncertainty about the VALUE of the artwork. Discounting gives the message that the work was perhaps not worth its retail price and may diminish what customers are willing to pay for all of the other work in the gallery or from the artist. Thus, in the long run, discounting can erode value. By not discounting, a consistent value is maintained for the work. 2) Discounting creates the impression that art should be bargained for, like items sold by resellers in a flea market. Many craftspeople find this highly undignified.

You stated in your question that your contract does not allow discounts. If the gallery is offering discounts then I would recommend the following steps. 1) Write a clear, very polite letter to the gallery that clarifies the clause in the contract that specifies the no discount policy. Ask why they are offering a discount. State that your prices are based on your expenses plus a small profit and that you can not absorb a discount on the wholesale price. Ask about their justification for not following the contract, and why they needed to offer a discount. 2) Have more than one person read your letter (before sending it) to assure that it sounds polite and professional. Mail the letter. Follow up with a phone call.

Professional-guidelines-discounts-300 At this point:
1) The gallery either agrees to honor the contract that states no discount.
2) The artist decides to withdraw their work.
3) The gallery could decide to buy your work outright at full wholesale at which point their decision to discount the work is outside of a consignment contract because they own the work.
4) The artist and gallery decide on a compromise agreement and write a new contract.

This reply is based upon the Professional Guidelines document about “Discounts.

Respectfully, 

Harriete Estel Berman

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