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Monday, April 2, 2012

Getting conned out of cash - gallery scam

Here is an interesting scam from my pal Stephen regarding galleries and markups:
I made a little discovery which I would like to share with you, which you can then pass on. I am arithmetically challenged, as are many creative people, and I always assumed galleries weren't out to screw me. I was wrong. Apart from some of the other tricks art dealers pull, there is a subtle one that can slip by unnoticed, and it always leaves the artist out of pocket. The culprit is the mark up structure used by some galleries.
An artist in the fortunate position of being able to sell a work with immediate payment, has no concern about what happens to the work thereafter. The gallery can mark it up any way it any it likes. It can add on as much as 100% or as little as 2%, or even throw it on a bonfire.  The artist has been paid, end of story.
However, those poor souls who leave work on consignment are the ones at risk. The scam works like this:
The artist wants R1000 for his piece. The gallery agrees to carry it on consignment, and puts on a mark up of - for example - 30% This means the piece will now have a ticket price of R1300.

 Some time later, the piece is sold. The gallery claims it's 30% of the ticket price of R1300.  And here is where it goes a bit wobbly. 30% of R1300 is R390. Subtract the R390 from the ticket price of R1300, and the artist is getting only R910. Not the R1000 they were originally asking for. Some galleries do this through ignorance, some do it intentionally. It's easy to be caught. For purposes of my example, I used relatively small sums of money. But if the artist wants R10 000 for a piece, and the above flawed system is used with a mark up of say 60%, you get the followng result:

 ARTISTS PRICE = R10 000

GALLERY 60% MARK UP = R6 000

TOTAL TICKET PRICE= R16 000

 Then, when the piece is sold, it is incorrectly worked back as follows:

 TOTAL TICKET PRICE = R16 000

GALLERY 60% "MARK UP" = R9600

ARTIST RECEIVES = R6400

 This is R3600 LESS THAN IS DUE TO THE ARTIST!

 The correct way to work the percentage back is as follows:

 TOTAL TICKET PRICE = R16 000

HOW GALLERY SHOULD WORK OUT 60% "MARK UP" : Ticket price R16 000 divided by 1.6

ARTIST RECEIVES = R1000

This is the same method used by SARS to calculate VAT
On top of this, the gallery might make all sorts of deals (10% off for cash to the gallery's client, for example) which my little brain simply can't even begin to work out. 
Have you experienced this? I have, and once I allowed myself to accept this kind of warped arithmetic, I couldn't escape the "bullying" tactics of the gallery.
Hope this is useful to you.

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