The exact operating result for the most recently reported fiscal year landed at minus 254,000 Swedish krona. Turnover for the same period amounted to 3.6 million Swedish krona. It is with this financial foundation that the e-commerce company has now secured 2 million Swedish krona in fresh capital.
Exactly how much the company is valued at in the new round, however, management chooses to keep to themselves.
We are not disclosing the valuation. What we can say is that it is at levels that both we and the investors are satisfied with ahead of the next phase,” says Fredrik Sologub.
Selling original art online is a business model that places specific demands on how the products are presented. For Artist Arena, it is not a pure e-commerce operation, but rather an interaction between the digital platform and physical exhibitions.
Digital and physical go hand in hand
The company does not share exact sales volumes for the past year. However, management notes that the spring brought an uplift for the business.
By combining its digital channels with physical events, the platform managed to sell 180 original works over a period of eight weeks. The distribution between sales channels shows that the physical presence carries a heavy load, even though e-commerce accounts for a large part of the revenue.
Approximately 40 percent comes from the platform and the rest from physical sales. The two are closely linked, however, many discover the art digitally and complete the purchase in the room, or vice versa,” says Fredrik Sologub.
To manage this combination of gallery operations and technology development, a working group is required that can balance both directions. Now that new capital has been received, resources are being redirected to develop the digital solutions of the future for art buyers.
Half the team builds new AI technology
The Artist Arena workforce currently consists of six people. In the future, half of the group will work on the physical aspects of the business, including contact with creators and exhibition planning.
The other half of the company will, from this autumn, focus all its efforts on designing and building the platform. One of the projects is a function that the company calls an "Art Advisor," which is based on AI.
The system is designed to interpret customer wishes through text or speech, and then produce suitable alternatives from the range.
You could describe it as "text to art" or "talk to art." The customer puts into words what they are looking for, it could be a feeling, a color scale or art for a particular room, and gets help finding matching original works. Without having to know art terms or exactly what style you like,” says Fredrik Sologub.
The company emphasizes, however, that the technology is not used to create images. The function only acts as a search tool to match buyers with paintings created by humans.
For us, text to art means discovering existing original art by living artists, never generating it. AI helps the customer find the art, the artists create it,” says the CEO and continues:
The goal is for customers to be able to come to Artist Arena and find art they love within five minutes, ready to be purchased directly on the site. Our AI-powered Art Advisor is being developed to make the art purchase more personal, inspiring and easy. The goal is to help the customer discover new art and feel more confident in their choice.
In addition to the uncertainty surrounding art terms, the industry is grappling with another obstacle. Not being able to see how a painting actually looks on the wall creates an uncertainty that often makes customers hesitate to complete the purchase.
Aims to increase buyer confidence
According to data from players in the industry, a majority of customers abandon their purchases because they have difficulty imagining the product in their own home. To address this, Artist Arena is building tools where the customer can see the art virtually placed in their own home.
The concept is called "Art In Home" and should make it easier for customers to dare to buy art online. At the same time, the aim is to give the platform's artists better tools to sell their works.
With visualization in the home environment and personal guidance, we want to make the path from discovery to purchase easier. The customer should be able to easily find relevant original works, get a clear and realistic feel for them in their own room and feel more confident in their choice. At the same time, we are developing tools that help artists present and sell their works, so that more time can be spent on creation,” says Fredrik Sologub.
How this will numerically affect the company's conversion rate remains to be seen.
We expect that a better customer experience and better support for the artists will contribute to higher conversion. However, we want to measure exactly how much on our own platform before stating a percentage.
In addition to sales to private individuals, the company has also launched an offering towards corporate customers. This B2B solution has become a new revenue stream.
At the same time, the main focus going forward is more on technology than on maximizing profits in the short term.
Investing in growth instead of profit
Which specific large companies the e-commerce company is currently furnishing offices for is not something management wants to communicate today.
Regarding the path to a positive result for an entire year, the company chooses to prioritize the platform. Management points out that the business model has already been tested during individual quarters.
Given that our model has already shown profitability in a handful of quarters, we have proven that we can achieve profitability with our model. Going forward, we are investing in the platform, technology and growth,” says Fredrik Sologub and concludes:
It is where the main focus lies, rather than profitability on a full-year basis in the short term. At a certain scale, we see strong synergies for our model, and expect to be able to have good profitability within a couple of years.