Trade has always been the driver of exposition growth; as economies emerge so too expositions. And while 50% of the world’s exposition activities occur in the US, the rest of the world is catching up. This spells OPPORTUNITY.
World Bank economist Branko Milanovic in his book The Haves and the Have-Nots. notes that American’s represent 50% of the world’s richest 1%. Put another way, $34,000/per year is what it takes to be in the top 1% and the poorest 5% of Americans are better off financially than two-thirds of the entire world. Moreover, the emerging global middle class are able to purchase goods and services not considered possible a few short years ago. This drives commerce and the need for expositions to connect buyers and sellers.
So where do the emerging economies reside?
“Not surprisingly, China and India are seeing their economies grow quickly, and along with that growth, large portions of their populations are also becoming richer. But remember, the emerging world is starting from a very low base to begin with, so its middle class is just that — still emerging”, says Milanovic. “Another four million live in Germany. The rest are mainly scattered throughout Europe, Latin America and a few Asian countries. Statistically speaking, none live in Africa, China or India despite those being some of the most populous areas of the world.”
Turning Opportunity into Growth
I was reminded at the recent Exhibit Designers & Producers Conference (EDPA) that while the world is large, the network of exposition companies serving this expanding market is finite and relatively small. Heretofore, international guests attended the EDPA conference to network with exhibit agencies and create opportunities to serve clients in their respective GEO. Now US-based exhibit agencies are seeking the same thing in reverse as market-maturity is a reality here (Note: The EDPA study of the top 44 US exhibit agencies confirmed a decline in actual total revenues) which helps to explain why US exhibit agencies want and need to grow their global business; owners estimate their global exposition revenue will increase from 3 to 10% by 2014. S0 how do you do this?
Growth vs. Risk
The impediment to this expansion, however, centers around a business-model issue: low gross margins and net profit. Over the past decade net profit of the top exhibit agencies averaged a meager 3% making it financially impractical and risky to invest in major expansion. And while we’re staring at this global opportunity, the risk to “go alone” is too great and has far too many barriers of entry. Therefore, the path to global opportunity is Alliance Formation.
Alliance Formation
Airlines are capital/labor intensive businesses with seasonality and razor-thin profit margins. Sound familiar? Needing to serve global travelers, however, airlines forged Alliances , a collection of independent airlines operating cooperatively and collaboratively, that today are branded entities: Global Alliance, OneWorld etc. This model is also prevalent in the hotel industry where independent owner/operators formed “Leading Hotels of the World”. And in our industry we have OSPI, an alliance of Octonorm partners. My belief is that our industry is ripe for more “Alliance Formation”.
What does this look like?
There is an “informal” alliance of global exhibit agencies (The Global Exhibit Alliance) that is more of a lead and business sharing coalition than a truely integrated “alliance” where vision and best practices are shared in the spirit of providing exceptional service consistently around the globe. Alliances can present significant business advantages:
- Aggregating buying power
- Opportunity to serve multi-national corporations
- Trend-watching
- Technology sharing
- R&D development
And while there are challenges surrounding alliance formation, proper partner selection, alignment and focusing on the better good of the client will prevail. The opportunity is NOW. What do we do as an industry to capitalize?
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