Exhibition organisers do still have a choice of shell and electrics contractors today, but organisers are in no doubt of the shrinking pool of options.

In light of the merger of Stanco/Opex and Early Action Group (EAG) into the SO Group, organisers participating in Zing’s survey who wanted full-service delivery from a single supplier felt they had lost a third contender and now only had two options in the marketplace: Melville and SO Group.  As a result, contractors underneath the top two players have failed to secure a position as a viable third option.

Not surprisingly, Melville received the highest market awareness score of 88 per cent, followed by the former Stanco (83 per cent), Opex (60 per cent) and EAG (50 per cent). The report included SO Group and its former parts as it was important to look at awareness and usage of the separate companies in context alongside the consolidated group. Zing found awareness of the new branding was still low. Many respondents also referred to their supplier using the old names and were still dealing with the same people they did pre-merger.

According to Zing, the extreme weighting towards the two largest players is due to a belief that smaller contractors can’t provide the infrastructure, scale or back-office support necessary to support shows. When asked which shell and electrics contractors they had ever worked with, 73 per cent of respondents said Melville, and 68 per cent went with SO Group and its historic component companies.

The gap between the third most used contractor, Joe Manby, was significant: Just 17 per cent said they had used the Harrogate-based player, and interviews suggested Joe Manby wasn’t necessarily considered an option away from the Harrogate International Centre. Rounding off the list were Hirex (used by 11 per cent of organisers), Showlite and Dimension 8 (9 per cent apiece), The Index Group and Anchor Exhibitions (8 per cent apiece).

Organisers also showed a preference for the top two as their primary contractors: 41 per cent of organisers said they used Melville as their main contractor, while 33 per cent used the combined SO Group. Just 13 per cent of those surveyed claimed not to use a main contractor.

Zing Insights director Joe Walther compared the SO Group/Melville duopoly to the brand dominance of Coca-Cola and Pepsi in the soft drinks market.

“Melville could be considered Coke to SO Group’s Pepsi,” she claimed. “People have a favourite and they pretty much stick with it. Unless Melville or SO Group do something dramatically wrong, that’s unlikely to change very much.”

It’s not impossible, however. Walther pointed to Coca Cola’s 1985 New Coke launch as an example of a major marketing failure which threatened to turn loyal consumers away from the brand.

Margin squeeze

A popular explanation for consolidation in the contractor sector has been the recession. Less money spent being spent on shows by organisers, exhibitors and visitors, combined with rising energy charges, forced everyone to cut their costs and find more value for money. It was the contractors at the end of the chain that bore the brunt of the downturn.

The enhancement and maturity of shell scheme thanks to developments like Octanorm’s reusable aluminium system have also commoditised some of the services traditionally provided by a skilled exhibition contractor.

Organisers participating in Zing’s qualitative research said they recognised contractor margin decline over recent years was largely due to taking a commodity approach to purchasing. They took the blame for pushing contractors to reduce costs and admitted a significant proportion of the recession ‘hit’ had been taken by their suppliers.

“I think [contractors’] margins must have declined otherwise we wouldn’t have had the consolidation we’ve had,” one respondent said. Another admitted organisers had been ‘beating’ down contractors on price, and they were giving in, resulting in scratched and badly maintained kit.

“I don’t feel like I have a responsibility for contractor margins but I don’t feel like you should screw them,” said another organiser. “They should be treated more like partners than someone you can just get cheap kit from.”

The majority of organisers surveyed also stressed the importance of contractor relationships in event delivery.

“Achieving a partnership that works for both sides means that organisers are taking some responsibility for maintaining contractor margins, in most cases because they feel that reduced margins can lead to reduced quality delivery,” Zing stated in its report.

Sixty-four per cent of respondents to the survey said the cost of shell and electrics services had increased over the past five years. An increase in more sophisticated solutions were also opening up some avenues for improved margins. 

“Venue costs have remained high, whereas the contractors were amenable to helping us through a difficult time,” one respondent said. “During the recession, a lot of contractors froze their prices and for the last three years it has stayed static, whereas with the venues, a lot of prices have gone up.”
However, the antagonism between contractors and organisers was still prevalent when discussing margins.

“I’m always of the view that you don’t screw down your supplier but at the same time you don’t want them creaming off too much money because you’ve got to make money as well,” one respondent said.

“I don’t care, it’s not my business. Do they offer me the right service? Can they deliver? Whether they make a million or £0.05 is irrelevant to me,” said another.

Supplier considerations

What is perhaps surprising is that price isn’t always the sole thing organisers focus on. Although pricing has often been seen as the overriding factor in how organisers choose their suppliers, Zing found quality of service actually pipped cost at the top of the list of decision-making criteria.

Following service quality and price was the quality of stock and people and skills. To a lesser but still important extent were flexibility, organisational stability, reputation and quantity of stock. The least significant criteria reported by organisers was the size of a contractor’s business and their physical location.

Nevertheless, market consolidation and the recession have led to a more cautious approach. Organisers touted credit checks, financial security and contractors with sufficient organisational infrastructure and back-office support as musts. In particular, web-based ordering and personnel could be the difference between an organiser choosing one contractor over another.

Once they got past core functions and operational reliability, organisers said they were increasingly looking for creativity and innovation.

One organiser said it chose on design, innovation and ability to deliver balanced with price.

“Spend has increased as we are doing more than just simply building a stand; we are adding to the content and inspiration of our event,” one organiser told Zing. “Our spend is increasing as we want to make ours a must-attend event rather than just being about a stand.”

Another way organisers are seeking to address the balance of price and cost is by extending contract terms. Traditionally, contracts have been awarded on an annual basis, yet those responding to Zing’s survey said most now choose suppliers for two or three years.

“Many organisers now view relationships as long-term ‘partnerships’ which needs nurturing,” Zing’s Jo Walther told EN. “Once a strong relationship of quality delivery is established, it’s worthwhile maintaining that partnership.”

Only 7 per cent of organisers said they were likely or very likely to change their shell and electrics supplier when the contract ends.

Future engagement

Change will remain the only constant over the next three to five years, organisers said. According to Zing’s research, 53 per cent of organisers expect to see contractors raising prices in the next three to five years. When asked specifically about pricing, 79 per cent forecast a prise rise on shell and electrics.

Innovation in how stands and exhibitions appear visually remains a critical factor given organisers are striving to devise better content, features and interactivity to keep visitors coming back to their shows. Forty-one per cent highlighted technology as a major influencer on contractor services in the next three to five years, while 45 per cent believed more value-added offers are on the cards.

“Delivering creative solutions for feature build or alternative stand-build solutions by moving away from formulaic shell scheme represents a significant opportunity for contractors,” Zing stated.
In addition, creating attractive content for sponsors and visitors with increasingly sophisticated demands is important.

“Contractors need to understand better the organiser’s focus on quality,  creativity and innovation, which is driven by the need to develop content-rich events to engage their audiences,” Walther said. “Many organisers are looking outside of the standard contractor marketplace to achieve creativity and innovation, choosing instead experiential agencies and festival content providers.”

A major criticism is that small contractors simply don’t make clear their comprehensive offerings, she continued. SO Group was perceived to have the most comprehensive services including shell, electrics, carpet, registration, security, floral, furniture, signage, lifting, logistics, show layout planning, feature design, innovation, AV exhibitor portals, visual aids, CRM and research with 8.53 out of 10. This was closely followed by Melville (8.07).

In contrast, the remaining players scored between 4.12 (Moyne) and 5.35 (Index Group).

“Smaller contractors are often viewed as one generic entity and are not being considered individually against their own merits,” Walther said. “Organisers want to support them but need them to be more proactive and market effectively their full offering and abilities; given recent market instability, organisers also need reassurance that smaller contractors have the ability to fulfil contracts and are financially secure.”

While innovation creates a new way for organisers and contractors to form stronger relationships, smaller contractors still have to work hard to gain visibility against the two giants, Melville and SO Group. 

The research found 64 per cent of organisers agreed having two major suppliers was unacceptable and recognised they had a responsibility to support newcomers or existing suppliers.

“Many organisers stated that they would be prepared to support alternative, existing suppliers if those suppliers ‘upped their game’ and communicated their services more effectively,” Zing said.

Organising greatness

The challenge for all contractors will be how to demonstrate their abilities to an increasingly mature, risk-adverse and rapidly consolidating organiser market.

As one organiser pointed out, it’s creativity and innovation that will set one show apart from another long-term.

“I think exhibition organisers have fallen into the same arrogant and lackadaisical way of putting shows together,” the organiser claimed. “I’m looking forward to a new generation of exhibition organisers coming through.”

Any comments? Email sarah@mashmedia.net