Saturday, 26 July 2014
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Profits are down in design – but is this just a phase we’re going through?

Taking the temperature of the design industry – gauging its optimism or pessimism - is always an interesting exercise, and one that often results in a significantly rosier outlook than you might expect.

Angus

The design sector, of course, has always relied on having a sense of positivity, and this remains in spite of an ongoing financial crisis now rumbling on into its fifth year.

But what’s interesting about the current situation is evidence – both empirical and anecdotal – that the design industry is growing both in size and positivity, and that this growth is, in the short-term, affecting its profitability.

A recent report from Kingston Smith W1 suggests that headcounts and employment costs at design consultancies are rising, as they take on more staff, but that this is affecting profitability as revenues aren’t rising to match.

While this may be a problem in the short-term, it does suggest a strong wave of hope in the industry. Taking on more permanent staff is not a decision taken lightly by design consultancies, who have, over the uncertainty of the past few years, become heavily reliant on freelance cover.

Meanwhile Elmwood chairman Jonathan Sands, among those who gave us their opinion on attitudes in the industry in today’s Voxpop, broadens this expansion out.

Design – as he points out – is now a global industry. And for most large independent consultants the only option is to invest in chasing international clients and, beyond that, to open offices around the world.

This is clearly an expensive business, and as Sands points out, one that can have a hugely negative effect on short-term profitability – but can lead to significant long-term rewards: ‘plenty of opportunity but it will come at a cost to short-term profit’.

So there is a growing suggestion that despite the seeming doom and gloom in the figures, there is a growing positivity and expansion in the design industry, one that in the coming months should, we hope, lead to rich rewards.

Readers' comments (2)

  • There are profits to be made in the short term for agencies venturing into international markets. The key ingredient is adaptability.

    'Acclimatizing' the business model for the local market (everything from staffing to fee structures) and avoiding a 'one price fits all' approach is the one step to reaping potential profitability gains in the short term. And in the long-term, you'd hope!

    Time for agencies to get clever. There's plenty of fish in the sea ..

    Michael Tucker
    Senior Account Manager
    Eleven Creative Strategy, Dubai (UAE)

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  • Given our agency name… this article immediately caught our attention with great interest! As it's written primary from an agency's perspective, I'd love to share our view from an industry perspective, having lead to the start of Positivity Branding last year.

    The design industry has fundamentally changed. Speed and ability to adapt are key drivers for clients. It pushes them to search the highest quality for project-based budgets. Secondly, it implies more short-tracked and highly focused projects. The challenge here is not to weaken over time and to deliver great results for each and every project, without loosing track of your clients’ ambitions on the longer term. So even small projects need directors level handling. In essence, we are a partnership of one consultant and one creative and its all we need for small and midsize projects. For big projects, we remain in the driver seat but call upon our tightly knit network of copywriters, illustrators, photographers, web developers and artworkers. It is this compact set up that keeps us highly flexible and responsive, with no overhead. Actual proof: along side the rebranding of Amsterdam's biggest brewery, we currently also handle a big global brand identity project from our office in Amsterdam.

    Concluding, positivity is a must for sure but without responsive positive results, it means very little.

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