The graphic design sector has enjoyed a strong period thanks to the growth in web design work, but the economic downturn is likely to see marketing and IT budgets slashed.
The continued growth in the online sector and Australia’s strong economic growth have meant good times for the graphic design sector.
IBISWorld estimates that this industry will grow by 4.3% over the five year period to 2008-09, largely on the back of solid robust economic growth between 2004 and 2007.
A decrease in advertising and packing caused by the economic slowdown in the US slowed revenue growth in 2006-07, and revenue is expected to contract slightly in 2008-09 as the financial crisis hits demand for industry services.
There are two main barriers to future industry growth.
First, the sector is largely reliant on overall advertising and promotional budgets and expenditures by clients, which are under great pressure as the downturn bites. Second, the industry is being hurt by the development of easier forms of packaged design software that can be used by people who are not trained graphic designers.
When internet advertising began to grab a substantial share of the media market, the industry was flooded with small design firms, often sole traders, looking to exploit new technology for advantage. The proliferation of small companies, which tend to earn less, has led to a drop in the average wage, as employment growth has outstripped wages increases. Larger firms are now starting to buy up many of these small companies.
IBISWorld forecasts that this industry will grow by 3.6% over the five year period to 2013-14. Growth will be insignificant in 2009-10 as the effects of the financial crisis continue to hurt demand for industry services. However, over the remaining years of the outlook period, a broad-based economic recovery will return the industry to strong growth.
Opportunities that are expected to be seized include the continuing move by clients towards use of more cost effective, targeted and direct forms of promotional expenditure. Continuing strong growth in web-based advertising and products will also give this industry a boost.
On the supply side, technology will continue to improve the quality and reduce the production cost of design work. This will lead to higher profits and lower the need for large staff numbers, though employment is still expected to grow along with revenue.
On the other hand, improving technology will lower the barriers of entry to the industry, potentially creating more competition from low-cost desktop publishers. Another challenge to the industry is the evident oversupply of graphics courses and graduates in relation to industry demand and growth.
Key success factors for operators in the industry
- Access to niche markets. In this industry there are still opportunities for people with creative talent to find a niche to operate in and be able to keep up with current technologies that will affect this industry, and be able to be specialised in key areas/industries.
- Marketing of differentiated products. To develop differentiated products and images for clients.
- Having a loyal customer base. To develop over time a base of repeat clients.
- Use of production techniques that add value to base product(s). To develop value-added services for clients.
- Optimum capacity utilisation. To ensure that staff spend the maximum time possible on chargeable hours to client work.
- Access to the latest available and most efficient technology and techniques. To have access to suitable industry and office technology, both hardware and software.
- Highly trained workforce. To have creative, well trained and qualified staff.
- Access to highly skilled workforce. To have in-house, or at least access to people/companies with specialist skills.
- Having a good technical knowledge of the product. To have or develop a thorough understanding of a client, their brands and their clients in the context of changes occurring in the market place.
- Effective quality control. To have strict quality control procedures.
- Having a good reputation. To have the ability to ensure a professional image.
- Well developed internal processes. To have the ability to monitor time and costs spent on projects and evaluate these against budget.
- Effective product promotion. To market & promote the company effectively.
- Ability to effectively communicate and negotiate. To prepare professional client proposals & have strong presentation skills.
- Production of premium goods/services. To provide quality service to clients (to continually deliver quality products to clients both within time and budget).
- Ability to quickly adopt new technology. Within this industry there are still opportunities for persons with creative talent, who can find a niche to operate in and have access to and keep up to date with the current and emerging technologies.
Products and service segmentation
Major market segments
IBISWorld supplies business information databases, including industry reports, company reports and business indicator reports. www.ibisworld.com.au