More offer than demand: The impact of economic slow-down on rates of high-quality business services

More offer than demand: The impact of economic slow-down on rates of high-quality business services

In times of strong economies, the price competition between service providers and freelancers has minimal impact on businesses. There are always clients who seek freelance services, and other clients who hire well-established service providers for their quality, scalability, and managed solutions. This, however, tends to change in times of economic slow-down.

Taking the media sector as an example, we have witnessed cost-cuts in various media companies in Dubai over the past two years, including government publishing arms and giant private sector publishers. Employees that were made redundant had little chance of finding full time jobs in a struggling sector, so many of them turned to freelancing. Result? A. an increased number of talented freelancers in the market, a positive; and B. More offer than demand for services such as media production, photography, videography, styling, and content services, a negative. To battle the effects of Point B, freelancers started to offer much lower rates, to compete with fellow freelancers, but the real impact is suffered by established service providers.

While many startups and established businesses have reasonable over-head, and are capable of coping with discounted rates, some media production companies have expensive equipment requirements and cannot exactly endure lower rates. On the other hand, established long-standing freelancers may suffer as well, they do not exactly have over-head, but they have reputations to protect, and life requirements to meet.

Given the above, it is not possible to propose a definitive solution, but three points come to mind:

  1. This situation is not sustainable in the market. Freelancers offering lower rates cannot maintain said rates on the long run, because they are in fact below cost lines. The fact that they are offering them today due to high competition and the urgent need for business does not mean they can sustain them.
  2. While the situation is temporary, and directly linked to economic slow-down, it is an actual challenge both for startups and well-established businesses. The only solution I can propose is endurance and persistence. Businesses are advised to cut costs, offer discounted rates, and be consistent in the quality they provide, both in terms of products and processes.
  3. While the actual challenge today is faced by service providers, it will shift into the freelance domain in the future. Freelancers are advised to take advantage of this market trend, not by aggressive marketing, but by a more stringent focus on quality and delivery.

 

To sum up, while this challenge is temporary, it is real, and it affects the entire value chain. It may appear as an opportunity to the freelancer side of the business, but in fact, it is as much a challenge for freelancers as it is for businesses.

 

Dr. Ali Mohamad is the Managing Director of House of Content