Arc Wordwide to close in Edinburgh - News Analysis
While there are exceptions to the network rule in Scotland – PR for example seems to do relatively well for them north of the border – the overall trend is undeniable. But why? What makes Scotland such a tough market to crack?
Brian Rees, now chairman of the If Agency in Manchester, has experience of an international company withdrawing from Scotland when his former agency PDP – part of InterPublic – upped and left. He believes that the reasons for the withdrawl are simple, as agencies discover the competitive Scottish market is not an easy place to meet shareholder expectations.
INBUILT MARGINS
“Scotland has a lot of talented people who work for themselves. This creates a small-to-medium sized agency culture which offers fantastic creative potential, but not at the right premium.
“In Scotland, these agencies have become a commodity and have allowed themselves to undersell the offering they provide. When you get a regional office of a global network, they have various inbuilt margins and revenue streams that are required and they also have a ROI that needs to be fully justified.
“When a major network puts its name outside a door, it comes with these margins and revenues. Quite frankly, Scotland doesn’t have a market that can command those premiums, because there are some very talented but comparatively inexpensive agencies that will work further down the food chain.”
“And,” continues Rees, “when it comes to below-the-line agencies, the prices are even less expensive and the market even more highly competitive.”
Scotland would ideally have the big network names, he adds, successfully co-existing with the regional agencies, but “either they’ve not been able to hack it due to cost, or they weren’t offering something different to sustain their offering. Scotland is a very different marketplace to the rest of the UK. It’s definitely a local market which requires local expertise.”
Ward Mulvey, managing director of Bob Marketing, has had experience of both worlds, having formerly headed Draft Worldwide, before the agency pulled out of Edinburgh four years ago.
He believes that the struggle is down to the offices simply being viewed as satellite operations to the main UK headquarters in London or elsewhere in England within the structure.
“The whole ethos behind Scottish independent agencies is to be on the ground and to have a level of full service on the clients’ doorsteps. Day-to-day contact is available and allows the ability to meet with a client, rather than trying to service accounts remotely.
“There’s a degree of land grab and of trying to grab business within Scotland whilst putting minimum resource against it,” continues Mulvey. “And that model, as has now been proved, simply doesn’t work.”
However, Paul Watson, managing director of Momentum Manchester disagrees. Despite operating only a small office in Glasgow to service Scotland, he claims that such a presence is vital.
“It’s impossible to service a country without a presence on the ground. If a company is pulling its presence then it is purely down to its commercial performance within that market.
“If you lose a valuable piece of business or revenue streams then cost savings have to take place and that means effectively closing the office. It’s not down to a particular trend or issue, it’s down to the performance of the office within the market.”
UTTER BULLSHIT
Mark Fowlestone, managing director of Multiply – who, like Mulvey, has experience both networked and independent structures as ex-managing director of KLP – cited his disappointment at the news of Arc’s demise in Edinburgh, saying that it underlined his relief at working as an independent agency now.
“It has always been the same old story – difficult trading conditions up north; clients looking for everything under one roof; economies of scale; having just one all encompassing creative department; expanding our London operations… well I say utter bullshit,” says Fowlestone.
“I cannot see this ever stopping as groups keep their HQ down south, regardless of the talent in other bases.
“It might look good on a map when they are showing clients their agency coverage, but in reality that’s where the story pretty much ends.”
Fowlestone continues by leading a rallying cry to the industry in Scotland: “The more I see good people trying their own thing the more I get excited about the industry in Scotland. All the great successes up here have been set-ups and long may it continue as I think we’ve all had enough of the big groups. I’m calling for independence all the way!”
If current trends continue, it looks like he will get his way.