The price of competition

Ashlee's picture
Ashlee

In an economy as small, yet diverse as Qatar’s, competition is key to keeping it thriving. Monopolization can lead to unfair cornering of the market and prohibit growth, so competition is healthy. But what happens when there’s too much of a good thing? Over-saturation can pose its own set of problems when there’s too much competition in a market like Qatar’s, and it begs the question – who’s really benefiting from it all? Certainly not the customer – and nor the business owner, as often times they end up taking a loss on their investment.

 

So why are profit margins not sustainable when there’s too much of the same thing? Let’s do a little case study: there are currently five online ticketing agencies here in Qatar, with two more popping up recently. What drives a business is supply and demand. Customers want a product or service – and you give it to them. For a price. Now, this begs the question – are there really that many events coming to Qatar annually to warrant five-plus ticketing agencies?

 

Keep in mind that though we’re always growing, we still don’t have the market pull that the U.A.E. has, drawing mega-artists and performances and the like – though this is set to hopefully change with the opening of venues such as Doha Festival City and the new Mall of Qatar. But do we really have the space to host acts like Coldplay for example (who just rang in the bells on New Year’s Eve with a concert at Yaz Island in Abu Dhabi). Right now our mega-stadiums are under construction ahead of the 2022 FIFA World Cup. (But we digress…)

 

The point is that profit margins in an already small-to-medium market are being split in too many pieces in an industry that’s currently seeing around five per cent ticket sales inclusive of a fixed transaction fee. Adding more competition to the pool only further saturates things to the point where it kills everyone. To recoup the cost of setting up the business each business would need to sell roughly QR 1.4 million worth of tickets in order to just break even.

 

Let’s do the math

To break down the numbers, it costs around QR 70,000 a month to set up a business in Qatar, or a total of QR 14 million a year. We’re talking about Chapter 1 and Chapter 2 investment costs, plus operational costs, staff salaries, office rent and more. Let’s translate these figures towards the online ticketing industry. If we assume that the average ticket sale is QR 75 – though some smaller events can offer tickets for an even lower price, while for some larger events they can still go as low as QR 100-150.

 

That’s an average of 18,700 tickets a year that would need to be sold to keep the company afloat – or a total of 130,900 with a seven companies saturating the market. It’s just not feasible in Qatar’s current market – nor is it realistic. Many people still buy tickets at the door on the day of the event rather than in advance online – as much as 70 per cent of ticket sales happen at the door here in Doha.  

 

Cause and effect

Based on our experience here at ILQ we’ve identified three main factors behind excessive competition:

 

1.        

Undercutting: Offering a product or service for a bargain basement price in order to gain clients sets a risky precedent no matter what industry you’re in as clients will start to expect that these prices are the norm. So what starts out as an attempt to drive business away from your competitors, leads to a downturn in profit margins for all.

 

2.        

Fee avoidance: In Qatar some events organizers try to set up their own ticketing companies as a means of avoiding to pay that five per cent fee we mentioned above for the service of using an online ticketing provider. This results in these organizers competing against the same companies who would promote them.

 

Alongside this sometimes, is a lack of focus on customer care as as service provider. Overseeing ticketing issues isn’t easy, and its here where cooperation is key. By understanding that the support of other organizations is an asset to the success of the business everyone wins.

 

3.        

Exclusivity: Many organizers and agencies often try and seek out lucrative deals with exclusive artists or events as a means of guaranteeing business. But this can lead to one-upmanship in the market as companies and organizers try to top one another and in the end no one has enough business to keep them going.

 

Qatar is growing quickly and the market is wide for businesses of all kinds to cast their nets. Competition is great when the market doesn’t become oversaturated. As a community we can all reap the benefits of working together. Something to remember as we start off this New Year.

 

What are your thoughts on the issue of too much competition in Qatar? Drop us a line in the comments section below and don’t forget to give us a like and a share!