I am not ashamed that I have an economics minor. It has helped me sort out many different challenges in my business career over the years. I wrote a while back about why your photography inquiries are down and about how fauxtographers are hurting the industry of professional photography.
Today, I am going to talk the economics of supply and demand and why there is and always will be downward pressure on prices. I will address why laws of economics are laws and what they mean to the portrait and wedding photography industry.
Economics and the laws surrounding them are crucial to understanding the state of the industry and where it may end up going. Here are some key concepts to understand.
- Demand – Buyers are willing and able to purchase
- Supply – Sellers who are willing and able to sell
- Shortage – More buyers willing to buy than sellers willing to sell
- Surplus – More sellers willing to sell, than buyers willing to buy
Reading the key concepts above, anyone who has been around the photography market in the last 5-10 years knows that we have an over-supply or a surplus in the market.
When there is an over supply in the market (a surplus) prices will naturally lower. Below I illustrate the number of buyers willing to buy at a certain price. As you can see, the number of buyers goes up as prices come down. Like a clearance sale. A buyer wouldn’t normally buy, but at this price, they are in the market.
The Groupon Effect
I call the above graphic the Groupon Effect. As you know I have written extensively on Groupon and it’s effects on photographers. When Groupon runs a sale on photo sessions for $49 for example, people will come out of the woodwork to buy them. As illustrated in the above chart, there are 150 buyers in the market for photography if the price is $50. But if Groupon ran the same deal for what it is really worth, $700, the demand would only be about 10 buyers (probably less).
Because there are suppliers (photographers) willing to shoot for $50 and there are a LOT of them, the market is getting used to lower prices and therefore causing the demand for higher priced photographers to decrease even more. When any market gets used to prices being at a certain level, it is very hard to move them back up….impossible during a surplus situation.
Comparison to a similar market
An example might be a fellow service person like a massage therapist. If you removed the licensing requirements of a therapist, then the only barrier to entry would be the price of the massage table.
Suddenly, you would have a flooded market of therapists offering massages for $10 for and hour of massage. Anyone with a massage table could then call themselves a therapist without regard to how good they are at massage. (see the similarities?)
In that case, there would still be great massage therapists in the market but the influx of untrained competition would still have a negative price effect on the rest of the market.
Someone may get a bad massage but they only paid $10 for it. The now flooded market has an influence on them and they’ll continue trying cheap therapists over and over until they find one that they like who are ready to massage them for only $10. Otherwise, they will give up on the market entirely and never purchase again.
The impossibility of a shortage
Any photographers who say that they are in short supply are fooling themselves. Even the big-time photographers will fall prey to economic forces IF they aren’t bringing their a-game when it comes to marketing. A well marketed photographer will do well even in a surplus situation, but they HAVE to keep a constant eye on their marketing efforts to make sure people find them easily.
In the short, mid and long term, I don’t see the photography market changing or a shortage happening. My outlook is that there will be a surplus (over supply) for a very, very long time into the future. Because photography has an ever decreasing barriers to entry threshold with lowered prices on great cameras and no licensing or education required, I can’t imagine that the flow of new “photographers” will ever slow down. Quite the contrary.
My economic prediction – There will be an ever-increasing flow of new photographers hitting the market in the next 5-15 years!
Unfortunately, if I am correct, there will be continued downward price pressure which will force some established photographers out of business. Similar to when Wal-Mart enters a market, established businesses simply won’t be able to compete.
Marketing can help
Now that you’ve read the bleak outlook for the photography market, I can tell you that marketing yourself can help. If you’re relying on Facebook for the majority of your marketing, you’re putting your efforts in the wrong place. You will NEVER make enough money marketing to people on Facebook. The supply is too high and you’re competing with forces that you simply can’t overcome. The very first place to start is to get off of Facebook. I know, I said it. At the very least, put your efforts onto Pinterest instead. (Read my article on how to get your boards to rank)
However, you can work to get your name out there more by increasing your visibility across the web, increasing the reviews you have on your business and by having warm buyers who are looking for photographers find you and your business. It costs money to properly market yourself. If you have a marketing budget of $2,400 per year or more, please contact me. I can help you get noticed and get business.