Okay, I’ll admit it –– trade shows can be fun, allowing staff to travel to a distant city, connect (and reconnect) with industry peers, and dine out on the company dime. There is a learning aspect too… about competitors, your customers, trends. Some trade show attendees even thrive on the deadlines and drama shows produce.
For decades, trade shows have been a primary medium for buyers and brands to meet each other. They act as a platform to elevate brand awareness, and a forum to connect with industry tastemakers. Each year numerous small suppliers and brands, particularly those in interior design and home furnishings travel from afar with the hope they will be discovered.
At Nomadory, we decided to evaluate the trade show economics to determine if, in fact, trade shows are worth it.
Consider a trade show with 5,000 attendees.
The cost of attending the event is estimated at $35,000. This includes $20,000 for booth space, shipping, travel costs, entertainment, signage, transportation, and warehouse space, and $15,000 in staffing to set up the show, man the booth, following up on leads, and then closing the business after the show.
A company with a 20×10 space in a prime location might expect to identify 100 potential leads a day. The follow-up from these leads require time and energy to qualify. Let’s assume this leads to 50 sales, or 1% of all show attendees. At a total cost of $35,000, the total cost per lead of $116. Therefore, if your team attends 10 shows a year, your annual trade show budget is $350,000.
Assuming your gross margin target is 70%, you need to make $1,000 per sale, or $500,000 to make events revenue neutral. This also assumes promoting expensive products or reaching decision makers with the capacity to buy in large lots to make these economics work.
Said differently, based on the numbers above, if your average order size is less than $1,000, then you are losing money on trade shows.
Scale this up or down – the basic economics remain the same. Go cheap and end up in the back corner in a 10×10 and your leads will drop and be lower quality. Glitz it up with rock star lighting and your cost per lead skyrockets along with the required revenue.
In other words, low conversion rates, huge costs indicate that trade shows are fundamentally broken. Juxtapose these realties to the fact that COVID-19 has brought the trade show industry to a screeching halt –– and there’s much to consider.
As the coronavirus spreads, travel bans continue, and social distancing becomes the new norm more and more fashion shows and trade shows are getting cancelled.
While some companies are rescheduling for the following year with the hopes trade shows can resume with some sort of normalcy, many experts––and common sense––say (even with a vaccine rollout) it could be even longer before people are comfortable jumping on planes, checking into hotels, meeting for dinner and then heading into crowded convention centers.
For those of us directly, and indirectly, involved in trade shows the question we should be asking is, “was this an eventual reckoning that just got expedited?” At Nomadory, we believe so.
While for some this is a clear sign of trouble, we believe this is an opportunity. A chance to reimagine the future of trade for businesses. Maybe a digitally focused marketplace experience, personalized sourcing tours or simply listing all products on a centralized platform.
Perhaps with the bleeding retail, thousands of furloughs and suffering factories, brands will re-evaluate the relative value of trade shows with profits and truly focus at the heart of what makes every product – the people, the technique and the purpose.
Akta Adani is the Co-founder and CEO of Nomadory, a B2B commerce company that is powering brands with transparent and traceable supply chains.
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