Prices are expected to grow over the next three years, largely due to an increase in the number of businesses. Growth in this factor increases the potential market size of service providers, boosting demand and prices.
Los Angeles, CA (PRWEB) November 20, 2013
Janitorial services have a buyer power score of 3.5 out of 5. The higher the score, the more leverage a buyer has in negotiating a favorable rate. This score largely reflects a highly competitive market with low-volatility, in which the average price of services has increased at an average rate of just 1.2% per year in the three years to 2013. The slow increase in prices is largely the result of marginal growth in the number of businesses. Over the next three years, prices are expected to rise faster as the office rental vacancy rate declines from recessionary highs. As such, buyers are encouraged to sign contracts now and consider multi-year agreements.
Janitorial service companies have low barriers to entry and few capital costs. The resulting large number of vendors is beneficial to buyers because they can shop around for a company that fits their budget and service needs. Although price competition reduces prices for buyers, the average profit margin (as defined by earnings before interest and taxes) for a vendor is just 5.5%, which reduces bargaining power when it comes to negotiating rates. As such, buyers may have better luck bargaining for additional services, rather than lower rates. Vendors generally offer “tag work” on an as-needed basis, with services including window washing, appliance cleaning and floor waxing. Aside from the provision of related services and “tag work,” the availability of substitutes is low for buyers. This factor reduces negotiating power as clients otherwise have to bring cleaning responsibilities in-house or opt for an alternative property management arrangement.
Buyers needing specialized services generally have less leverage when negotiating rates. This is because fewer companies specialize in niche markets, like healthcare, than more generalized services. On the other hand, large contracts are more price competitive than smaller contracts. Buyers can use this to their advantage by bundling services or having a vendor service more than one facility. For more information, visit IBISWorld’s Janitorial Services procurement research report page.
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IBISWorld Procurement Report Key Topics
This report is intended to help buyers of janitorial services for commercial and industrial work sites, including office buildings, retail centers and manufacturing facilities. While the services are provided on a contract basis, the frequency at which they are provided varies from daily to weekly or otherwise. The services offered include building and office cleaning services; deodorizing services; restaurant kitchen cleaning services; service station cleaning and degreasing services; and window cleaning services. This report does not include companies that provide maintenance services in conjunction with janitorial services.
Recent Price Trend
Product Life Cycle
Total Cost of Ownership
Supply Chain & Vendors
Supply Chain Dynamics
Supply Chain Risk
Market Share Concentration
Vendor Financial Benchmarks
Buying Lead Time
Key RFP Elements
Buyer Power Factors
About IBISWorld Inc.
IBISWorld is one of the world's leading publishers of business intelligence, specializing in Industry research and Procurement research. Since 1971, IBISWorld has provided thoroughly researched, accurate and current business information. With an extensive online portfolio, valued for its depth and scope, IBISWorld’s procurement research reports equip clients with the insight necessary to make better purchasing decisions, faster. Headquartered in Los Angeles, IBISWorld Procurement serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.