Photo: flickr: GavinLi
Kevin Boyland and Anna Son at IBISWorld released a report highlighting 10 U.S. industries with limited growth prospects.Even as the economic recovery continues, these industries aren’t likely to be losers.
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U.S. GDP growth is projected to be 1.8% per annum from 2012 through 2017, which is higher than forecasted revenue growth for any of the at-risk industries over the same period.
Threats faced by these industries include:
- High competition from substitutes and low-cost imports;
- Decreasing demand;
- Market saturation;
- Technological stagnation; and
- Declining life cycles.
Though a majority of these industries will recover in the long term, for some the death knell has surely been rung.
The two analysts developed a risk score for each industry composed of a weighted combination of structural risk, growth risk, and sensitivity risk.
Risk Score: 6.07
Revenue Growth: +0.4%
Description: Digitization reduces the need for mailbox rentals and other services provided by this industry, and its relevance is on a seemingly irreversible decline.
Risk Score: 6.14
Revenue Growth: -1.8%
Description: Vertical integration and low-cost imports have shifted footwear manufacturing overseas. The number of industry participants is expected to decrease nearly 2% annually while imports are projected to meet over 96% of domestic demand in the next five years.
Risk Score: 6.17
Revenue Growth: +2.6%
Description: Homeownership rates, which declined when the housing bubble burst, go hand-in-hand with homeowners' associations. As a result of the recession, fewer homeowners will have the means and desire to pay fees to these organisations.
Risk Score: 6.19
Revenue Growth: -1.9%
Description: Virtual cards and social media are sending traditional cards the way of the woolly mammoth. This industry's growth rate correlates strongly with disposable income, which contracted during the recession.
Risk Score: 6.21
Revenue Growth: -5.6%
Description: The industry faces rising competition from junior colleges and trade schools, as students seek to improve their credentials in a persistently weak labour market. In addition, IT courses are quickly becoming obsolete for younger genereations who were practically raised in front of a computer.
Risk Score: 6.27
Revenue Growth: -2.0%
Description: This industry will be adversely impacted by countercyclical demand -- people are more likely to buy new furniture as their incomes rise, rather than repair an old couch. An organic increase in demand for new furniture, buoyed by low-cost foreign manufacturers, dampens the outlook for repair and reupholstery. Industry profitability will be further damaged by rising costs for inputs.
Risk Score: 6.35
Revenue Growth: +1.1%
Description: Measures against overfishing, volatile weather patterns, and changing migration patterns will limit the size of a catch, and therefore, the revenue opportunity in this industry. Aquaculture is not included as part of the fishing industry.
Risk Score: 6.45
Revenue Growth: -1.1%
Description: Consumer behaviour moves from rentals to purchases due to the availability of low-cost imports. Baby boomers with higher disposable incomes also prefer purchases over rentals. Tuxedo rentals will continue to drive industry demand.
Risk Score: 6.69
Revenue Growth: -1.3%
At-Risk Companies: Coca-Cola, PepsiCo
Description: External competition and health concerns which reduce consumption will push sales downwards over the next five years. Lower prices for plastic and corn syrup benefit profit margins in the short-term.
Risk Score: 7.10
Revenue Growth: -0.4%
At-Risk Companies: Altria, Reynolds American, Lorillard
Description: Reduced demand for cigarettes and a forecasted annualized 1.5% rise in the cost of tobacco over the next five years impair this industry's ability to make a profit.