The 10 Riskiest Industries In America

risk

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.

#10 Business Service centres

Risk Score: 6.07

2012-17 Annualized
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.

Source: IBISWorld

#9 Shoe and Footwear Manufacturing

Risk Score: 6.14

2012-17 Annualized
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.

Source: IBISWorld

#8 Homeowners' Associations

Risk Score: 6.17

2012-17 Annualized
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.

Source: IBISWorld

#7 Gift Shops and Card Stores

Risk Score: 6.19

2012-17 Annualized
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.

Source: IBISWorld

#6 Business Certification and IT Schools

Risk Score: 6.21

2012-17 Annualized
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.

Source: IBISWorld

#5 Furniture Repair & Reupholstery

Risk Score: 6.27

2012-17 Annualized
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.

Source: IBISWorld

#4 Fishing

Risk Score: 6.35

2012-17 Annualized
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.

Source: IBISWorld

#3 Formal Wear and Costume Rental

Risk Score: 6.45

2012-17 Annualized
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.

Source: IBISWorld

#2 Soda Production

Risk Score: 6.69

2012-17 Annualized
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.

Source: IBISWorld

#1 Cigarette and Tobacco Manufacturing

Risk Score: 7.10

2012-17 Annualized
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.

Source: IBISWorld

You've seen the industry laggards -- now check out the global slowpokes.

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