Video and DVD hire retail outlets among the industries set to fall in 2013-14
As Australian companies prepare for the new financial year, IBISWorld has released its annual list of the industries set to soar and sink in 2013-14.
Superannuation funds top the list of growth industries with an impressive 40.5% rise anticipated in 2013-14, followed by iron ore mining, wind and other electricity generation, online shopping and internet publishing and broadcasting.
The industries that might prefer the new financial year not to start at all include video and DVD hire outlets, automotive electrical component manufacturing, heavy industry and other non-building construction, book publishing and mineral exploration, as these industries are forecast to decline.
Industries to fall:
1. Video and DVD hire outlets
Tipped to decline by 12.3% this year, the video and DVD hire industry is facing huge competition from online rental services, piracy and services such as iTunes that provide cheaper and more convenient access to movies.
It's a classic case of new technology squeezing out the old and to compete on price; video and DVD hire outlets have had to significantly slash margins, making it nearly impossible to operate profitably.
2. Automotive electrical component manufacturing
An overall economic slowdown and poor demand for new vehicles have affected sales for automotive electrical component manufacturers, as has the consumer shift towards smaller, more fuel-efficient imported cars.
Falling demand for domestic vehicles has hurt specialised equipment manufacturers, since their products are mainly used in new vehicles.
Overall, the Australian supply chain is uncompetitive compared with overseas manufacturers.
While the government is making efforts to support the local manufacturing sector, its future performance is on shaky ground and the exit of Ford from local manufacturing will have a negative knock-on effect on component manufacturing industries.
3. Heavy industry and other non-building construction
In 2013-14, IBISWorld expects that a reduction of investment in new mining projects will have a negative effect on demand for new rail, port and sorting facilities, leading heavy industry and other non-building construction to decline by 5.4% this year.
As investment in new mining infrastructure is wound back, this industry's revenue will become more dependent upon traditional sources such as telecommunications, so revenue will fall before the industry finds its feet again.
4. Book publishing
A structural shift in favour of online book stores is hurting domestic book publishers, with many consumers preferring to buy from foreign retailers that have exceptional bargaining power and offer fast postage and heavily discounted prices.
The collapse of major book store owner REDGroup has had a detrimental effect on the industry, as has the competition books now face from other sources of entertainment. These factors are expected to result in a 4.3% decline in revenue this year.
5. Mineral exploration
Mineral exploration rounds out the five industries with the lowest growth prospects in 2013-14.
The industry's decline will be largely cyclical as a number of mining investments made in the past five years reach completion and ramp up production, meaning that capital expenditure on new products will decrease – directly reducing demand for exploration services.
Additional economic uncertainty around commodity prices and growth rates for developing economies means undertaking new exploration projects will carry additional risks.
While current production is high, exploration is subdued for the time being. The growth rate is anticipated to pick up in the long run thanks to growing resource demand in developing countries, but as more exploration services are required abroad – such as in Africa – domestic participants may face new threats.
Karen Dobie is the general manager of IBISWorld.
This article originally appeared on SmartCompany.
