Top 10 industries set to thrive in 2011
After a return to positive economic conditions in 2010, businesses across several different industries are gearing up for a big 2011.
For start-ups, good ideas will remain good ideas regardless of economic conditions, but it’s advisable to see which way the wind is blowing before launching your business.
Business information analyst IBISWorld has researched 500 industries, forecasting which sectors can expect exceptional growth this year. StartupSmart has obtained the top 10 to keep an eye on in 2011.
1. Organic farming
This sector has continued to enjoy huge success as consumers become increasingly concerned about the health benefits and environmental impact of their food choices.
The likes of Coles, Woolworths and McDonald's have contributed to the industry’s growth with their heavy promotion of organic lines.
Demand for organic products has been rising steadily over the past five years and doesn’t look likely to slow down anytime soon.
According to IBISWorld general manager Robert Bryant, organic farming can expect revenue growth of 14% – equating to $58.4 million – in 2011.
2. Video games
With new app games launched on a daily basis, sprouting concepts as outlandish as “Foursquare meets Mafia Wars”, it is no surprise that gaming is well and truly established as a booming part of Australia’s entertainment economy.
Where once video games were associated with teenagers only, older users are increasingly taking up the habit as companies start to cater for a wider market.
“Older gamers are maintaining their interest at the same time as new gamers embrace industry products as a fresh form of entertainment, with female gamers opening up additional avenues for revenue as a burgeoning new audience,” Bryant says.
Bryant says the rise of female gamers is of particular interest to the industry as key players have historically paid little attention to this segment of the market.
IBISWorld forecasts Australia’s video games sector will grow by 11.9%, or $433.9 million, in 2011.
3. Electricity distribution
In 2011, IBISWorld anticipates growth of 9.3% in this sector, with revenue pushed up by higher retail electricity prices.
“We expect electricity prices will continue to increase due to strong investment in electricity generation and distribution networks, growth in more expensive renewable energy and increased production of electricity from gas-fired power stations,” Bryant says.
An estimated $130 billion is required to upgrade Australia’s electricity generation and distribution networks in the next 20 years.
Not surprisingly, IBISWorld expects the retail sector to face tougher competition in 2011 as consumers shop around for the best deal.
However, higher competition for retail customers and higher input prices mean electricity retailers’ profit margins will decline.
4. Motorcycle dealing
On the back of high fuel prices and increasing concern for the environment, motorcycle dealers have been one of the few sectors to thrive in the last five years, with growth of 7.4% tipped for 2011.
In 2004, motorcycles accounted for just 2.4% of total vehicle registrations in Australia. That figure had jumped to 4% by 2009.
“We expect growth in demand for oil and a softening of the Australian dollar… will result in higher price[s] at the pump for Australian motorists,” Bryant says.
“This will be favourable for the motorcycle dealing industry as more people will seek a move away from traditional cars towards alternative means of transport as they try to cut costs and act upon mounting concerns over fuel efficiency and environmental impacts.”
5. Online retailing
Unsurprisingly, online retailing is expected to outpace growth in sales from traditional retailers, indicating there are opportunities for bricks and mortar stores who choose to get online, as well as online-only start-ups.
“Increased internet connects, larger download limits, faster internet speeds and increased internet security has encouraged more Australians to seek bargains online from both local and international providers,” IBISWorld says.
“Among the fastest growing products online is the group deal of the day style on-sellers. These sites offer heavy discounts on selected goods and services if a set number of people agree to purchase the deal.”
However, the largest market for the industry is travel and tourism, which accounts for around 40% of industry revenue. Online retailing can expect growth of 7.3% in 2011.
6. Cafes and restaurants
Stronger economic conditions, improved tourism numbers, higher consumer confidence and increasing disposable incomes all point to higher revenue for cafes and restaurants this year.
“The industry is currently feeling some positive flow-on effects from the extraordinary ratings success of the TV show Masterchef,” IBISWorld says.
“Many households are rediscovering the joys associated with the total meal experience, incorporating the package of well-presented quality meals as well as the ambience and associated hospitality.”
“However, the industry remains one of the most fiercely competitive in the country. As such, half of all new cafes and restaurants will close their doors within three years.”
Despite the gloomy forecast for new businesses, the sector will grow by 6.9% this year, equating to $676.5 million.
7. Domestic airlines
Growth in this sector is fuelled by recovery more than anything else. Australia’s domestic airlines were hit hard by the GFC, with industry revenue falling 13% during 2008-09 and a further 6.8% last financial year.
However, IBISWorld predicts this trend to soften in 2011 as prices start to resume pre-GFC levels.
“More stable global economic conditions will result in more international visitors this year, although more than half of the domestic airline industry’s revenue is from domestic travellers,” Bryant says.
“Although lower unemployment and steady economic growth will boost the number of Australians taking holidays in 2011, one factor limiting growth will be the large numbers of Aussies heading overseas to make the most of the soaring Australian dollar.”
According to IBISWorld, the industry can expect growth of 6.8% this year amidst predictions 2011 will see the return of the business traveller to Australian skies.
8. Painting and decorating services
IBISWorld predicts the demand for painters and decorators will continue to grow in the new housing construction market, despite the impact of rising mortgage interest rates.
“[This is] partly a flow on effect from the stimulus of the Commonwealth’s first homebuyer subsidy in 2009-10,” it says.
“[It’s] also supported by pent-up housing demand resulting from the escalation in Australia’s resident population over the past three years.”
According to IBISWorld, an anticipated upswing in office and retail store construction will offset the declining investment into the institutional building market, associated with the winding back of federal funding for construction in primary schools.
The sector is expected to grow by 193.7 million this year, or 6.8%.
Weddings represent a $4 billion industry in Australia, including ring design, wedding gowns, photography, flowers, car rental, the ceremony itself and the reception.
According to IBISWorld, revenue in this sector will be aided by solid growth in real disposable income and the strong Australian dollar, both of which will increase the perceived wealth of consumers, leading to higher expenditure by couples on their weddings.
“Rising consumer sentiment will also be beneficial. In years of poor consumer confidence, couples will put off their wedding due to the high cost,” it says.
“Therefore, the number of marriages is expected to rise in 2011 as the economy continues to gain strength, boosting revenue for the wedding industry.”
The wedding industry is tipped to grow by 6.6% or $256.6 million this year.
10. Veterinary services
This sector will enjoy solid growth in 2011, helped along by the growing trend of people spending more on their pets, particularly as household disposable incomes increase.
“The industry’s efforts to educate the public on animal health issues and veterinary services will continue to have a beneficial impact on demand for veterinary services,” IBISWorld says.
“Additional pet care products and services will be introduced by veterinary practices, including nutraceuticals, premium pet food, parasite preventatives, grooming, geriatric care, and behaviour and training.”
“Emerging opportunities for veterinarians to diversify or add to services provided include acupuncture and canine dentistry.”
“Other specialist areas of growth in the small animal area include MRI scans, hip replacements, oncology, lens replacement for cataracts and cardiovascular surgery.”
As a result of increased consumer spending, the veterinary services sector will grow by 6.5% in 2011, equating to $149.2 million.