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The Top 10 Most At-Risk Industries in the US


Although an expected uptick in the economy may support some of these industries in the coming year or two, the long-term forecast looks gloomy.

What Darwin said about living species is just as relevant to businesses: Adapt or die.

That's what a lot of US companies are learning now that astonishing advancements in technology have given rise to new thriving business categories (see The Top 11 Fastest-Growing Industries), while leaving others struggling to survive.

This year's list of high-risk industries, identified by IBISWorld and profiled here, are those that once reigned supreme over the corporate landscape. Now, they're quickly being dethroned by plucky upstart enterprises born out of 21st-century change.

The following 10 industries needn't be the strongest, nor the most intelligent but, in order to survive this dinosaur-obliterating asteroid of innovation, they must figure out how to respond to the upheaval. And quickly.

Newspaper Publishing

Not quite hanging in, but rather, hanging on, is the newspaper industry.

While there's still a crop of news consumers that will never give up the smell of newsprint and the feel of holding a paper in their laps, they are a dying crop. The business model that made corporate behemoths of The Wall Street Journal (NASDAQ: NWS), The New York Times (NYSE:NYT), and USA Today (NYSE:GCI) is struggling to support the media sources in print as Generation X and beyond are increasingly reading (and watching) news via digital outlets.

Paywall systems and ancillary mobile platforms have only slowed the bleeding; the newspaper-publishing industry is expected to follow the declining revenue path of the past five years and drop by an annualized rate of 3.7% to $27.7 billion through 2018.

Maybe Jeff Bezos, who purchased The Washington Post earlier this year, knows something the rest of us don't.

Apparel Knitting Mills

One of the casualties of Bill Clinton's NAFTA, apparel manufacturing has become a barely visible category in the US. And its long decline has turned this country's once-humming clothing mills into boarded up and abandoned real estate.

A peek at the tag on the shirt you're wearing will tell you it came from China or Bangladesh where -- even after rampant and fatal factory accidents -- Western safety standards are still not enforced.

At the top of the supply chain it's a far rosier picture. US manufacturers like Wal-Mart (NYSE:WMT) and Gap (NYSE:GPS) enjoy a $19 billion garment industry boosted tremendously by the low cost of doing business overseas.

An exception to the dismal forecast -- that has industry revenue falling at an annualized rate of 3.1% to $412.0 million through 2018 -- is the outlook for domestic operators catering to niche markets that demand higher quality knits. These manufacturers, along with ones that can incorporate designing and marketing activities, may be poised for growth.

Gasoline and Petroleum Wholesaling

Gasoline and petroleum wholesaling has always been a risky business. Growth is largely out of the industry's own control since it hinges on crude oil prices that, in turn, are reactive to a host of fickle factors: the economy, the stability of an oil-rich Middle East, and literally, the weather (i.e., natural disasters).

Now that oil prices have bounced back from the recession, wholesalers are expected to enjoy a modest rise in annualized revenue of 2.5% to $439.5 billion over the next five years. But as US energy policy shifts toward alternative fuels and greater efficiency standards, oil futures will remain uncertain in the long term.

Business Certification and IT Schools

College debt isn't a just problem; it's an outright crisis. Tuition rates have skyrocketed in the last decade, and the average student borrower now leaves school carrying a $26,600 tab.

Though people are taking other, budget-conscious approaches to higher education, business certification and IT schools aren't necessarily the go-to path. Junior colleges and trade schools offering degree programs have been stealing away students and -- despite a recent plunge in enrollment -- universities still attract a hefty number of students who would otherwise be in the industry schools market.

Offering online programs and also coursework in higher-growth fields are the surest strategies to mitigate revenue loss, but the business certification and IT schools industry is nonetheless expected to drop at an average annual rate of 5.6% to $2.1 billion through 2018.

Major Household Appliance Manufacturing

If you thought the state of manufacturing during the Great Depression was rough, feast your eyes on these figures: America lost 5.7 million manufacturing jobs between 2010-2012, and the decline as a share of total manufacturing jobs (33%) exceeded the rate of loss from 1929-1933. Never in US history has this industry suffered more job loss than over the past decade.

Singled out among the worst of the worst is the appliance-manufacturing sector. The many whammies this category has endured include the rising costs of steel, plastic, and resin; weak sales from recession-hit consumers; the overseas outsourcing of labor; and increased demand for imports. (The demand for appliances made abroad is expected to reach a staggering 47.5% of total demand by 2018.)

US appliance manufacturing certainly has a lot working against its success, but a couple of silver linings will actually allow the industry annualized growth of 2.8% to $17.7 billion over the next five years -- namely, a recovering housing market and product releases of highly popular, energy-efficient models.

Commercial Banking
Risk score: 6.33

Given the unprecedented, $13 billion fine with which the Justice Department just slapped JPMorgan Chase (NYSE:JPM) (an amount that equals half of the bank's 2012 profit), it seems reasonable that investment banks and the financial sector would be facing hard times. Instead, commercial banking has been in flux, at least with respect to its growth potential.

But not for much longer.

Increased government oversight, new legislation that limits fees banks can charge customers, higher requirements for capital reserve holdings, and increased competition from nontraditional financiers have all posed threats to the industry's well-being.

The next five years, however, will prove kinder (an annualized 7.4% to $725 billion kinder) to commercial banking. The Big Four -- Bank of America (NYSE:BAC), Citibank (NYSE:C), Chase, and Wells Fargo (NYSE:WFC) -- among other large banks are expected to leverage their "wider array of service offerings to attract retail depositors."

Banks are also building more sophisticated mobile platforms, which will cater to a new generation of clients coming of banking age.

Fuel Dealers

Much like their cohorts in the gas and petroleum space over the last five years, fuel dealers have fallen victim to a less than robust market of crude oil and natural gas. At the height of the recession in 2009, prices sank 36.3% and 39.9%, respectively, and industry revenue fell 14.5% for the year.

Many experts and policymakers believe natural gas will power our future. We've begun to see heavy investment in infrastructure and, as the pipeline reaches more customers, fuel firms are expected to feel the competition squeeze from natural gas companies. Still, consistently rising fuel prices point to an annualized 2.2% increase of $51.3 billion in fuel operator revenue through 2018.

Leather Tanning and Finishing

Leather goods are another chapter in the manufacturing sob story. Cheaper operating costs and labor overseas have pushed the industry from our shores. Even recently increased demand from car companies and furniture makers can't keep leather in the black. The industry is anticipated to lose an annualized 1.9% to $1.7 billion in revenue in the five years to 2018.

Appliance Repair

The phasing out of the independent repairer isn't just a simple matter of the big-box shops like Home Depot (NYSE:HD) and Best Buy (NYSE:BBY) bundling service warranties into appliance purchases.

Ironically, the appliance manufacturers themselves have just as much to do with the shuttering of the mom-and-pop shop by not only writing those warranties, but making products that don't break -- or at least not as often. When something does go wrong, built-in diagnostic tools empower owners to make fixes themselves and, as an added bonus, make their cable TV lineup of DIY shows finally relevant.

More zeroes in the (post-recession) bank account is also starting to allow consumers to splurge on shiny new replacements rather than repair old ones.

This all bodes badly for the appliance-repair industry, headed for a fall of an annualized 1.5% to $3.4 billion through 2018.

Recordable Media Manufacturing

Going the way of the floppy disk's recycled existence as an ironic art statement is the recordable CD and DVD. Our state-of-the-art lives now revolve around clutter-free content -- whether we're watching videos on YouTube (NASDAQ:GOOG), streaming movies from Netflix (NASDAQ:NFLX), tuning into Internet radio on Pandora (NYSE:P), or listening to digital music files on the now-seemingly-ancient iTunes (NASDAQ:AAPL).

In addition, as conventional businesses are increasingly turning to cloud computing for IT services, so goes the need for physical software.

The film industry is recordable media's last hope since studios continue to profit heavily from movie sales in DVD format. In particular, 3-D films, with file sizes too large to stream, will help drive demand for the optical disc.

Still, Hollywood alone can't stop the industry's five-year projected freefall of 3.9% to $3.2 billion.

It will take a new runway rage of these beauties to keep recordable media from the brink. Ah, but who are we kidding? They'd be manufactured in China anyway.

(See also: The Top 11 Fastest-Growing Industries)
No positions in stocks mentioned.

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