It’s been a rough few years. Because of the pandemic, spiking inflation, supply chain disruptions and a strange labor market, some formerly thriving industries are facing existential risks, and some previously at-risk industries have completely collapsed. Smart entrepreneurs are doing everything they can to avoid the wreckage.
There are lessons for every entrepreneur in the failures of these businesses: Find innovative ways to keep your initial costs down, consider where customers are going, and pay careful attention to labor and automation trends.
Here are four examples of dying industries and the important lessons you can learn from them.
Newspapers have been dying for years. They’ve tried many changes in strategy, such as instituting paywalls and building communities through comment sections. Nothing has worked.
Though newspaper circulation has been declining since the mid-1980s, subscriptions were never their economic engine. Revenue came from business advertising and, crucially, classified ads. Naturally, these revenues declined with drops in readership driven by competition from other online resources, and ultimately, services such as Craigslist (and, later, Facebook Marketplace) wiped out classifieds.
Today, readers complain about subscription prices, and most advertisers focus on social media ads. The latest death knell? Hedge funds consolidate local papers, gut newsrooms, erode quality – and eventually kill them. Though some major papers are still going strong, it’s usually because they’re owned by companies or individuals who see them as public goods, rather than as sources of profitable businesses. The overall trends facing newspapers are not good.
The lesson: Ignore the rhetoric, and focus on real customer behavior. Though plenty of people will tell you they care about newspapers, most customers aren’t willing to shell out for a subscription.
Smaller businesses used to do as much as they could in-house. Then, companies began to outsource everything they could. HR outsourcing, staffing, payroll, inventory, accounting, marketing and pretty much any service that was not a company’s primary business became available for outsourcing. By the mid-1980s, faster, cheaper, more widely available computers made it possible for smaller companies to outsource administrative tasks.
Now, however, the introduction of more user-friendly online tools has made many of those jobs obsolete. According to the National Small Business Association, by late 2021 just over 13% of small businesses still outsourced their payroll and other work; what once required multiple dedicated employees can again be done in-house, but cheaply and efficiently.
The lesson: Think a step ahead. Growth industries such as artificial intelligence, data analytics and green energy will certainly create casualties, so make sure your business isn’t left in their wake.
In the 1970s, 140,000 Americans made their living by repairing televisions, according to the U.S. Bureau of Labor Statistics. By 2006, only 40,000 did, and in 2009, Americans sent 20 million TVs to the landfill.
As manufacturing has become cheaper through automation or cheap overseas labor, the cost of appliances has dropped dramatically, but repair costs have kept up with inflation. Meanwhile, many companies invalidate a product’s warranty if the user tries to repair it. Instead, when an appliance breaks, most people will spend a few bucks more to buy a new appliance rather than try to repair it.
However, some customers are concerned about the environmental and financial implications of throwing out their appliances, and many like the challenge of fixing things themselves. Some companies, such as Apple, are also facing legal challenges for creating products that aren’t easily repaired.
As the Right to Repair movement shows, even if TV repair isn’t exactly a growth industry, there might still be ways to build a business around extending tech products’ life spans, such as by hosting workshops to train others to repair their own phones and computers.
The lesson: Sometimes industries that look dead come back in new forms. Take advantage of consumer demand to fulfill a need that isn’t being met, even if you have to think outside the box to do it.
Bookstores, record shops, video sales and rentals, and newsstands have been cratering for years. Revenues for periodical publishing have dropped by more than half since 2000; video rental was clobbered to the tune of nearly 90% in the same period. City newsstands, operating on even slimmer margins than brick-and-mortar stores, were forced to shutter entirely during lockdowns, and few have returned.
Bookstores, which were struggling well before the pandemic, briefly benefited from these trends. Readers with an abrupt surplus of time and cash opened their wallets to support local shops across the country, and many bookstores adapted by focusing on shipping and curbside pickup. Now that pandemic shutdowns have subsided, though, bookstores are struggling again.
The lesson: Think longer-term: If it’s clear that an industry really is dying, don’t mistake short-term good news for long-term opportunity. Create financial projections that span years, not months.
Sometimes, an industry that appears to be dead makes a dramatic comeback and finds new life. Consider arcades. Long seen as one more casualty of universal high-speed internet, they’ve made an unexpected comeback.
“By 2000, the arcade industry went bust,” said John Karalis, co-owner of Nerd Haven, an arcade in Madison, Wisconsin, that has been thriving since it opened in 2020. A multigenerational nostalgia has repopularized these machines, Karalis added.
“Suddenly, these are trendy places for young people again,” he said.
Karalis and co-owner Adam Wood had a savvy strategy: charging a daily rate, keeping overhead low by offering ready-made snack foods, and focusing on classic arcade games and vintage pinball machines. They also chose a location in a neighborhood with a lot of foot traffic.
But they also had a stroke of luck: They opened just as local COVID-19 restrictions began to ease in October 2020.
“People had cabin fever,” Karalis said. Parents and grandparents were eager to share their nostalgic find with their kids and on social media, and kids went into school talking about their arcade birthday parties.
“The profit margin is not exceptional,” Wood said, but it works because he is an expert technician. The overhead savings are phenomenal, and customers know their favorite machines will be working, he added. The number of people who know how to service the machines is dwindling, making them expensive and hard to find.
Karalis and Wood have succeeded in swimming against the tide because, though the market for arcade technicians is tough, they have a great one on their team and he isn’t going anywhere.
The lesson: Rethinking old ideas with a creative business model can resurrect an industry and create a profitable niche. Leverage your skills and expertise to find savings in-house where others have to outsource.
There’s no crystal ball or precise algorithm for running a business, but if you leverage your unique expertise to keep your overhead low, follow real customer data, and think through the implications of labor and automation trends, you can find a niche that works for you. And when industries are dying, there is usually opportunity for disruption and reinvention – and therein lies a chance to create a profitable business that will stand the test of time.