Declining Industry
A declining industry is an industry where growth is either negative or is not growing at the broader rate of economic growth. An example of a declining industry is the railroad industry, which has experienced decreased demand — largely due to newer and faster means of transporting goods (primarily air transport and trucking) — and has failed to remain competitive in pricing, at least in relation to the benefits of faster and more efficient transport provided by airlines and trucking services. A declining industry is an industry where growth is either negative or is not growing at the broader rate of economic growth. An industry is said to be in decline when it does not keep pace with the rest of the country's economic growth, or when its rate of growth contracts across multiple measurement periods. After recording some of their highest sales in history during the early 1990s, sales for the vinyl record industry began falling and industry watchers assumed that it was on its death bed.
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What Is a Declining Industry?
A declining industry is an industry where growth is either negative or is not growing at the broader rate of economic growth. There are many reasons for a declining industry: consumer demand may be steadily evaporating, the depletion of a natural resource may be occurring or there may be emergent substitutes because of technological innovation.
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Understanding Declining Industries
An industry is said to be in decline when it does not keep pace with the rest of the country's economic growth, or when its rate of growth contracts across multiple measurement periods. Usually, the country's economic growth rate is measured by its gross domestic product (GDP). When an industry is heavily utilized within the market, it's expected that it would grow as a function of overall economic growth.
However, sometimes an industry does not grow when the rest of the economy grows. This can be the result of many factors, from changing consumer preferences, technological innovations that make the industry or its products obsolete, or the emergence of substitutes. When the growth rate of an industry stagnates or starts to shrink, for any of these reasons, it is said to be in decline.
In some cases, a declining industry can rebound and start growing again. An example of this is the vinyl records industry in America. Vinyl records are one of the oldest types of audio formats and have sustained sales through various changes in the industry, from radio to the Internet. After recording some of their highest sales in history during the early 1990s, sales for the vinyl record industry began falling and industry watchers assumed that it was on its death bed. However, demand for used records began increasing during the Great Recession and has been on a steady upward climb since. Experts attribute vinyl's staying power to unique audio quality and nostalgic value.
Example of a Declining Industry
An example of a declining industry is the railroad industry, which has experienced decreased demand — largely due to newer and faster means of transporting goods (primarily air transport and trucking) — and has failed to remain competitive in pricing, at least in relation to the benefits of faster and more efficient transport provided by airlines and trucking services.
Video rental services are another example of a declining industry. The rise of the internet along with video streaming services, such as Netflix and YouTube, has drawn its customers away from stores and kiosks to online platforms. The most powerful example of its decline is Blockbuster, which was a major player in the industry with more than 9,000 stores, but has since gone bankrupt — today, only one Blockbuster location remains. In 2021, Family Video, the last major movie rental chain which operated some 200 stores in 17 Midwest and Southern states, decided to close down all its remaining brick-and-mortar locations,
Related terms:
Capital Decay
Capital decay is an economic term referring to the amount of revenue that is lost by a company due to obsolete technology or outdated business practices. read more
Consumer Price Index (CPI)
The Consumer Price Index (CPI) measures the average change in prices over time that consumers pay for a basket of goods and services. read more
Depression
An economic depression is a steep and sustained drop in economic activity featuring high unemployment and negative GDP growth. read more
Disruptive Innovation
Disruptive innovation describes innovations that make products and services more accessible, affordable, and available to a larger population. read more
Economic Growth
Economic growth is an increase in an economy's production of goods and services. read more
Gross Domestic Product (GDP)
Gross domestic product (GDP) is the monetary value of all finished goods and services made within a country during a specific period. read more
The Great Recession
The Great Recession was a sharp decline in economic activity during the late 2000s and was the largest economic downturn since the Great Depression. read more
Growth Recession
Growth recession describes an economy that is growing at such a slow pace that more jobs are being lost than are being added. read more