Global Funeral Services Industry
The global funeral services industry (segment of the consumer services market) encompasses a range of outfits catering to all the necessary aspects of funerals including cremation, burial, providing urns and caskets, and making memorial products. Pre-burial services also fall into this industry category and include processes such as embalming. The industry is characterized by a high degree of fragmentation, with many outfits tending to be small and family-run. Larger sized companies represent less than 15% of the overall market, according to research from industry experts.
Trends & Challenges in the Funeral Industry
Growth in the funeral services sector is fuelled by demographic factors, mainly the percentage of older citizens in a country. Funeral service providers compete through effective marketing and building a reputation as being reliable. Hoover’s underlines the advantage of pooling resources for larger outfits. Resources that can be readily shared include vehicles such as hearses and limos, along with marketing costs and specific service providers such as embalmers. As the funeral services industry is primarily a local one, smaller outfits can compete with larger nationwide operators. Local demand remains more or less fixed, allowing smaller outfits to predict the needs of their clients and to build a working relationship with the local community.
Pre-burial services generate around half of the overall revenue of the funeral services industry. These pre-burial services include transportation, cosmetic preparation, wake and memorial service facility rental, and embalming. Funeral products such as wreaths, urns and caskets account for around 45% of the sector’s revenue. Burial rights also generate a portion of industry revenue. Leading casket suppliers currently operating in the US funeral services market include Matthews International, Aurora Casket and Batesville Casket. On average, funeral homes cater to around 120 funerals each year. This means that valuable physical assets, such as hearses and limos, are often unused. Though traditionally burial represented the most dominant funeral service, industry trends have witnessed the rise of the more cost effective alternative of cremation, and the number of cremations per year continues to climb.
Funeral Services Regional Market Share
Growth in the US funeral services industry is being challenged by the increasing popularity of cremation. This less expensive alternative to traditional burial has squeezed profit margins in the US market, which is comprised of 24,000 outfits and is valued at around $13 billion, according to IBISWorld. The economic recession also contributed to industry difficulties as families with falling incomes began buying caskets from discount manufacturers and retailers to lower funeral service costs. Revenue fell at a yearly rate of almost 0.5% between 2007 and 2012, mainly due to the recession.
Despite certain difficulties, the US funeral services sector is expected to pick up somewhat between 2012 and 2017. Industry performance will be fuelled by an increasing number of citizens joining the older age category. Death rates in the US are also predicted to rise, further driving growth in the funeral services industry. The funeral sector is generally regarded as stable, though demand is affected by the economic climate, with falling incomes and employment rates prompting consumers to seek out discounts.
As economic recovery continues, it is expected that the recent trend toward the less-expensive option of cremation will turn around, with families spending more on more costly graves and funeral services, reports IBISWorld. To combat revenue loss due to the rising popularity of cremation, industry players will likely concentrate their efforts on providing more value-added services.