Over the five years to 2014, rising per capita disposable income and decreasing unemployment briefly stitched away recessionary woes for the Commercial Embroidery Services industry. However, industry operators have had to contend with intense external competition, which is expected to hinder revenue growth at the end of the five-year period. As the economy has begun to recover and unemployment has fallen, demand from downstream buyers, which include the administrative and hospitality sectors, has increased. However, the decade-long trend of large multifunctional apparel companies integrating embellishment processes into their operations has stifled growth opportunities for the industry. As a result, industry revenue has increased at an average annual rate of just 1.6% to $733.4 million over the five years to 2014. After four years of steady yet constrained growth, industry revenue is expected to decrease 2.4% in 2014. According to IBISWorld Industry Analyst Sally Leman, “Profit has declined in 2014 due to rising costs of key inputs, such as cotton and synthetic fibers, which have grown due to world shortages in 2010.”
Since the recession, industry players have experienced some relief: unemployment in downstream markets has begun to decline and per capita disposable income has inched up. Players that can successfully cater to Generation Y (those roughly between the ages of 12 and 32) are more likely to succeed in this declining industry. Furthermore, operators have increasingly automated their activities to reduce labor costs and gain greater efficiency in production. “Over the five years to 2014, industry employment has declined at an average annual rate of 2.1% to 3,913 workers, while depreciation has grown from 2.7% of revenue in 2009 to 2.9% of revenue in 2014,” says Leman. These trends are anticipated to continue into the next five years, with wages dropping at an annualized 4.1% and depreciation growing to 3.0% of revenue.
Despite their efforts, industry participants are not expected to experience growth over the five years to 2019. Overarching competitive pressures, which affect the entire apparel-manufacturing sector, are likely to remain hallmark traits of the industry. Consequently, IBISWorld expects industry revenue to decline in the five years to 2019.
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