Personal services providers persevere

Over the past decade, Australians have grown increasingly cash and asset rich, and increasingly time poor. As a result, they have become ever more willing to pay professionals to perform tasks for them, be they mundane or extraordinary. From that attitude has grown the personal services sector and the baby sitting and “other” personal services industry, which covers the smallest and most diverse collection of personal services.

Firms in the industry vary markedly, from babysitters to marriage celebrants, tattooists and introduction agencies. Within these segments, establishments are overwhelmingly small or non-employing, while there are occasional exceptions, such as Advanced Hair in the hair restoration segment, and RSVP or Lavalife in the introductory agencies segment.

The common thread that connects many of these industries is their increasing favour across the five years to 2007-08. However, these growth industries proved to hardly be immune from recession, with growth slowing from 5.7% in 2007-08 to 1.0% in 2008-09 and 1.1% in 2009-10. Collectively, they are set to generate around $870.6 million in 2009-10.

Some of these industries-within-an-industry are performing better than others. For example, wedding celebrants have enjoyed rapid growth, as the number of secular weddings in Australia has jumped. Likewise, the proliferation of internet introduction agencies has caused revenue to surge for a sector that was once considered to be struggling.

Some industries, though, are effectively dying. Heraldry, a boom industry in the 14th century, was already struggling around the time of British settlement in Australia. Likewise, sauna operators are facing stiff competition from health clubs and gyms that offer a sauna as a part of a larger experience.

Just as growth over the five years to 2009-10 should average around 3.7%, so will the industry shake off the current recession and bounce back strongly, increasing by 5.2% per year to 2014-15, despite slower growth in 2009-10, when many smaller personal service providers were forced out of business. The industry will experience substantial job losses from 2008-2010, although a smaller number of industry entrants will limit decrease in total employment.

What is certain is that once the economy and consumer sentiment rebound, personal service providers will be waiting to offer whatever the customer demands.

Industry outlook

While the industry is presently proving to be vulnerable to fluctuations in disposable income and consumer sentiment, it is equally responsive to improvements in the economic climate. As such, after a lacklustre 2009-10, the industry is set to resume the upwards trajectory that has typified the past decade.

Key success factors

IBISWorld identifies 250 Key Success Factors for a business. The most important for this industry are:

Access to quality personnel management: Good personnel management practices can improve customer service levels.

Having a good reputation: It is crucial for businesses in the industry to have a good reputation, as most are small and lack the advertising budget to improve public perception in other ways.

Providing client confidentiality: Confidentiality is important for some segments, primarily hair restoration and introduction agencies.

Having marketing expertise: Strong marketing skills are important, as this industry can be highly competitive in sections and perceptions of service and product quality are a key point of competition.

Ability to attract local support/patronage: The ability to build rapport with customers is very important due to the personalised nature of services in the industry.

Barriers to entry

In most industry segments there is a low level of capital and labour skills required to establish a business. However, the industry is highly fragmented and barriers may vary between industry segments. In some industry segments, such as weight loss and hair restoration services, franchising has been used to reduce initial capital costs. These industry segments have moderate barriers to entry because there can be significant costs involved in establishing brand awareness, due to high marketing expenditure by existing players. However, new operators can initially grow very quickly due to the initial attraction among consumers of a new name and a new marketing theme.