The entrepreneurial spirit is alive and well in America despite its recent hardships and a new report from IBISWorld has made its picks for the best business startups for the new year. Experts say one of the keys to pinpointing these opportunities is to identify niche markets that are still making the transition to online service and marketing. A few of these that stick out for IBISWorld analysts include the online social gaming market, online shoe sales, virtual data storage, digital forensic services and IT security training. For more on this continue reading the following article from TheStreet.
Ever considered starting a business to sell shoes online? A recent IBISWorld report pits the industry as one of eight excellent opportunities for startups.
The business of online shoe sales might seem a bit random, but consider the success of Zappos, for instance.
In fact Amazon’s (AMZN) online shoe retailer fits perfectly into the IBISWorld report’s thesis.
"Fragmented industries with a low level of capital intensity often present excellent opportunities for startups," analysts Kevin Boyland and Eben Jose write in the February report. "During the past decade, the key trend creating the majority of these opportunities has been the shift toward providing services online."
Start-up prospects are most prevalent in the retail and service industries, with e-commerce presenting the biggest opportunity, particularly with the likes of Amazon, eBay (EBAY) and Etsy or platforms like Shopify taking away the challenges presented by technology for entrepreneurs.
Nowadays, a small online business can sell its wares through one of these portals, which eliminates the hassle, time and resources needed to create an online store.
"All of these factors have made starting an online business easier than ever," the report says.
To be competitive, though, start-ups will have to "keep pace with the high level of technological change that has transformed their respective industries. Additionally, access to capital via investments or loans will play a critical role in determining the speed at which firms can grow the scale and scope of their operations," the analysts caution.
Given their low barriers to entry, high level of technological change and strong revenue growth expectations, there are eight industries that present prime opportunities for startups in 2013, according to IBISWorld.
1. Social Gaming
The social gaming industry has exploded at an average annual rate of 184% during the past five years, driven by surging Internet traffic and the widespread prominence of social networks, particularly Facebook (FB), the analysts write.
As mobile devices proliferate, consumers have increasingly been able to access their social networks anywhere, at any time.
Revenue is expected to grow 31.9% to $6 billion in 2013.
"Rising demand for social network-based games creates opportunities for potential industry entrants. Additionally, widely available industry associations like the Entertainment Software Association can help new entrants by providing market research to develop more highly in-demand products," the report notes.
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2. Online Shoe Sales
Online shoe sales have benefited from consumers flocking to the Web to purchase goods and services online. Shoe sales online alone are expected to grow at a "robust" 16.2% five-year annualized rate to $8.9 billion through 2013. The report cites a survey by Nielsen indicating that clothing, accessories and shoes are the second-largest category of items behind books that consumers purchase online.
"With such rapidly increasing demand, traditional brick-and-mortar retailers have an opportunity to enter the online realm and recapture sales taken by retailers that operate exclusively online," the analysts write. "Although new industry entrants face competition from well-established incumbents, this threat to success is partially mitigated by the industry’s fragmented nature."
Currently the industry’s two largest players — Amazon and Foot Locker (FL) — control less than 16% of the market.
However, new entrants will need to differentiate, with either a unique product line or non-traditional strategy to drive traffic to their website.
3. TV and Home Theater Installation Services
The TV and home theater installation services industry is "highly fragmented," IBISWorld says. Yet with a low level of capital needed to start a business, those with transportation and proper tools can easily enter the industry. In order to be successful, though, startups must "keep up with the rapid pace of technology in the industry," the report says.
With 98% of today’s households owning at least one television and 84% having at least one DVD player and another 25% that have home theaters, the industry has expanded rapidly. Revenue rose on an annualized basis of 4.1% to $12.2 billion over the five years to 2013, according to IBISWorld.
4. Virtual Data Rooms
Virtual data rooms provide clients with secure document sharing and storage services geared toward legal due diligence, mergers and acquisitions, initial public offerings, bankruptcies and other information-sensitive applications.
The industry is growing quickly, with industry revenue expected to reach $728.4 million in 2013, a 16% increase from 2012 and an annualized growth rate of 15.8% since 2008, according to the report.
"Driving this growth has been the economy-wide transition toward providing services online. In particular, the proliferation of access-limited document sharing infrastructures — and programmers in the field — has enabled this industry to flourish without requiring huge investments," IBISWorld says. "The time and money savings this industry offers have made [virtual data rooms] enormously valuable to investors."
Industry revenue is forecast to expand at an annualized rate of 14.2% over the next five years.
5. Digital Forensic Services
Digital forensic service firms recover and investigate material found in digital devices. Its services are often in relation to computer crime, but they increasingly involve mobile devices, according to IBISWorld.
In the five years to 2013, IBISWorld estimates that revenue for the digital forensic services industry increased at an annualized rate of 11.9% to $976.2 million.
As consumers are spending more of their time online, the amount of electronically stored information is rising exponentially. A boost in demand for services is expected to contribute to steady revenue growth of 11.2% in 2013.
The report notes that while there are few "prohibitive governmental, licensing or regulatory barriers" to starting a digital forensic services firm, capital requirements are high in order to keep up with competition.
Industry participants will also be challenged by the expansion of cloud computing, which allows information to be "manipulated, stored and processed from multiple computers," the report says.
6. IT Security Consulting
IT security consultants have benefited greatly from the increasing amount of high-profile data breaches. Sony (SNE), Citigroup (C), LinkedIn (LNKD) and even EMC’s (EMC) RSA security division are just a few big companies that have been victims of cyber-attacks in recent years, moving IT security far into the spotlight, the report says.
Over the past five years, IBISWorld estimates that revenue for the IT Security Consulting industry rose an annualized rate of 9.8% to $5.3 billion. Industry revenue is predicted to climb 8.8% in 2013, the report says.
7. Travel Agencies
After a rough few years, the travel industry has been slowly recovering since 2010, given the strong opportunity in the cyber world for travel-related assistance.
While the "era of storefront travel agencies is entering a long-term decline," it is being replaced by online agents, which offer a "relatively high-profit, low-cost way to handle transactions," the report says.
"This segment of the industry has grown significantly and will likely continue to display strong growth during the next five years. Major operators will continue to acquire global, regional and local websites to improve their revenue and profit, and capture a larger share of this growing area. Furthermore, many firms will enter the industry, increasing demand for loans associated with data storage and labor requirements," the report says.
IBISWorld estimates revenue will grow 6.1% to $20.7 billion in 2013. From 2013 to 2018, industry revenue is forecast to increase at an annualized rate of 2.2% to $23 billion.
8. Translation Services
Translation services is a growing area due to globalization and an increasing number of non-English speakers in the U.S. Businesses taking advantage of the increasingly global marketplace are looking for translation services as they expand into new countries, often requiring services to adapt websites and marketing materials to the new region, the report notes.
Industry revenue has increased at an annualized rate of 2.4% to $3.2 billion in the five years to 2013. In 2013, IBISWorld expects industry revenue to increase 3.4%.
While technology has helped automate the process, the services still remain labor-intensive. "Some competition exists through programs and free Internet websites, but these systems often give translations that do not provide a cultural context," the note says.
This article was republished with permission from TheStreet.