Industry Stagnation: Manufactured home dealers are the sickest patients here -- guilty, says Van Beeck, of failing to improve their product. Though many have made cosmetic changes to their products, few have spent money on research and development to keep their offerings genuinely fresh and new. The industry saw income fall almost 74 percent in the past decade; the next five years should see a further 62 percent decline. The number of establishments fell by almost 57 percent in the past decade; the next five years should see them drop another 58.7 percent.
At a time when millions of Americans are looking to reduce living costs, shouldn't sales of manufactured homes be up?
Ordinarily, yes, says Van Beeck. But the bursting of the real estate bubble left behind a housing market so depressed that bargain-seekers don't need to buy a manufactured home.
"There are a huge number of unsold homes of the conventional kind available at rock-bottom prices," Van Beeck says. "Demand for manufactured homes simply isn't there."
So, which industry is nearest death?
"I would give record stores top rank," says Van Beeck. "While there will be a core following of vinyl enthusiasts and physical disc owners, stores will be unable to generate enough of a turnover to stay alive."
Manufactured housing, by comparison, might enjoy a modest rebound in years ahead, as prices of conventional homes begin to rise, says Nikoleta Panteva, an IBISWorld analyst. Her most recent forecast for manufactured housing calls for sales to improve by 2 percent next year -- too little to constitute a significant turnaround, she says, but enough to keep the industry on life support.
The IBISWorld study notes that just because an industry is dying doesn't mean that there cannot be found within it exceptional companies that are managing to thrive.
"I found it interesting," says Van Beeck, "that even within the 'mills' category, for instance, there were businesses that didn't suffer from the category's typical disadvantages. They have a special niche, or they rely on a new technology that isn't yet widely available overseas."
As an example, he cites mills producing higher-tech non-woven fabrics, including flame-resistant and moisture-absorbent ones.
"In those, the U.S. has technology advantages," he says.
Warren Buffett's Berkshire Hathaway, Van Beeck says, has made a science out of identifying profitable, still-lively companies in ailing industries. Clayton Homes, a maker of manufactured homes, is a Berkshire subsidiary. Ditto apparel maker Russell Corporation.
What would Van Beeck say to a youngster who came to him and said, "Gee, Mr. B, I've got a great idea for a new business: Renting formal wear to people who live in manufactured housing!"
Van Beeck replies, "I guess I'd ask the young person, 'How interested are you in hard work?' You have to be able to look hard to see where the opportunities are. Opportunities still exist in all these industries, but getting the remaining dollars out is getting more difficult and more competitive -- more so than in a growth industry. If you've got a unique idea, though -- who knows?"