Revenue will expand as people return to work, but online-only operators still pose a threat
Los Angeles, CA (PRWEB) March 13, 2013
Competition with online services and high unemployment have dented the Tutoring and Test Preparation Franchises industry's revenue during the past five years. Throughout this time, many online businesses developed convenient tools and programs for students as a substitute for industry services. “Low employment has further depressed consumer spending on tutoring and test preparation, not only because of deflated disposable income, but also because parents and peers have had more time to help students with homework or studying,” says IBISWorld industry analyst Agata Kaczanowska. US employment is expected to decline at a 0.4% annualized rate, representing 2.4 million fewer jobs in 2013 than in 2008, and disposable income is anticipated to grow just 0.2% annually on average during this time. Consequently, industry revenue is estimated to contract at a 0.2% annualized rate to $840.4 million in the five years to 2013. In 2013 alone, industry revenue is expected to decline 1.4%.
To attract clients, tutoring and test preparation franchises have spent an increasing proportion of revenue on teachers and marketing, continues Kaczanowska. Accordingly, industry employment is expected to grow about 4.0% annually on average during the five years to 2013 to 115,134 people. As companies differentiated themselves based on highly qualified staff, wages have also shot up 6.3% annually on average to $458.7 million during this time. These rising expenditures, combined with pricing pressures, have deflated profitability. In response to cost pressures, companies cut back spending on educational materials, and instead are investing in their own online educational systems. These internet-based materials are cheaper, and students can conveniently access them from home. Online systems have contributed added value to industry services, which slowed profit declines during the past five years. The Tutoring and Test Preparation Franchises industry has low market share concentration, with Kumon North America Inc. representing the only major company. The industry has a large number of similar-sized firms that cater to the US market. Low barriers to entry and increasing demand for test preparation services are encouraging new operators to enter the industry. Industry firms that specialize in tutoring services are slightly more fragmented, and some firms serve a specific geographic region. However, due to the nature of standardized testing, firms that specialize in test preparation tend to serve a wider region.
In the five years to 2018, the industry will benefit from rising employment, school enrollment, government funding and disposable income. As a result, industry revenue is projected to expand in the five years to 2018. Nonetheless, rising competition from online tutoring and test preparation services will still represent a challenge for industry players. For more information, visit IBISWorld’s Tutoring and Test Preparation Franchises in the US industry report page.
Follow IBISWorld on Twitter: https://twitter.com/#!/IBISWorld
Friend IBISWorld on Facebook: http://www.facebook.com/pages/IBISWorld/121347533189
IBISWorld industry Report Key Topics
This industry offers exam preparation and tutoring services. Academic schools, colleges and universities are excluded, as are schools that offer instruction in business, driving, management, computers, technical and trade areas, fine arts, athletics and languages. Online-only operators, as well as revenue from publishing, are excluded from this industry.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
About IBISWorld Inc.
Recognized as the nation’s most trusted independent source of industry and market research, IBISWorld offers a comprehensive database of unique information and analysis on every US industry. With an extensive online portfolio, valued for its depth and scope, the company equips clients with the insight necessary to make better business decisions. Headquartered in Los Angeles, IBISWorld serves a range of business, professional service and government organizations through more than 10 locations worldwide. For more information, visit http://www.ibisworld.com or call 1-800-330-3772.