United States / Analyst Insights
Top 5 Highly Defensive Industries in 2019

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by Nick Masters, Lead Analyst
Sep 23 2019

As economic uncertainty grows, IBISWorld has identified the top five industries most likely to weather an upcoming economic downturn.

As of July, the current economic expansion has now become the longest in US history. While expansions rarely end of old age alone, potential catalysts for an economic downturn continue to linger.

Industries that are expected to endure an economic downturn better than others are considered to be “defensive” industries. Factors that influence an industry’s defensiveness include inelastic demand, price-competitiveness and diversification of major markets.

Warehouse Clubs & Supercenters

The discount retail cluster consists of industries that are among the most resistant to an economic downturn. During the Great Recession, the $505.6-billion Warehouse Clubs & Supercenters industry (IBISWorld report 45291) continued to grow in 2008 and 2009, even as other retail industries exhibited severe declines. In 2009, for example, the Retail Trade sector (IBISWorld report 44-45)’s economic output declined 9.0%, but the Warehouse Clubs and Supercenters industry grew 0.2%. Industry operators such as Wal-Mart and Costco sustain sales during economic downturns due to their competitive pricing, achieved through economies of scale. Moreover, the industry’s defensiveness is attributable to the wide range of products carried by industry operators. Each store’s balance of both discretionary (i.e. sporting goods and consumer electronics) and nondiscretionary (food and clothing) products mitigates the effects of a negative change in consumer spending habits.

Dollar & Variety Stores

Another industry that tends to outperform its sector during a recession is the Dollar and Variety Stores industry (45299). The $87.4-billion industry is characterized by its competitive prices and expansive presence in both suburban and rural areas. For example, industry leader Dollar General currently operates over 15,000 stores in 44 states, with the majority located in the Southeast. Similar to the Warehouse Clubs and Supercenters industry, dollar and variety stores primarily compete on price and carry a wide range of products. However, given their relatively smaller size, dollar and variety stores place a greater emphasis on nondiscretionary products such as food and household items. As a result, the industry outperformed both the Retail Trade sector and overall economy during the previous recession. As consumer incomes declined, dollar and variety stores provided the greatest value, causing the industry to grow 1.1% and 4.1% in 2008 and 2009, respectively.

Water Supply & Irrigation Systems

Due to their nondiscretionary nature, utilities providers are among the most stable industries in terms of revenue volatility and correlation with the overall economy. The $81.3-billion Water Supply & Irrigation Systems industry (22131) is a prime example of a utilities provider with defensive characteristics. During the previous recession, the industry continued to grow at a steady pace despite declining consumer incomes. The industry’s essential role in the functioning of communities largely insulates it from changes in consumer and business sentiment. Moreover, the industry’s major markets are well-diversified, with households accounting for 60.0% of revenue and commercial and public interests accounting for the remaining 40.0%. Additionally, the industry outperformed the overall Utilities sector (IBISWorld report 22) during the previous downturn, growing 8.9% in 2009 even as the sector declined 11.6%.

Space Vehicle & Missile Manufacturing

The consistency of defense spending regardless of the macroeconomic environment sustains demand for defense-oriented industries, including the $31.5-billion Space Vehicle & Missile Manufacturing industry (33641b) . For example, in 2009, defense spending increased 6.5% despite a 2.5% decline in US GDP. This is typical for the industry, which largely remains immune to short-term shifts in the economic climate. Additionally, the industry’s insulation from economic uncertainty also lies in its globalization. Although overshadowed by domestic demand, exports’ share of total industry revenue has increased in recent years.

Online Recruitment Sites

The $7.7-billion Online Recruitment Sites industry (OD4590) represents an emerging industry with defensive characteristics. The industry’s various career-related services enable greater market diversification and versatility in different job environments. During periods of economic growth, companies will use online recruitment sites to expand their workforce; conversely, during an economic downturn, unemployed individuals will leverage online recruitment sites to facilitate their job search. The industry’s wide range of services and low overhead costs have led to exponential growth in recent years. Industry revenue increased 12.6% in 2018 and is forecast to expand another 10.9% in 2019.

Due to the industry’s still-emerging status, it experienced mixed results during the previous recession, exacerbated by an imbalance of revenue derived from job-posters as opposed to job-seekers. However, industry leader LinkedIn has significantly boosted its revenue from job-seekers by offering premium networking services and an online learning platform. As the industry approaches maturity, it will be well-positioned to withstand an economic downturn.



Interested in related coverage on highly profitable industries? Check out IBISWorld’s recent Industry Insider article on the top 10 most profitable US industries!



Edit by Kieran Newton, Lead Editor
Infographic Design by Victoria Wolak, Lead Editor