One of the great things about beginning a New Year is that we have a chance to speculate where those next 365 days will bring us. That speculation also gives us a little perspective on where the trends are moving that will carry our profession into the future. So here’s my take on some of the issues that existing funeral service faces. . . .
I think that there are five trends that are happening in society right now that have some type of ramification for our profession. They include:
- Employment Issues
- Supply Chain and Manufacturing
- Niche Companies
- Investment Opportunities
Here is how I believe that each of those trends may settle into the death care profession:
Employment Issues – The Covid-19 pandemic has caused Americans to really look at what we want out of our employment. In some occupations it has allowed many to look at the work from home lifestyle. In other occupations it has allowed some, especially older Americans, to look at the reasons they are working and then make a decision if they should continue to chase the extra income and be on the front lines where there is a pandemic, which may become endemic, or simply retire at their present stage and be content with that.
It is my opinion that many older funeral directors will opt to leave the profession probably a little earlier than they would have sans Covid-19. That issue will exacerbate the problems finding qualified people and will certainly result in wage escalation for those men and women who are talented in our profession.
What Others are Saying: Labor has been the major concern for many industries, given the shrinking workforce from early retirees, mothers that need to secure childcare and those looking for better-paying jobs. Employers not only need to be competitive within that shrinking pool, but also need to retain their talent. . . . . “The war on talent in 2022 is going to only intensify”, says Shane Grant, CEO of Danone North America. “It’s about game-changing people policies . . for not only corporate workers, but frontline workers. It’s about institutionalized flexibility. . . .And I think those things are going to become true differentiators in this war for talent in 2022.”
Supply Chain and Manufacturing — We are all now experienced with the supply chain issues that have happened over the past two years. Regardless of what the reason for these delays are, companies have realized a low-cost product that cannot be delivered in a timely manner because of distance issues is virtually worthless when trying to make a profit. A higher-priced, locally delivered product, that can be shipped in a reliable fashion will almost always be more desired than a product that is difficult to land on your doorstep. . .even though it is less costly.
Manufacturing being brought back to America may mean a little higher prices for finished goods such as caskets, however, the flip side of that will be satisfied families that can get the products and services they want when they want them.
What others are saying: Supply chain disruptions have meanwhile played a key role in stalling the global economic recovery due to logistical logjams, a shortage of shipping containers and a steep rebound in demand that left producers in short supply. . . . Again, here is what Shane Grant, CEO of Danone North America says, “As we go into 2022, I think it’s this theme of just volatility, and it’s not one particular type of volatility. It’s enormous volatility in our supply chain. It’s everything from input availability, capacity, transportation, labor, it’s COVID adaptations by ways of working adaptation. It’s this accordion economy of sort of stop-and-go and the adaptations required. The theme going forward is just volatility in everything.”
Inflation — Well, the first two topics I’ve touched on. . . if I am correct, won’t cause prices to go down. Both, employment issues and bringing manufacturing back home will actually cause a funeral businesses costs to rise. I’m pretty certain, that while maybe not at the 6.8% inflation we’ve seen in 2021, we will have higher inflation on costs of business operations than we have gotten accustomed to in the past 30 years.
I don’t know how long it will last, but the general rule to tame inflation is to raise interest rates. However, so many people and businesses have so much cash built up over the past 7-10 years, I’m not so sure that is a sure fire weapon at this time either. It’s my opinion that the best weapon against inflation at this time may be a full court press on getting our manufacturing and supply chain moving so we have easily accessible and available products.
With inflation, the battle for existing funeral establishments will be on how to cover these inflationary costs without moving client families into a lower cost alternative because of the growing inflationary pressures. This could be a delicate dance.
What others are saying: Inflation is by far the No. 1 economic concern going into 2022. Many are worried about a period of escalating prices, and don’t trust what they’re hearing from mainstream economists and central bank officials. At the start of 2021, the U.S. was forecast to end the year with 2% inflation, but it is close to 7% instead. Fed Chair Jay Powell has subsequently backtracked on his “transitory” thesis, with the term endangering a delayed reaction to the current price environment.
“I think the biggest risk is that expectations about inflation will continue to rise and the more they rise, the more difficult those expectations are to manage,” said Gad Levanon, head of the Conference Board’s Labor Markets Institute. “It was a hard-earned accomplishment for the Fed to able to anchor inflation expectations, and they are at risk of losing it.”
Or, another opinion in the opposite direction. “I do think that we’ll see a gradual slowing in inflation throughout 2022,” predicted Gus Faucher, chief economist at PNC Financial Services Group. “After a big run-up in energy prices, they’re going to stabilize or come down next year. I do think that a lot of the higher price pressures from the reopening of the economy are going to fade, things like airfares, hotel rooms and new and used cars.”
Niche Companies – It is my opinion that a lot of people desire to own and operate their own companies. We see it all the time. . .people leave their place of employment and start their own businesses. It’s really common in the trades where people like heating and cooling technicians start their own business and are willing to work 14 hour days to get the business going in the early years.
I think funeral directors are not much different from those types of tradesmen who venture out on their own. However, the traditional starting costs of a funeral home are much more than an office and a van where some of these technicians start their, eventually, very successful companies. However, I now think death care has options available for many funeral directors that want to venture out on their own. Funeral planners, cremation specialists who may use a trade crematory, preneed planners, and other niche operations are much more available and viable than they have ever been before. Technology and its marketing aspects also offer help in this realm to the start-up guys that was never available before.
Again, my opinion, but the lack of adequate compensation to some really good funeral directors may put them on this path. When this happens a funeral home owner not only losses a valued employee but many times faces a new competitor. Keeping employees happy may be the best way to fight this battle.
Investment Opportunities — One thing the Covid-19 pandemic has done for Death Care is get it noticed. You’ve seen the articles and the investment capital coming into death care in every segment — from building traditional funeral home roll-ups to millions going into technology companies with a vision of helping death care providers serve their clients.
I’ve seen a lot of it. . . and been approached by many who are looking for investors in everything from building a national direct cremation provider chain to post-cremation products to obituary services to funeral home roll-up partners. It’s a crowded field out there right now, but some of these alternatives to the traditional funeral homes will catch on and siphon client families away from traditional funeral homes.
I think the traditional funeral homes with branded heritage names still have a lot going for them. However, as we move forward with new trends there certainly is a challenge to them to not get left behind with high overhead and diminishing service revenues. It behooves funeral home owners and managers to know what is coming and how they will not only defend the turf they own. . . . but try to move forward and grab a bigger share of a growing market of death care services. . . that is not necessarily all earth burial or cremation.
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