The market for funerals today is beginning to shrink and downsize due to the costs and added expenses that are incurred when planning a casket funeral as supposed to choosing cremation. The funeral industry accounts for roughly over $16 billion dollars in sales every year, and in recent years has seen a decline in the services being provided for individuals choosing to use caskets and burials, because the average cost of a funeral today is roughly $7,075. With the merger proposal of both Stewart Enterprises, and Service Corporation International which are both leading the industry, there will be a market dominance that will crush a majority of these privately owned funeral homes. In today’s funeral home market it is comprised of small independent homes, with approximately 86% of them being private and the remaining 14% are publically traded. With this in mind, only a small portion of the multi-billion dollar industry is accounted for by large businesses, with a larger portion of the $16 billion in sales contributing to smaller, privately owned homes.
Since 2007 till 2012 there has been a steady increase in privately owned funeral homes closing down, because the costs and expenses of leasing the property, including services are just too steep to manage. If the FTC allows the merge of both Stewart Enterprises and Service Corporation, the market for funeral homes will shrink, and they will start to monopolize the funeral home market. This poses a moral dilemma, because when families are trying to pay respect and homage to their loved ones, they do not need to stress about the price being fixed, and getting over charged by these larger companies like SCI and Stewart Enterprises. With the Corporation price ranging from anywhere between $3,000 to $170,000, and the average cost of the just the service alone without the burial is around $6,000. This is costly when considering you are burying your loved one, and although it is a one-time cost, it has been a deciding factor for individuals, hence why cremation has been more popular over the years. The average cost of a cremation is roughly $1,650, which is about a 78% difference between the average costs of a funeral with a burial. Cremation has seen an increase throughout the years, since 1960 when cremation only accounted for 3.56% of individuals who passed on, it now has transpired into 43.2% in 2012. This is a difference of 39.64%, which is projected to continuously increase to 48.8% by the year 2017. With the loss of over 5,320 homes in the past five years, this has caused the funeral home industry to lose over 21.5% of their business because there are fewer homes to choose from in 2012, as supposed to ten years ago. Since 1960, the average cost of a funeral back then was minimal, at $708 it was significantly less expensive to burry your loved one, when compared to today when costs have increased almost 91% to $7,075.
This substantial increase in costs has made it difficult for these privately owned homes to maintain business. Companies such as Costco have established themselves in this market by offering coffins as cheap as $880 and up, with a delivery service within 48 hours. This gives them a competitive price advantage as well as a competitive advantage in the market because they are accessible online enabling them to reach a larger market, and they are still offering caskets at a significantly lower price. With only approximately 25% of U.S. citizens have a living will, this shows that cremation is becoming even more common because being left at the will of their loved ones to deal with costs and arrangements can be difficult.
The solution to this is these smaller privately owned homes must use a competitive pricing technique, and offer deals that will gain the interest of individuals looking to potentially burry their loved ones rather than cremate. Offering the option to come in and give a small tour and a brief display of how they operate and handle matters could also attract business to their location, as well as build local publicity. SCI charges a lot more and does not meet a majority of customers with satisfaction, which is where the smaller homes have the point of opportunity to take advantage of this and really establish themselves in their local communities with a positive image.
With death rates per 1,000 people decreasing .5% from 2000 to 2012 and medical research is improving and enhancing life expectancy this is the time for the smaller funeral homes to action. These smaller homes need to take a different approach and offer competitive pricing along with customer satisfaction to maintain business.