Tertiary Sector: Definition, Examples, and Importance


The tertiary sector, often referred to as the service industry, is a vital component of the economy. This article explores the tertiary sector, its definition, examples, and its role in different economies.

Tertiary sector: Understanding the backbone of services

The tertiary sector, also known as the service industry, constitutes a significant part of the modern economy. It includes a diverse range of businesses and organizations that provide services rather than tangible products. In this article, we will delve into the tertiary sector, its definition, examples, and its pivotal role in various economies.

What is the tertiary sector?

The tertiary industry, also known as the service sector, encompasses a wide range of businesses and organizations. These include financial institutions, educational institutions, hotels, restaurants, healthcare providers, personal services, and much more. In a developed economy, such as those in most Western countries, the tertiary sector is one of the three primary industrial sectors, alongside the primary (raw materials) and secondary (goods production) industries.

The two categories of tertiary industry

The tertiary industry can be categorized into two main segments:

1. For-profit tertiary sector

The for-profit segment comprises businesses that aim to generate revenue from their services. For example, financial institutions, such as banks, and investment brokers fall into this category. Other examples include hotels, restaurants, and transportation companies, which provide services for a fee.

2. Nonprofit tertiary sector

The nonprofit segment consists of organizations that provide services without the primary goal of making a profit. This includes state education, healthcare facilities, and various social services.

Examples of tertiary industry organizations

The tertiary industry is incredibly diverse, and it includes a wide array of organizations. Here are some examples:

Transportation services

This category encompasses businesses involved in the movement of people and goods. It includes companies in the shipping and transportation industry, such as railroads, trucking, taxi services, and public transportation systems.

Hospitality and food services

Hotels, resorts, and restaurants are integral components of the tertiary sector. These businesses provide accommodation, dining, and entertainment services to customers.

Financial services

Financial institutions like banks, credit unions, and investment brokers offer a range of services, including loans, investments, and financial advice.

Personal services

Personal services cover a broad spectrum, from hair salons and tattoo parlors to pet grooming and animal care facilities. Services to humans and animals alike fall into this category.

Healthcare and medical services

Hospitals, clinics, doctors, veterinarians, and various medical service facilities are essential parts of the tertiary sector, providing healthcare and wellness services.

Challenges in pricing tertiary services

Pricing services can be more challenging than pricing tangible products. Unlike physical goods with clear price tags, services are intangible, making it difficult to determine their value. Quality often depends on the skills and personality of the service provider. For instance, when choosing between two seemingly identical brokers, consumers may struggle to differentiate their services.

Transition from tertiary to quaternary sector

The tertiary sector is evolving rapidly, driven by technological advancements. Some services that were once considered tertiary have now been categorized into a new segment known as the quaternary industry. This includes services provided by telecommunications companies, cable providers, and internet service providers.

Businesses in the quaternary sector emphasize the knowledge economy, where understanding and meeting customer needs quickly and efficiently are paramount. While they are service-oriented like the tertiary sector, they are distinct in their focus on knowledge-based services.

Leading tertiary service providers worldwide

The importance of the tertiary sector is evident in the global economy. Here are some of the countries with the highest tertiary output as of 2020:

  1. United States: $16.7 billion
  2. China: $8.0 billion
  3. Japan: $3.6 billion
  4. Germany: $2.4 billion
  5. United Kingdom: $2.0 billion

Why the tertiary sector matters

The tertiary sector plays a crucial role in the modern economy. As economies develop, they tend to shift their focus from primary industries that produce raw materials to secondary industries involved in goods production, and eventually to the tertiary sector. This transition signifies economic growth and increased employment opportunities.

The future of the tertiary sector

The tertiary sector is poised for continued growth, especially as technology and knowledge-based services become increasingly prominent. As the largest sector in terms of value-added, it is a cornerstone of advanced economies.

Emerging trends in the tertiary sector

The tertiary sector is not static; it evolves in response to changing consumer demands and technological advancements. Here are some emerging trends in the service industry:

Digital transformation in banking

In the financial sector, digital transformation is reshaping the way services are delivered. Online banking, mobile payments, and robo-advisors are becoming increasingly popular. Traditional brick-and-mortar banks are adapting to stay competitive in the digital landscape.

Educational technology and e-learning

The education sector is experiencing a significant shift toward e-learning and educational technology. Online courses, virtual classrooms, and interactive learning platforms have gained prominence, especially in response to the COVID-19 pandemic.

The role of tertiary services in a post-pandemic world

The COVID-19 pandemic has highlighted the importance of the service sector in maintaining the functioning of societies. As economies recover, the tertiary sector will play a crucial role in various aspects:

Healthcare services

The healthcare industry, a vital component of the tertiary sector, will continue to adapt to new challenges. Telehealth services, remote patient monitoring, and healthcare tech startups are expected to flourish.

Remote work and telecommuting

The pandemic accelerated the adoption of remote work and telecommuting. This trend is expected to persist, leading to increased demand for services related to remote work infrastructure, cybersecurity, and virtual team management.

Globalization and the tertiary sector

Globalization has a profound impact on the service industry. As businesses expand across borders, so does the demand for international services:

International financial services

Global companies require international financial services such as currency exchange, cross-border investments, and international trade financing. Financial institutions specializing in these services play a crucial role.

Cross-cultural hospitality

The hospitality industry adapts to cultural differences as international travel becomes more accessible. Hotels, resorts, and restaurants cater to a diverse clientele, offering a broad range of cuisines and services tailored to different cultures.


The tertiary sector, or service industry, is a dynamic and diverse component of the global economy. It includes organizations that provide a wide range of services, from transportation and hospitality to healthcare and financial services. Understanding the importance and evolution of this sector is vital for comprehending the overall economic landscape.

Frequently asked questions

What are some lesser-known sectors within the tertiary industry?

The tertiary sector is vast, and there are numerous sub-sectors within it. Some lesser-known sectors include event planning, virtual assistance, and digital marketing services. These sectors play essential roles in supporting businesses and individuals.

How does the tertiary sector contribute to GDP and employment?

The tertiary sector often makes a significant contribution to a country’s GDP and employment. It includes a wide range of services, from retail to healthcare, which collectively generate substantial economic activity and job opportunities.

What challenges does the tertiary sector face in terms of regulation and quality assurance?

Regulating the quality of services in the tertiary sector can be challenging. Ensuring that educational institutions maintain high standards or that healthcare providers deliver quality care is an ongoing concern. Regulatory bodies and standards organizations play key roles in addressing these challenges.

What are the key drivers of growth in the tertiary sector?

The growth of the tertiary sector is influenced by several factors, including technological advancements, changing consumer preferences, and globalization. As consumers seek more convenience and personalized services, businesses within the tertiary sector adapt and innovate to meet these demands.

How can entrepreneurs and startups participate in the tertiary sector?

Entrepreneurs and startups can enter the tertiary sector by identifying gaps in the market and offering innovative solutions. Technology and digital platforms have lowered the barriers to entry, enabling new players to provide services in areas such as fintech, e-commerce, and online education.

Key takeaways

  • The tertiary sector, also known as the service industry, provides a wide range of services, from transportation to healthcare and financial services.
  • It can be divided into for-profit and nonprofit segments, with a primary focus on delivering services rather than goods.
  • Pricing services can be challenging, as their value often depends on the quality of the service provider.
  • The transition from tertiary to quaternary sectors reflects the growing importance of knowledge-based services in the modern economy.
  • The tertiary sector is the largest contributor to the global economy, with the United States, China, and Japan leading in output.
View article sources
  1. Sectors of the economy – Economics Help
  2. Tertiary economic activity: definition, background, examples – economicactivity.org