Consumer Goods

Updated on April 18, 2024
Article byKatie Barton
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

What Are Consumer Goods?

Consumer goods are the products purchased by buyers for consumption and are not for resale. It is also referred to as final products. Some of the examples of such goods include an Apple cell phone or a box of Oreo cookies, which are directly consumed by average consumers. These companies offer various products that heavily contribute to the global economy.

What Are Consumer Goods

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Consumer goods are different from capital goodsCapital GoodsCapital goods are man-made assets used in the manufacturing process of a product. They are used to produce the final goods that people consume daily. They are one of the four factors of production- the other three being natural resources, labor, and entrepreneurship.read more with the latter being used to build the final products. The former, on the other hand, is the final product itself. Thus, while food and appliances are final goods, the raw materials and tools used to prepare or make them are capital goods.

Key Takeaways

  • Consumer goods are products that consumers purchase and do not resell. The industry fuels the global economy.
  • Without a thriving consumer industry, the economy could face a meltdown.
  • There are three types of goods – durable, non-durable, and services – worldwide.
  • The availability of products globally depends on factors, like supply and demand, income levels, and disposable income rates.

Consumer Goods Explained

Consumer goods are produced or manufactured to satisfy the needs of the consumers, and it comprises the last stage in the supply chain when reaches the retailers for direct sale to consumers. The industry has been around for centuries and it initially consisted of handmade items, like hunting tools, rawhides, or food, which could take hours to days to make. However, because of technological advancements, they are now quickly and efficiently manufactured.

The consumer goods industry operates on supply and demand. The demand for essential goods like food, clothing, appliances, and furniture will always remain. For products rising beyond the boundaries of need, such as toys or luxury cars, the demand rises and falls based on their popularity and a company’s positioning. High-value consumer products are likely to be more in need in a growing economyEconomyAn economy comprises individuals, commercial entities, and the government involved in the production, distribution, exchange, and consumption of products and services in a society.read more.

According to the Federal Reserve Bank of St. Louis, billions of dollars are spent on consumer goods and services. This makes them a robust industry that keeps the economy afloat globally and contributes to other manufacturing, advertising, and retail sectors. According to Global Edge, the consumer product industry accounts for around ⅔ of the trade in the world, offering products varying from country to country. While products, like soap and toothpaste, may be popular worldwide, the popularity of a few of them may vary depending on the country’s socio-cultural aspect, per capita incomePer Capita IncomeThe per capita income formula depicts the average income of a region computed by dividing the total income of that area by the total population of the region. It is used to figure out the average income of a city, provision, state, country, etc.read more, and economic well-being.

Some of the largest consumer economies are the United States and China. On the other hand, countries like Burundi and Yemen, with weak economies, are struggling consumer economies due to rampant corruption, lack of financing, low digital penetration, and the like.

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Types

Exploring the types helps us understand consumer goods’ meaning even better. These include durable, non-durable, and services.

Consumer Goods Types

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#1 – Durable Goods

Durable goods do not easily become obsolete and survive for some years. For instance, laptops are a good example of durable goods. However, these items tend to be more expensive than non-durable goods as they are relatively a long-term investmentsLong Term InvestmentLong Term Investments are financial instruments such as stocks, bonds, cash, or real estate assets that a company intends to hold for more than 365 days in order to maximize profits and are reported on the asset side of the balance sheet under the heading non-current assets.read more. As a result, consumers are more likely to spend time researching and planning their purchases.

Here are a few examples of items in this classification of consumer goods: –

  • Appliances
  • Furniture
  • Automobiles
  • Electronics
  • Medical equipment

Bottom line: A product a consumer purchases and expects to use for more than three to four years is a durable good. In an expensive sector, companies dealing in durable goods work on product enhancements to boost durability to cut across the stiff competition.

#2 – Non-Durable Goods

A non-durable good may require quick consumption being perishable. Some examples of such goods include a box of doughnuts, hair care products, or clothing. The resilience of non-durable goods varies from product to product. For instance, clothes may probably last longer than a bag of veggies. Another term for this category is soft goods.

Here are a few examples: –

  • Cosmetics
  • Food
  • Cleaning products
  • Clothing
  • Shoes
  • Medication

Bottom line: These goods need quick consumption as they may not last for three to four years. Non-durable goods are usually much less expensive than their durable counterparts.

#3 – Services

The last category is services, the intangible items that one consumes immediately. Here is the list of consumer goods from services: –

  • Salon services
  • Home painting services
  • Grocery delivery
  • Electronic repairs

Bottom line: A service is what makes one’s daily life easier or is needed to keep functioning. For example, repairing air-conditioning is the service to mitigate the effects of summers in a region.

Examples

Let us consider the following consumer goods examples to have a better understanding of the concept:

Example #1

Some famous consumer goods companies include L’Oréal, Hugo Boss, and FMCG giants like NestleFMCGFMCGFast-moving consumer goods (FMCG) are non-durable consumer goods that sell like hotcakes as they usually come with a low price and high usability. Their examples include toothpaste, ready-to-make food, soap, cookie, notebook, chocolate, etc.read more or the fast-moving consumer goods dominate the industry as they include low-priced packaged products that sell easily. The consumer goods industry also helps with job creation. Keeping products on the shelf needs workers in factories and retail establishments, both online and in brick and mortarBrick And MortarBrick and Mortar is a kind of business that offers goods and services to its customers face-to-face through a physical outlet. It represents a physical presence of a business. read more shops.

Example #2

The industry has a great influence on the advertising industry. In 2019, the estimated amount for consumer product advertising was $560 billion worldwide. Out of them, the United States spent a whopping $229 billion, while China spent around half of what the U.S. did. In 2017, the single biggest worldwide advertising spender was the U.S. company Procter and Gamble, which spent around 10 billion dollars for the purpose.

Frequently Asked Questions (FAQs)

What is the difference between consumer goods and capital goods?

Consumer goods are those products that consumers use. Capital goods are products the business uses to create consumer or other capital goods.

What are non-durable consumer goods?

Non-durable ones are those products used for one or few uses. Food and transport services are some examples of non-durable goods.

What is the difference between industrial goods and consumer goods?

Industrial goods are those used for industrial and business purposes. At the same time, consumer products are ready for use and satisfy human wants. Machinery, plants, and raw materials are some examples of industrial goods. On the other hand, food, clothing, and drinks are some examples of consumer items.

What are consumer goods companies?

Consumer products companies are those companies that produce and sell products that are for the buyer’s direct use for enjoyment or own purposes.

This article has been a guide to what are Consumer Goods. Here, we explain the role of these goods in the global economy, their types along with multiple examples. You may also learn more about financing from the following articles: –