What are Consumer Goods
Consumer goods are products bought for consumption by the average consumer. Alternatively called final goods, consumer goods are the end result of production and manufacturing and are what a consumer will see on the store shelf. Clothing, food, and jewelry are all examples of consumer goods. Basic or raw materials, such as copper, are not considered consumer goods because they must be transformed into usable products.
BREAKING DOWN Consumer Goods
There are three main types of consumer goods: durable goods, nondurable goods, and services. Durable goods are consumer goods that have a long-life span (e.g. 3+ years) and are used over time. Examples include bicycles and refrigerators. Nondurable goods are consumed in less than three years and have short lifespans. Examples of goods include food and drinks; services include repairs and haircuts.
Consumer goods are also called a final good, or end product. These items are sold to consumers for use in the home or school or for recreational or personal use. Consumer goods exclude motor vehicles.
The Consumer Product Safety Act was written in 1972 to oversee the sale of most common consumer goods. The act created the U.S. Consumer Product Safety Commission, a group of five appointed officials who oversee the safety of products and issue recalls of existing products.
Classification of Consumer Goods
Consumer goods can be classified into four categories: convenience, shopping, specialty, and unsought goods. These categories were identified based on consumer buying patterns. Convenience goods are those that are regularly consumed and are readily available for purchase. These goods are mostly sold by wholesalers and retailers and include items such as milk and tobacco products. Convenience goods can be further segmented into staple convenience goods (fulfilling basic customer necessities) and impulse convenience goods (non-priority goods, such as cigarettes).
Shopping goods are those in which a purchase requires more thought and planning than with convenience goods. Shopping goods are more expensive and have more durability and longer lifespans than convenience goods. Shopping goods include furniture and televisions.
Specialty consumer goods are rare and often considered luxurious. The purchase of specialty goods is reserved for an elite class of shoppers with the financial means to conduct the purchase. Marketing efforts are geared to a niche market, usually the upper class. These products include furs and fine jewelry.
Unsought consumer goods are readily available but are purchased by a few members of the available market. These items are not usually purchased repeatedly and usually serve specific needs, such as life insurance.
Fast-Moving Consumer Goods
One of the largest consumer goods groups is called fast-moving consumer goods. This segment includes nondurable goods like food and drinks. Companies and retailers like this segment as it contains the fastest-moving consumer goods from stores, offering high shelf-space-turnover opportunities.
Consumer Goods ETFs
The largest consumer goods ETF is the iShares U.S. Consumer Goods ETF (IYK). This ETF, founded in 2000, has 115 stock holdings and more than $900 million in assets under management (AUM). The fund tracks the Dow Jones U.S. Consumer Goods Index, also created in 2000. Top holdings are Procter & Gamble, Coca-Cola, Philip Morris, PepsiCo, and Altria Group.
Beyond the U.S. Consumer Goods Index, several of the largest companies are missing. The largest consumer goods company in the world as of December 2017 is Nestle, with brands like Gerber, Toll House, Stouffer’s, Lean Cuisine, and Purina.
Privately Traded Consumer Goods
The index also does not include privately traded consumer goods companies. Two of the largest private consumer goods companies are Mars and SC Johnson. Mars is famous for its candy and gum brands, whereas SC Johnson is a consumer goods company focused on the home with brands like OFF, Pledge, Raid, Ziploc, and Windex.