Difference Between Consumer Goods vs Capital Goods
If you are an aspiring producer, student or entrepreneur, the difference between consumer goods and capital goods should interest you. The reason is that you will need to understand what those concepts mean become more enlightened. As for an aspiring entrepreneur, you will make decisions that will either make or mar your business.
So, having a good understanding of what those terms mean will make you an enlightened boss. With that being said, this guide will provide you with sufficient information about meaning of the terms, dissimilarities, and then the conclusion. However, we will start by defining the terms.
Definition of Consumer Goods
Consumer goods are end-user products, meaning that they are meant for the final user only. In other words, the essence of making them is to satisfy the end-user. Given that these items are meant for the final user, the demand for them is extremely high. Examples are packets of cigarettes, hairbrushes, laptops, etc. Whenever someone buys these items from the supermarket, they are almost always going to use them.
For instance, a mother can visit the supermarket to buy a loaf of bread for breakfast. The loaf of bread is meant for consumption at home, not for a commercial reason. The same applies to a man who just bought a new car. Going forward, he will be driving himself to the office every morning as opposed to taking a commercial vehicle or cab to the office.
In clear terms, whenever someone buys a product for personal use, the item is classified under this category. Before getting to the difference between capital goods and consumer goods, let’s break down what the former is all about.
Definition of Capital Goods
Capital goods are items or assets acquired by a business for use in its production process. More often than not, the reason for purchasing them is for the buyer to use them for facilitating the making of the final item. There are certain occasions where a company acquires another that manufactures the inputs used in its production process.
This usually happens when the parent company is expanding, and taking such a step has numerous benefits. Manufacturing companies have many suppliers that contribute to its value chain. A simple example is where a beverage company buys cocoa seeds from local farmers for the production of chocolate. The company didn’t purchase large quantities of cocoa for final consumption.
However, it buys the raw materials from local farmers for making the chocolate sold to their end-users. So, the cocoa, in this context, is the capital goods. Another example is a soap-making factory acquiring a soap boiler from an engineering firm. Notice that it didn’t buy the machine to resell it. However, the firm had to procure the machine to help its manufacturing process.
Main Differences Between Consumer Goods vs Capital Goods
The table below explains consumer goods vs capital goods some more.
|Basis of Comparison||Consumer Goods||Capital Goods|
|Meaning||These are items that are meant for end-users||These are tangible things or assets that will be subjected to further industrial use|
|Point of Purchase||They are always bought from retail stores||They are always purchased from companies or supplied to the buyer|
|Quantity||The quantity is always small for personal or family use||These are always purchased in large quantities|
|Examples||Bread, rice, hairbrush, and bags||Machines, tools, plants, buildings, and equipment|
|Demand||The demand for them is always high because many people use them||The demand is always low, but buyers always purchase them in bulk|
|Marketing strategy||Business to consumer (B2C)||Business to business (B2B)|
Difference Between Consumer Goods and Capital Goods: Conclusion
To wrap up this guide on capital goods vs consumer goods, one has to understand that the major dissimilarity between them is how they are utilized. While manufacturers use the former, end-users often use the latter. That is the significant disparity between them.
Looking at the table, one can also summarize that the marketing strategy, point of purchase, demand, and storage facilities distinguish one from another. Finally, this piece has given you the most important facts about the concepts.