WHAT IS A COMMODITY?
There are two defining factors of commodities — they can be purchased from many places, and they are not differentiated.
Some examples of commodities include corn, bleach, coffee beans, gasoline, and gold. Any substance that’s the same regardless of which manufacturer or brand you buy it from.
In today’s world, there are two ways to be commoditized.
The first is if you manufacture a product that is a commodity, like gasoline. It’s difficult to sell your fuel for more than anyone else because you can only charge what the market is willing to pay.
The second is to be a retailer that sells products that are widely available in the marketplace. An example is a smartphone retailer. The same item can be purchased from Best Buy, Verizon, Sprint, and others.
Being a commodity is not always bad. Let’s look at some of the advantages and disadvantages.
LOW COST MARKETING AND SALES
One advantage of being considered a commodity, is that if there’s a market for your product or service, you will likely have a low cost for marketing and sales.