Commodities are a part of life! We use them all the time! The coffee on your cupboard, the cereals, the soap, the shampoo, the toothpaste – all of these constitute everyday commodities.
The word commodity comes from the French word commodité. This means ‘benefit’ or ‘profit.’ This too comes from the earlier Latin word commoditas which refers to good quality or propriety. The word commodité is related in meaning to the French word biens. Biens means goods. Many people use goods and commodities interchangeably.
As a business word, commodities are products that can in fact be worth more to their owner if sold instead of used. For example, you might have a large stock of canned goods that you won’t be able to consume before it expires. It would be better to sell them off instead, since you would benefit more from the sale than from just eating all of them.
In the business world, the most common examples of commodities are oil, chemicals, raw materials, canned goods and other consumer goods that are often bought or sold.
Originally commodities were things that had value. Commodities had to be uniform in their quality and mass produced by different entities to be considered as such. There is an unwritten contract among these producers that their products must be of such standard that they can be at least interchangeably used to some degree. This allows the consumers to, for example, to switch brands of flour when baking without having to agonize too much over the brand of the flour product.
Let us take, for example, producers of powdered milk. Although they belong to different brands with different organizations and process management, they will still be expected to produce a powdered milk brand that is similar, in category. There will be differences in quality, taste and some other attributes. However, when you think of powdered milk, these products will have to fit the bill.
Strictly speaking, commodities will often refer to wholesale or brandless goods. This means that the commodities will come from direct suppliers of these goods and do not go through the process of marketing, and branding.
A good example of this is oil. The supplier in this case does not matter. Oil is assumed to be oil, and that the use of such should not depend on the supplier. That is why, in commodities trading, once you’ve seen one barrel of oil, you’ve seen them all.
Producers may want to have their products distinguishable from other products. To do this, they employ branding. Branding is the activities engaged to make a product, from a certain producer, stand out from other products of the same kind. Taking the milk example from earlier, we could give one of the producers the name, Moo Milk. It could be told apart from others because of its label, marketing, and container. It might differ a bit from other products in quality.
This will most definitely increase the price of the goods. The upside to this is that the particular product with the best brand name and brand recognition is sure to get a better portion of the market.
About the author:
David Arnold Livingston is a successful business owner
and entrepreneur. He recommends the resource: