Utilized by economists and market analysts, the term "consumer industry" may be better understood if the distinctive subunits of the economy that make up consumer industries are examined and classified. In simplified terms, the consumer industry sells products and services directly to the consumer, as opposed to the capital goods industry, which manufactures goods for sale to other companies.
The consumer sector of the economy refers to the subunit where goods are sold directly to customers for consumption.
Unprocessed wheat sold by the grower to a manufacturer or a supplier is an example of capital goods, since it will eventually end up in baked food products. When an individual enters a bakery and purchases a loaf of bread, she is buying the final product. Thus, products sold directly to consumers are called consumer goods or "final" goods. Anything purchased by the average consumer, from an apple at the local market to a laptop computer to a washing machine, is part of the consumer business industry.
Products and services that make up the consumer sector can also be divided into consumer staples and consumer discretionary (or cyclical) goods and services. Consumer staples include food and beverage products, household supplies and any other items that typically must be replaced on a regular basis due to ordinary use; in other words, the necessities. Consumer discretionary purchases include things like jewelry, vacations and automobiles. They are nonessential and more likely to be purchased when the economy is in an up cycle.
The consumer industry may also be understood by looking at companies that are included within the sector. In the world economy, a niche company that specializes in one product or a group of related products can be easily classified.
For example, the main focus of Ford Motor Company, an American company established in 1903, is to sell cars and trucks to consumers. Thus, Ford is a company in the consumer industry. Still more specifically, Ford's products are considered part of the consumer discretionary industry.
Proctor and Gamble, another well-known American company, is an example of a consumer staples industry company. Although Proctor and Gamble manufactures a wide variety of products under several dozen brands, for the most part its products are what consumers consider essentials or staples, items such as soaps, toothpastes, cosmetics, over-the-counter medicines and laundry and dish detergents.
Over the past several decades, the fastest growing segment of the U.S. economy has been in the services sector, of which the consumer finance industry is a component. A financial planner and a commercial banker provide consumer services that cannot be physically touched but still yet are consumed.
Another example of services are hotels, which can be further classified as discretionary or cyclical. Hotel services are akin to the majority of businesses in the sector in that they too are part of the consumer industry, offering their services directly to customers for consumption.