Wondering about how to start a consumer products business? Developing a consumer product and marketing it to the public may seem like a daunting process, but it’s a great business venture for entrepreneurs who have a specific product idea that they believe can serve a consumer need and help people better live their lives. Just like for any other type of business, you will need to name your business, register your business with the relevant state, local, and/or federal authorities, and choose a business structure that best suits your company’s vision and needs.
The challenges of starting a consumer products business are different from those of a service-based company or online business. Most other business types do not require working with manufacturers to create a specific product.
What Is a Consumer Product?
What are consumer products? Consumer products, also called consumer goods, are items purchased by the consumer to use themselves, for their family, or for their household. They are often grouped in terms of the consumer’s buying habits or on the basis of durability. Examples of consumer products include automobiles, medical devices, clothing, cosmetics, and electronics.
Convenience goods – much as milk, eggs, and toilet paper – are, as their name indicates, items that consumers seek to buy as conveniently as possible. Shopping products are items that a consumer purchases after researching their different options to look for the best price, quality, and style. Specialty consumer products are items that shoppers go out of their way to obtain due to a product’s unique attributes or loyalty to a brand. Cars and wedding dresses are two examples of shopping consumer products. Finally, unsought products are items that people are not that interested in obtaining. Due to the fact that most people are not actively interested in and pursuing unsought products, they require heavy marketing. Life insurance and funeral services are two examples of unsought products.
Consumer products can also be classified in terms of the product’s lifespan. Durable products, such as furniture, have a long life; non-durable products, such as perishable food items or school supplies, run out quickly.
What Is a Consumer Products Business?
The consumer goods sector is comprised of a variety of companies that deal with items that customers purchase. Consumer goods can include anything that a person can purchase for themselves, their household, or their family at a retailer — from clothing to electronics to automobiles. Therefore, performance in this industry is highly dependent on consumer shopping patterns. When the economy is performing well, consumers will seek higher-end retail products. When the economy is not performing as well, consumers will shy away from luxury products and instead opt to spend their money on necessary items such as food.
Why Start a Consumer Products Business?
The time is ripe for business opportunities in the consumer goods industry due to several market considerations. Consumer preferences are changing, which gives new companies an opportunity to capitalize on their preferences for more innovative brands. Investors, also, are turning their attention to early-stage consumer goods as a fresh alternative to high-risk investments in tech businesses. At the same time, thanks to megastores such as Amazon and Walmart, as well as direct-to-consumer sales powered by social media channels, retail participation has never been easier. Additionally, because manufacturing and sales can be outsourced, the costs for starting a consumer goods business can be very low.
How to Start a Consumer Product Business
Once you’ve determined that this is the correct vertical for you, consider the following steps for finding success as a new consumer products business:
1. Come up with a unique product idea.
Product design is the first step in any industry. While an idea is not enough to launch a successful business, a good product idea is essential for starting a consumer goods business. Think of the market you will serve and the needs of consumers in that market. You may consider obtaining formal training to be better familiar with the needs of customers in your market or find a product designer or laboratory to help you with the ideation process. Don’t hesitate to use your networking skills to connect with others in the industry who could help you turn your idea into reality.
2. Do some research to find the right manufacturer for your company.
Finding the right manufacturer that you trust to create your products is arguably the most important step in starting a consumer products business, as your relationship with the manufacturer could last for several years and affect the success of your business. Choosing a bad manufacturer could spell the failure of your business organization. Therefore, do your research beforehand and don’t be afraid to negotiate terms.
The research to find a product manufacturer doesn’t have to be too complicated if you use your networking skills. Work your professional connections to find the right factory. You can use LinkedIn or reach out to others in the industry for recommendations. Once you have a list of consumer product manufacturers, research each one and their internal procedures. You will want to learn as much about each manufacturer as possible so that you can determine whether they are the right one for your business. Remember to ask for product samples and inquire about quality assurance. Certain products which are regulated by the U.S. Food and Drug Administration – for example, in the cosmetics and skincare industry, some beauty products which contain SPF, and some acne products – will require additional certifications and licensing. Ensure that the laboratory or company with which you work has the proper certifications to avoid issues with the FDA.
3. Negotiate a contract, including terms and prices, with the manufacturer.
Remember that you will need to negotiate the terms of your contract with the manufacturer you choose. You will want to make sure that the manufacturer will be held responsible for any issues in the production line, such as defects that could lead to product recalls. You will likely need to go through several rounds of design before you arrive at a final product and will also need to agree on a production timeline with the manufacturer. The manufacturer will quote you a price which depends on the cost of the raw materials that go into the product. Expect to pay some upfront costs related to the cost of the materials and the tools required to manufacture your product.
You should also be knowledgeable about pricing strategies in your negotiations. Specifically, you will want to negotiate tiered pricing which is a price structure that varies depending on order volume. Larger orders will cost less, and smaller orders will cost more. You will still want to start small and work on expanding your business slowly.
If your manufacturer is located overseas, you will also need to coordinate how the finished products will be shipped to your warehouse. This will require thinking about how the product will be packaged to be sent via international mail. For direct-to-consumer orders, you will need to set up a different system which also considers how the consumers will receive your finished product. Whatever your final choice, ensure that it is the best option for your business venture.
4. Once you have a product, test it out, and get as much consumer feedback as possible.
While you may think that your job is done once you have a product, the truth is that you will need to do some market research to determine whether your product is, in fact, helping address an important consumer need. This means that you will need to find potential customers and ask them about your product. In general, consumers appreciate a company that asks for their input in designing products, and you will find that your products are more successful if you make sure to test your products continuously. You may consider developing prototypes of a product and then take them to a place where your consumer base hangs out and ask for opinions on the product. You will want to query your customer base on subjects such as how useful they find the product, what other features they feel would be useful, how they would utilize the product in their everyday life, and how much they would be willing to pay for such a product.
If you decide to develop and maintain a social media presence on the web, you may want to send samples of your product to influencers on Youtube, Facebook, Twitter, and other leading social media sites to obtain feedback and also gain exposure on the internet.
5. Don’t be afraid to stick to your values.
While it may seem like the consumer goods industry is driven by profit, remember that consumers, these days, are looking for products which align with their values. Research shows that consumers are willing to pay more for a quality product which reinforces their values and beliefs – for example, Inc. reports that 73% of millennials, who are those born from 1977 to 1995, are more likely to buy fair-trade items, even though they are more expensive, because of the higher quality and more humane production standards.
Starting a consumer products business poses its own unique set of challenges, such as working with a manufacturer and ensuring that your product’s specifications meet a demonstrated market need. As a business owner in the consumer goods industry, you will need to exercise excellent negotiation skills in deciding on the terms of your contract with the manufacturer, so do not shy away from trying to strike a good deal that can best suit the needs of your company. Because most successful businesses start small, it could be a good idea to build a product with all the essential core features and then expand your business slowly over time. Remember to regularly obtain feedback about the features of your products in order to do the market analysis and ensure that your product is indeed well-received by consumers, who will in return be grateful to you, the business, for paying attention to their needs. Above all else, remember to start small and grow slowly, as doing too much too soon can spell financial ruin for a business.