Durable Goods

Durable goods are items that boast a lifespan of more than two or three years, showcasing resilience and longevity. These goods are intended to deliver sustained economic value over an extended period, providing reliable utility and durability.

Durable goods can be a source of significant value for individuals, as they provide long-term benefits and avoid resource overuse and waste. They can also serve as an investment, yielding returns over an extended period. However, durable goods may block household expenditure and consumption, depending on the context or circumstances.

• Durable goods refer to those commodities that allow consumers to enjoy their benefits for a very long period.
• The estimated lifetime of these goods is more than two or more years. Therefore, individuals try to replace or repair them to extend their shelf time by some years.
• Capital goods also fall under consumer durables; businesses primarily use them, whereas durable goods are intended for household use.
• The demand for this type of goods accounts for a significant portion of imports and exports in many OECD countries, estimated to be around 70%.

Durable goods require a one-time purchase but provide utility for two or more years, setting them apart from capital goods. Households primarily use these goods, including cars, furniture, beds, refrigerators, etc. There are also semi-durable goods like footwear, clothes, and jewelry that have a shorter lifespan.

Consumer durable goods are designed to have an extended shelf life, operating on the assumption of a single purchase that provides utility over a longer period. As a result, they are more sensitive to business cycles. In economics, they are known for their more elastic supply, while demand tends to be less elastic than utility.

Due to their long expiration period, producers often store durable goods in warehouses instead of ramping up production to match demand. While greater demand for these goods does occur, it is rare as consumers typically try to maximize their utility until scrap value. For example, consumers may replace a part to extend the shelf life of a car if repair is impossible, or they may use a refrigerator beyond its reference period of, say, eight years for up to 15 years. As a result, the purchasing price of durable goods tends to be higher, which correlates with consumer spending.

Consumer spending on durable and semi-durable goods is influenced by disposable income. For instance, during the Covid-19 pandemic, household spending on durable goods initially decreased but later rebounded substantially, driven by the extra cash available to consumers despite the global crisis. Moreover, they are commodities that provide utility over an extended period and have unique supply, demand, and consumer behavior characteristics, making them an important category in economics and consumer spending analysis.

Let us look at the types that are prevalent in the industry:

#1 - Consumer Durables

These goods have a major occurrence in households. Furthermore, they usually last for more than three years. Hence, consumers usually buy the product and stay away from the market for a long. For example, refrigerators, furniture, electronics, equipment, books, jewelry, etc.

#2 - Business Durables

This includes those goods that are used in organizations. For example, machinery, printing machines, computers, software, defense equipment, trucks, commercial aircraft, etc.

Let us look at the examples to understand the concept better:

Example #1

Suppose Tyler bought a double-door refrigerator worth $280 for his renovated home in 2010. As per the sales staff, the lifetime of this fridge is ten years. However, during the tenure, its compressor was disrupted. So, Tyler took the after-sales service and replaced it with a spare part. Thus, it extended the value of the fridge. Therefore, the fridge that was about to last for ten years now has a shelf life of an extended five years. However, if it stops functioning, Tyler has to buy a new refrigerator. Thus, its demand tends to remain elastic.

Example #2

Amazon.com, Inc. is a renowned multinational technology and e-commerce company that has made its mark in the "consumer durable" industry. With its vast online retail platform, Amazon offers a wide range of "consumer durable" products, including electronics, home goods, and appliances. Customers can browse an extensive selection of products such as smartphones, laptops, televisions, refrigerators, washing machines, and more. As a leader in the e-commerce space, Amazon has played a significant role in shaping the consumer durable industry, providing consumers with easy access to a wide range of products from the comfort of their homes.

Although they fall into a similar category, they have a major dissimilarity. So, let us look at their differences:

This article has been a guide to what are Durable Goods. We explain it with its examples, compare it with nondurable goods, and its types. You may also find some useful articles here -

• Consumer Goods
• Fast-Moving Consumer Goods
• Consumption