Product (business)
In the context of business, a product is any item or service exchanged between a seller and a buyer. Products can be tangible, like groceries or antiques, or intangible, such as digital content or online services. They vary in nature; some products are reusable (like tools), while others are consumable (like food). Businesses acquire products through either collecting existing items or creating new ones, which involves labor and craftsmanship. Transactions can occur in two primary forms: business-to-business (B2B) and business-to-consumer (B2C), with each serving distinct purposes and relationships between entities.
The rise of e-commerce has transformed traditional business practices, allowing transactions to occur in the digital realm without physical goods. This has led to new product types, including digital goods and e-procurement services, which streamline the acquisition of items for businesses. Companies must carefully price their products, ensuring they cover production costs while also considering customer psychology to drive sales. Understanding the dynamics of products in a business context is crucial for both merchants and consumers navigating this complex marketplace.
Subject Terms
Product (business)
In every business, something is being exchanged: the customer pays, and the business delivers. The object or service that is being traded is the product of the business. For example, a grocery store’s products might include fruit, bread, and other foods. An antique shop’s products consist of the antiques they sell. A taxi company’s product is the ride taken by passengers. With the advent of the Internet, products can also be virtual. This may take the form of in-game purchases, downloaded entertainment content, or access to material only accessible through a specific site.
Overview
Products come in many forms and vary in their particular nature. Some products are continually usable (such as tools), while others are consumed and can only be used once (food). When searching for a product, potential buyers may be looking within a narrow range of options—such as a record by a particular band—or a larger variety—a record from a genre, but not necessarily by one band. The specific product for which a consumer is searching can also determine the company or store where they will likely find what they desire. If the consumer is looking for a highly specialized or rare item, they will look in specialty shops rather than general stores.
Product Types
An important part of running a business is amassing products, which can be done in two ways: by collecting existing items or by creating new ones. The procurement of items necessitates labor on the part of the business. In the case of a flower shop, for example, the seller or provider needs to grow and/or gather particular plants. If a plant requires special care or effort to grow, the price of the product will likely be correspondingly higher. If the plant is highly valued for its beauty, this may also be a factor in its eventual pricing.
The creation of artificial (human-made) products involves a different kind of labor: that of craftsmanship. The item may be made by the sellers themselves or by an associated business with which the seller deals—known as a "business-to-business" (B2B) relationship—before offering the product to customers— known as a "business-to-customer" (B2C) relationship.
In a B2B transaction, the two entities involved understand each other on the basis of an exchange that will benefit both their businesses. This is distinctly different from a B2C transaction in that the purchaser is usually the end user.
The automobile industry provides an example of B2B transaction: individual parts are created by various companies and sold to the car manufacturer, which assembles them and sells the completed car to consumers. In this interaction, both businesses benefit by the transaction, and contribute to an eventual B2C transaction.
E-Commerce
The advent of the Internet has affected all realms of human endeavor. One of those is the realm of business. Instead of business being merely the trading of physical goods or services, commerce can now take place within the ephemeral sphere of the digital world. E-commerce has created a unique new variety of transaction: digital products have no physical weight or substance, but they are bartered in significant ways. An example of e-commerce is a company website. The construction of a website is itself a product, that of the programmer, and websites allow companies to promote their business and sell products, as well as connect their employees. With the ubiquity of the Internet, it has become almost compulsory for companies to have a website.
Sites that provide products in bulk for businesses are known as "e-procurement" sites. These sites allow the persons responsible for office supplies and other necessities related to their business to easily acquire goods without having to spend time searching at physical venues for what they require.
Another category of e-commerce is the "infomediary" (a portmanteau of the words "information" and "intermediary"). This is a company whose purpose is to gather information (often links to resources) and catalog it for the easy perusal of large organizations. This saves valuable time for the organizations and allows them to easily access needed materials.
The purchase of art (especially music) online has proven to be highly controversial as Internet culture has grown. Because of peer-to-peer (P2P) file sharing, music, video content, and other information can be distributed freely and easily. The producers of the original works often object to the free acquisition of their product but have enormous difficulty preventing its ready dissemination. Though steps are constantly taken to suppress Internet piracy, there is little that companies or agencies opposed to its proliferation can do to stop the practice entirely.
In Practice
When considering the price at which items will be sold, merchants must calculate the price of producing the product. Selling products at a price higher than the cost of producing them ensures that the business will make a profit; this, in turn, is used to pay the business, its employees, and anyone involved in creating the product.
By selling items at a price lower than they cost to produce, merchants may incentivize customers to buy related products that have a higher markup. For example, a teashop might sell tea at a reduced price and also stock teakettles that cost enough to offset the low cost of the tea. This is an example of how a business can use customer psychology, rather than the direct quality of the merchandise, to drive sales.
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