Consumer discretionary refers to a category for services and goods that aren’t essential. For instance, you would consider wheat and rice as essential products but streaming services as non-essential.
So, when will a consumer invest in this category of services?
Consumers will only purchase this category of products when they have enough funds to pay for the items on the last day of the month. Consumers may want to buy new clothes or items, but they’ll avoid purchasing those if they cannot finance them.
Hence, these products and services are consumer discretionary, also known as consumer cyclical.
The 7 Types of Consumer Discretionary Companies –
1. Consumer Products Companies like Nike, British American Tobacco, and Unilever
These companies make and sell products that are intended for direct use by the buyers for their own use and enjoyment. This sector includes companies involved with food production, packaged goods, clothing, beverages, automobiles, and electronics.
An example can be Nike, they are involved in designing, developing, and worldwide marketing and selling of athletic footwear, apparel, equipment, accessories, and services. They are the largest seller of athletic footwear and apparel in the world.
2. Consumer Service Companies like Playboy, FedEx, and Mr. Handyman
Consumer services are intangible products or actions that are typically produced and consumed simultaneously. They include services provided by hotel companies, personal insurance, rail travel, education, health care, recreation, catering, tourism, finance, entertainment, and home maintenance.
An example can be FedEx, they use wholly-owned subsidiaries to provide a portfolio of transportation, e-commerce, and business services. They generate value by offering ‘high value-added’ package delivery services to 220+ countries.
3. Education/Training Companies like Stanford University, Udemy, Harvard Business Publishing
The Education Industry comprises establishments whose primary objective is to provide education. These establishments can be public, non-profit, or for-profit institutions. They include elementary schools, secondary schools, community colleges, universities, and ministries or departments of education.
A new addition in this space is Educational technology (commonly abbreviated as edutech, or edtech), it is the combined use of computer hardware, software, and educational theory and practice to facilitate learning.
An example of this space can be Udemy, it is a massive open online course provider, and its learning experience arranges coursework into a series of modules and lessons that can include videos, text notes, and assessment tests.
4. Food Companies like BeyondMeat, Del Monte, and Nestle
The term food industries cover a series of industrial activities directed at the production, distribution, processing, conversion, preparation, preservation, transport, certification, and packaging of foodstuffs.
An example can be Nestle, they sell everything from baby food and bottled water to cereal and healthcare nutrition products. Their biggest brands include Nescafé, KitKat, Nespresso, Maggi, Toll House, and Milo.
5. Retail Companies like Starbucks, Barnes&Nobles, and Walmart
An example can be Walmart Inc (Walmart), they are a retailer that operates grocery stores, supermarkets, hypermarkets, department and discount stores, and neighborhood markets.
6. Transportation Service Companies like Lufthansa, Avis Budget Group, and Cosco Shipping
Transport businesses are a type of business that transports goods or passengers from one location to another. They can provide services to individual passengers, other companies or global trade partners.
An example can be Avis, it is a leading rental car provider to the commercial segment serving business travelers at major airports around the world, and to leisure travelers at off-airport locations.
7. Travel and Leisure Companies like Las Vegas Sands Corporation, Marriot International, Walt Disney World
From airlines, cruise lines, and hotels to restaurants, tour companies, and theme parks, the travel and leisure industry employs millions of Americans each year and rates among the top 10 employers, according to the U.S. Travel Association. This industry has four major pillars: transportation, lodging, dining, and entertainment.
An example of this industry is Walt Disney World Resort, it is an entertainment and recreation center of nearly 40 square miles featuring four theme parks, two water adventure parks, dozens of resort hotels; 81 holes of golf on five courses; two full-service spas; Disney’s ESPN Wide World of Sports complex; and Disney Springs, an entertainment-shopping-dining complex.