Fads can make you a fortune fast. Two kids who were among the first to sell fidget spinners in 2016 made $350,000 in just six months.
But the problem with fads is that they can die very quickly. First, the big guys notice the market, create their own products, and use their immense economies of scale to bring the price down. Fidget spinners started at $25 and ended up selling for $5 each by mid 2017.
And eventually, a fad has nowhere to go. I saw a market trader trying to sell some a while back – three for a buck! (I wonder what he paid for them?)
So how do you spot a fad, as opposed to a trend?
A fad is a product that’s going nowhere. You can’t think of a way to improve or develop it. It does what it does and that’s it. Whereas, let’s say, you have come up with a new cat toy, there are a whole load of different ways to develop into other cat-related fields, or special toys for multi-cat households, or scratchers… you get the idea.
How would you develop the fidget spinner?
A fad is also a product that’s going too fast.
There’s a fascinating paper by marketing professors Jonah Berger and Gael le Mens, who studied baby names over 100 years. Their conclusion; the faster names become popular, the faster they fall out of favor. (I’d love to know if anyone has called their baby daughter Daenerys in 2021.) And the names that zoom up the rankings fastest never stay at the top.
Fads are like magic beanstalks that shoot up six miles in an hour – and then disappear into magic dust. Trends have a proper life cycle; they get started, the early adopters start buying, they gain mass market traction, they improve, they become widespread, they start to become mature.
Fad products often don’t really do anything other than amuse. Trends, on the other hand, rely on a long term, basic human requirement. CompuServe and early mobile phones were improvements on helping us communicate with each other, wherever we were. Food mixers took drudgery out of cooking.
So let me guess where some products are headed.
• Cat backpacks? Pet owning fulfills a basic human need for love and companionship. Taking your cat for a hike? Yup, this could be here for the long term.
• RVs? A basic desire for new experiences and freedom.
• Craft beer? The desire for flavor, variety, and fun when you’re drinking beer. (Peanut butter and jelly flavored pastry style double imperial stout, on the other hand? Fad.)
Now this all sounds as if I’m saying “don’t get involved in fads”. Far from it. Remember, those guys with the fidget spinners made massive money in a very short time. Fads can deliver remarkable returns, but you have to be in early, and get out before your inventory is devalued.
You also need to be sourcing new product all the time, because when the fad runs out, you need something else. And you need to be close to your customers, so you can find the thing they’re going to want next.
But above all, you need to keep a really close eye on two figures – price and inventory. If the price starts falling consistently, and your inventory isn’t shifting (even if your sales are still increasing), then you probably have a fad product. It’s time to start reducing inventory, running bundle promotions, and making sure you’re not stuck with fidget spinners or Cabbage Patch Dolls that cost more than you’ll ever get back.