Yellow goods can refer to heavy equipment used on construction sites or a specific category of consumer goods. Large companies may keep their assets, but small businesses may rent them. Yellow products are large, expensive items with a low turnover, while orange and red products are replaced periodically or regularly, respectively.
The term “yellow goods” is used in two very different ways. In one sense, it can refer to heavy equipment used on construction sites and similar places, such as bulldozers and cranes. In another sense, it refers to a specific category of consumer goods. The intended meaning is usually clear from the context, as the two contexts tend to emerge in very different places.
When it comes to earthmoving equipment, yellow goods include the equipment itself, as well as spare parts and tools for maintenance. Large companies and government agencies may keep their assets, believing the initial investment to be worth it in the long run. The equipment must be operated by specially trained operators who are familiar with the ins and outs of using the equipment, as well as the safety procedures that must be observed to keep it operating safely. This represents the need for further investment in research and operator training.
It is also possible to rent yellow goods. Because the equipment is so expensive, small businesses may not be able to afford it or may find that leasing is more cost-effective. Individuals who need access to this equipment for a single project will generally also opt for rental, with an equipment operator accompanying the rental equipment to ensure it is being used correctly. For example, someone who wants to dig a pond might hire a bulldozer and operator for the day, or a construction company might bring in heavy rental equipment to prepare a construction site.
In the consumer goods arena, yellow products are large, expensive items that will last a long time. The turnover of this equipment is very low and the profit margin is high, as a company predicts that consumers will only buy yellow products a few times in their lifetime. Some examples include large appliances such as stoves and refrigerators, which presumably won’t be replaced for years and possibly decades.
This is in contrast to orange goods, which are replaced periodically as needed. Clothes and furniture are good examples of orange products. Red products, of which food is a classic example, are replaced regularly and have a very low profit margin. The company compensates for low profits on individual sales by selling in very high volumes; people only buy a refrigerator once, but they will keep buying cartons of milk to put in it.
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