Every year, a handful of consumer products become runaway hits. They seem to come out of nowhere. They’re hyped by traditional and social media. Demand surges, and retailers can’t seem to keep them in stock. Revenues ramp up spectacularly.
Sometimes, that success persists for a while — for a year, two, three, perhaps even four. And then they fade, or vanish suddenly. Sometimes the companies that produced them vanish too. Or perhaps they survive — but at dramatically lower levels of revenue, profitability and attention.
Pet Rocks, Beanie Babies, the Atkins Diet, inline skates and paintball arenas are good examples of fads, whereas Lego, yoga and natural shampoos became part of an established and consistently growing market.
But telling fads apart from trends isn’t easy. These examples make the differences seem obvious, and indeed they are — after the fact. The challenge for investors or decision-makers is to spot potential fads when the product is still under development.
In this Executive Insights, L.E.K. Consulting takes a deeper look at fads versus trends, which is crucial to investment strategy and revenue projection across industries, from technology to toys to consumer services.