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Fad businesses: Catchy but risky

By Rafael Santos |

Shawarma, roasted chicken, pearl shakes, and rubber clogs have one thing in common in the Philippine setting: they were once touted as market changing businesses, and recognized as burgeoning segments in their own right. However, their mercurial rise was almost as precipitous as their rapid fall; overnight, these ‘novel’ business ideas fizzled or became a shell of their former prominence. These ‘fads’ made a lot of money in their time, but were ultimately deemed unsustainable.

[related|post]For a person that wants to be in business for keeps, these short-lived successes may not be as palatable compared to a sustainable long term business. So when looking for a business opportunity, it’s therefore important to distinguish between a trend and its ugly cousin, business fads. But as the businesses above have shown, fad businesses can be a profitable enterprise as well, so it’s a matter of deciding where you throw your hat.

But how does one tell the difference a fad and a trend? Entrepreneur Philippines asked marketing expert Ernest Tamayo of Singapore-based marketing and research firm Huthchins and Mercer, as well as business consultant and financial planner Mike Yason, to enlighten us on the subject.

WATCH OUT FOR THE SIGNS
A trend is something that has staying power, and usually has a social, political, and economic significance. Tamayo says trends gradually develop and follow a sequence of events, and is generally tied to a global movement or idea.

Tamayo gave us a simple acronym to help determine if a business is a trend or a fad:

Time: Trends don’t happen overnight. “A trend must gradually build towards acceptance, and not just come out of nowhere,” he said.

Roots: “Because of its unique characteristics which is a function of the market it services, a trend develops roots,” explains Tamayo. This will ensure that trends will not fizzle even as they evolve, because their background is deeply ingrained in the consumer’s mind.

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Everywhere: A trend will slowly sprout up in different places. “After a while, you’ll see it being established by more people, and in the process, it will evolve,” Tamayo said.

Nonstop growth: Trends are like a slow and steady train that builds momentum over time. “A trend is a sustainable idea--it will be there for a long time, compared to a fad that will die out fast,” says Tamayo.

Durability: Trends can stand the test of time, and won’t wilt when the going gets tough. “Trends are strong. Unlike fads, they don’t weaken as they become mainstream; they only become stronger,” Tamayo said.


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