Cottage Industry Definition
Cottage industry is a production system that relies on producing goods, or parts of goods, by craftsmen at home, or small workshops, by individuals, small teams or family units instead of large factories. A cottage industry describes the methodology used to produce most goods common throughout much of human history up until the Industrial Revolution.
How Cottage Industries Work
Modern cottage industries serve customers who seek out original and handcrafted goods. Cottage industries can also specialize in services that only require a single or small number of people to operate. Commonly, artists producing artisanal products – whether paintings, sculptures or pottery – operate in a cottage industry as they are capable of completing the entire production process under a single roof alone or with only a few assistants.
Given the rise of e-commerce, many cottage industries have seen a comeback. Artisans can leverage niche websites to offer everything from hand-sewn clothing to crafts to custom woodworking. Etsy.com, for example, permits vendors to list for sale to a global market a wide range of unique artisanal products made by hand by individuals or small groups. Similarly, eBay empowers single individuals to create goods and sell them independently to potentially a vast market.
Though most goods are now mass-produced, goods made by hand are still seen as a sign of higher quality.
Cottage Industry Example
If a bride planned on an expensive wedding and required all of her bridesmaids to be outfitted in the same style, she could turn to a private seamstress working from home to design and fabricate all outfits by hand. That seamstress working alone would be considered a cottage industry.
Interestingly enough, many global factory-based industries today started as cottage industries. For example, the first fixed-wing powered aircraft was made by two entrepreneurs, Wilbur and Orville Wright. They constructed by hand a simple biplane made in a cottage industry: their bicycle shop. The Wright brothers built the plane from scratch, starting with little more than wood, canvass and steel. They even built their gasoline engine. Each piece of their airplane was individually fabricated by hand.
Cottage Industry Advantages and Disadvantages
Historically, a significant advantage of cottage industry was that most of the world’s population did not live in or near towns and cities, but rather in small farming villages. Small family units were forced to be mostly independent and usually produced much of their own food, clothing, and household items. This ancient system allowed families to survive independently across a vast geographic area. The few cities that existed were far too distant to reach regularly to purchase manufactured supplies or food.
Because we live in an increasingly modernized and hyper accessible world, most cottage industries have long since been replaced by industrialization over a century ago. Centralized production in factories usually produce the same quality of goods in a far less expensive manner. In medieval times, a single person could spend days producing an item of clothing as they would usually start with little more than raw hemp fibers.
By the industrialized era of the late 1800s, textile manufacturing was an enormous factory-based industry. Villagers left the farms and rural areas to live and work in urban centers where factory production proliferated. Cottage industries were rapidly eliminated and replaced by industrialization, which could produce a far greater quantity of a good at a far lower unit cost.
Nonetheless, despite the high unit costs of production, cottage industries, particularly in producing unique one-off goods, are still thriving in many areas of the globe. In underdeveloped economies, cottage industries provide employment and a means of survival. Further, even in industrialized economies, there is a growing consumer demand for handmade artisan goods, such as artwork, that is still usually produced by cottage industries.
Personalized Financial Plans for an Uncertain Market
In today’s uncertain market, investors are looking for answers to help them grow and protect their savings. So we partnered with Vanguard Advisers -- one of the most trusted names in finance -- to offer you a financial plan built to withstand a variety of market and economic conditions. A Vanguard advisor will craft your customized plan and then manage your savings, giving you more confidence to help you meet your goals. Click here to get started.