“Commoditization is defined as the process by which goods that have economic value and are distinguishable in terms of attributes (uniqueness or brand) end up becoming simple commodities in the eyes of the market or consumers. It is the movement of a market from differentiated to undifferentiated price competition and from monopolistic competition to perfect competition. Hence, the key effect of commoditization is that the pricing power of the manufacturer or brand owner is weakened: when products become more similar from a buyer’s point of view, they will tend to buy the cheapest.”
Example of commoditization: Coffee became available in 16th century as an exotic luxury product enjoyed by affluent and rich. In 1616 a Dutch merchant Pieter van den Broecke obtained some of the closely guarded coffee bushes and brought them to Amsterdam. This event had a major impact on the history of coffee turning it into commodity.