That's always a tricky decision. Let's say, it's not bad to have 404 errors if you'll no longer stock those products. it's completely natural.
If however there's a good alternative, I'd redirect those, but only if a product is similar enough.
Lets say you've been selling 2GB USB sticks of brand XYZ. They stopped producing 2GB sticks and now 8GB is the smallest one they can offer you. I'd redirect that 2GB to the 8GB page, especially if there are external links towards that page.
If you don't have a similar enough item, I'd leave it 404.