A new Harvard study shows that shoppers—at least the crazy rich ones who frequent ABC Carpet and Home in New York City (if you’ve ever been inside ABC, you know the sort of people we’re talking about)—will not only gravitate toward products labeled “fair trade” over identical but unlabeled products, but will buy even more of them when the prices are raised.
Because the shopping pool at ABC is so unique, it probably means the results aren’t completely applicable to big box retailers who have more price-sensitive customers. On the other hand, the study found that “gift” items (candles, in this study) sold at higher rates than plain household items (towels) when the price was jacked up and a fair trade label was slapped on, which implies that shoppers believe the fair trade label itself is a valuable addition to the gift and therefore worth a premium.
This study reminds us of the chapter in “The Undercover Economist” by Tim Harford regarding fair trade coffee, which basically said that coffee shops that charge a premium for fair trade are really just practicing a form of pricing that helps them find the customers who are willing to pay more, and then giving them the opportunity to do so. (Fair trade coffee can cost less than a penny more per cup, but the sales price is often many times higher.) It doesn’t mean that fair trade or sustainable products aren’t better choices all round, only that the shoppers who buy them tend to care more about the label than they do about the price tag, which means retailers can take advantage of fair trade trendiness to make a little extra money.
“The Undercover Economist” by Tim Harford [Amazon]