Study Shows Shoppers Will Pay More Than Necessary For Fair Trade Goods

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.

“Virtue for Sale: Will customers pay more to do good?” [Slate]

RELATED
“The Undercover Economist” by Tim Harford [Amazon]

Comments

Edit Your Comment

  1. UpsetPanda says:

    I think that while a lot of fair trade products are for legitimate good, a lot of people hop on the fair trade bandwagon and took advantage. It’s sort of like the organic bandwagon…only certain products are USDA certified organic, and most who are certified choose to put the label on their products. Many of the ones who are uncertified by USDA can still label their items organic to an extent, but a lot of consumers just don’t know that organic items are not all equal.

  2. rmz says:

    @CoffeeCup: I immediately thought of the similarity to the “organic” label as well. It seems that a lot of people will pay more to buy something with “organic” or “fair-trade” on the label just to make themselves feel good, regardless of whether those items actually are or not.

  3. AD8BC says:

    Is “Fair Trade” a regulated package mark? In other words, does a product have to be 90% or more “fair trade” to be labeled as such?

    It would be kind of cool if a gas station could label their gas “fair trade”… would anybody pay more then???

    How about organic fair-trade carbon offsets?

    It’s starting to get ridiculous.

  4. Adam Hyland says:

    @ad8bc:

    just wait for the ‘carbon offset’ marketing to get into full swing. Corporations can’t WAIT to get you to pay more for “carbon neutral this” and “greenhouse free that”.

    to the best of my knowledge, fair trade is not a term regulated by the US government, but some fair trade associations. This does mean that the potential for fraud is there, but that really isn’t the interesting part.

    the interesting part is in the link above (thought it is hardly novel), that we are willing to spend more for ‘fair trade’ products as they grow more expensive. It’s all about information, and we are really bad at managing it and applying it properly to retail purchases, unfortunately.

  5. llcooljabe says:

    I’ve tried fair trade coffee. It’s terrible stuff. I may be willing to pay more for it, if it was good stuff.

  6. phrygian says:

    I’m not bsure how this is news. I mean, of course some people will spend more money on an item that’s labeled fair trade. Exactly what’s wrong with being able to “vote with your dollars” and buying products that are produced in a method that you agree with? I would (and have) pay more money for produce that was raised organically and picked/shipped by workers who are paid a living wage. That’s not news; that’s just a different type of consumerism.

  7. MonkeySwitch says:

    Fair Trade isn’t about the coffee, it’s about the famers, guys. I’m not a coffee drinker, but I work for a small coffee roaster in Alabama. All of our products are 100% organic and Fair Trade. The coffee is more expensive because we pay THE FARMERS a certain percentage above what proctor and gamble (Foldgers) or your average joe coffee corporation is paying. Please please please if any one really is skeptical about what fair trade is or really means you can e-mail my company at info@highergroundroasters.com or goto our site and e-mail us from there. My bosses love to talk about that stuff. Fair Trade isn’t a *perfect* system, but it’s people who are at least trying to take a step in the right direction.

    Also, saying that you tried fair trade coffee and didn’t like it doesn’t mean that all fair trade coffee will taste bad to you. It’s all about who did the roasting :)

  8. cobaltthorium says:

    @PHRYGIAN
    Read the description – it’s not that people are buying fair trade items more than regular ones. I buy fair trade stuff all the time. It’s that if you increase the price of the fair trade item, apparently people are *more* likely to buy it than when it was cheaper.

  9. EvilSquirrel says:

    Now I could argue about paying the market value for goods, but there seems to be a market for overpaying producers for goods. For me personally, I am more concerned about the build quality of the goods and how the food tastes. If you can make me some coffee that is twice as good as Folgers, I might consider paying twice as much for it. I will not however buy it because of some label stuck on it.

    I doubt we would need labels saying a product is organic, fair trade, or union made, if people would spend more time making a product than telling me who made it.

    And for the record, I prefer Trader Joe’s coffee. It’s a good quality for the price, and I can afford to drink it everyday. Their fair trade offerings are pretty good too, but my personal favorite is their Sumatran.

  10. junkmail says:

    P*ss on that. I’m spending my hard-earned cash on the best product I can find, for the cheapest price. The End. I couldn’t give a sh*t what friggin label somebody smacks on the package.

  11. mconfoy says:

    @junkmail: Can we put that on your gravestone? Can’t wait until your daughters are old enough to read this. Should make them so proud.

  12. mconfoy says:

    Fairtrade is legitimate. They are assuring that the farmers don’t get screwed by eliminating the middleman. The coffee is pretty decent no matter what others say. Many vendors buy through them such as Starbucks. If high end is your stick, but want to see the farmers do well for themselves, then check out this NY Times article on “direct trade:” [www.nytimes.com]

  13. littlejohnny says:

    What is ‘Fair Trade’? I’ve never heard of it and I don’t recall ever seeing it on any packaging. I shop at Giant and Acme grocery stores. Is it sold there???

  14. phrygian says:

    @cobaltthorium: I understand what the article’s saying, but I don’t understand how pricing based on demand (in conjunction with labels like “fair trade”) is anything other than capitalism driven by consumerism. This is exactly how many couture labels are able to stay in business; it’s just that now we’re seeing the same sorts of practices move into the food industry.

  15. mconfoy says:

    @littlejohnny: I have not seen it at Giant. Wegman’s, Harris Teeter, Whole Foods.

  16. lost-guy says:

    I think a few things have have been missed here. First, if you overpay for products labeled Fair Trade that money doesn’t go the the guy who produced it. If you pay 100 times market value all the extra goes to the retailer who has already paid the producer for it. So no matter how much you over pay you’re not helping the guy at the bottom who could use it most, you’re helping the top-tier retailer.

    As for Fair Trade coffee. As a serious coffee drinker who has had the opportunity to learn more about coffee than I should, I can say I have had some excellent and some horrid Fair Trade coffees. A lot does have to do with the roaster, a bad roast can ruin the best coffee. Fair Trade isn’t the only or perfect system. Some of the best paid for coffees, produced by growers paying good wages, will never be Fair Trade. Kona for example. The growers involved with the Specialty Coffee Association generally get paid as well or better than Fair Trade growers because they have a premium product that demands higher pricing. Fair Trade is a good idea but you have to think past mere labels.

  17. junkmail says:

    @mconfoy: I would hope it WOULD make them proud. I’m not sure what you’re attempting to insinuate, but are you saying I SHOULD care about labels? That my purchasing decisions should be based upon a sticker that some marketing schlub pasted to a package? Sorry, that’s not the way I’m raising my daughters. If you choose to raise your children that way, then umm more power to you, I guess. But my family has a little more respect for our finances than that.