Harvard / MIT Study: Consumers Will Pay a Fair Trade Premium

Advocates of fair trade certification maintain that socially conscious consumers will be willing to spend more for a product if they can be assured that it was produced in fair working conditions. A May 2012 study by researchers at Harvard University and Massachusetts Institute of Technology finds evidence to support this, based on field research that measures what shoppers are willing to pay for fair trade labeled clothing.

In 2008, fair trade products accounted for approximately $1.1 billion in total sales. While sales have been growing, they still represent a tiny fraction of the total market.  For over 10 years, multiple surveys have shown that consumers report a willingness to pay significantly more for products that are produced ethically. The Harvard and MIT report is one of a few that measure actual consumer behaviors to determine whether this is true in practice.

The study was performed at 111 Banana Republic Factory Stores in 38 U.S. states over a period of four weeks in 2010. The target market for these stores is consumers that are attracted to both style and affordable prices. Three products were selected: a women’s linen suit sold for $130, a men’s t-shirt sold for $12, and yoga pants for $18. These products were selected to test purchase habits of men and women across a range of price points. The results of the study showed that fair trade labels did not influence the shoppers who were considering lower price items. However, women who purchased the higher-price linen suit were willing to pay up to $18 more for the item labeled as made with fair trade labor practices.

The study concludes that even in a setting where lower prices and affordability are expected, some shoppers (in this case women considering higher priced clothing) are willing to pay a premium for an item that is labeled as being made using fair trade practices. The researchers concluded that when offered the option to pay more for ethically manufactured products, a significant segment of US consumers will pay a premium to act on their socially conscious beliefs.

While fair trade products make up a small share of food and clothing sold to consumers, especially in the US, this is not is due to a lack of demand. Rather, this study and others suggest that the small market share of fair trade products is due more to lack of access to consumers. As suppliers step in to fill this gap, more consumer adoption of ethically grown and produced consumer goods can be expected.

Source:
The Socially Conscious Consumer? Field Experimental Tests of Consumer Support for Fair Labor Standards

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