The public appetite for fair-trade goods has risen in recent years, but the potential for this market’s large-scale growth is less clear. While research has shown that many consumers are willing to pay a premium for goods produced according to certain ethical standards, companies continue to assess how profitable fair-trade goods can be. Moreover, non-governmental organizations wonder if they should divert some resources into fair-trading training programs, and governments contemplate whether or not they should encourage these voluntary initiatives.

A 2012 study from the Massachusetts Institute of Technology and Harvard University, “The Socially Conscious Consumer? Field Experimental Tests of Consumer Support for Fair Labor Standards,” details the outcome of an experiment conducted in 111 Banana Republic factory outlet stores in 38 states for four weeks in the summer of 2010. The researchers designed two versions of a promotional in-store 20” x 30” sign for three apparel items — a women’s suit available for $130, women’s yoga pants for $18 and a men’s t-shirt for $12. One version of the sign emphasized the item’s style, the other emphasized its fair-trade pedigree and some items were not promoted by either sign. Results were determined by correlating item sales with the signs displayed.

The study’s findings include:

• Sales of the $130 women’s suit rose by 14% in stores in which the product was labeled with a sign emphasizing the fair trade origins of the apparel. There was no difference in suit sales in stores that used the sign emphasizing the fashion of the apparel.
• “Even in this outlet setting there is a segment of shoppers who respond positively to a message conveying information about fair labor standards in factories making apparel. Among female customers shopping for a higher priced item — the linen suit — the message about labor standards had a substantial positive effect on sales.”
• The fairness and the fashion messages had no effect on sales of the yoga pants or T-shirts when compared to sales that did not use signs with the products. Shoppers looking for lower-priced items “do not pay attention to marketing messages that convey information about product attributes other than price.”

The authors conclude that product labels highlighting fair labor practices had a “substantial positive effect” on the purchasing behavior of women shopping for higher-priced items, but no effect on men or shoppers with lower price points. They also note that further research to better understand the demand for fair-trade goods might include assessing the individual motivations of consumers and examining “individual-level variation in ethical consumption and support for fair labor standards” including age, socioeconomic status and educational attainment level.

Tags: human rights, consumer affairs, labor unions

By Katie Gleason | July 11, 2012