Given that overall US consumer spending in the fourth quarter of 2008 fell by its largest margin in almost 30 years, one has to wonder how the market for ‘green products’ will be impacted by this recession. Leading up to the economic downturn the momentum of the green economy was chugging along splendidly. The consumer demand for environmentally-friendly products was at an all-time high, even if the products were priced at a premium over standard options.
A recent survey by the consumer research firm Mintel explored the green buying preferences of Americans during this recession. The results should serve as a wake-up call to producers and retailers of green products.
The number of Americans who say they regularly buy green products remains unchanged at 36%, after tripling in growth the previous year (from 12% in 2007 to 36% in 2008). Over half of the respondents (54%) said they would buy more green products but the products are too expensive. This reveals a huge opportunity for green product growth, even during these troubled times, if there is more flexibility in their pricing.
No stimulus or tax cut will increase green product spending in this economic climate unless the prices are brought in line with everyday goods. An expected shift in recession-era consumer spending to ‘best-value’ products may be the catalyst that is needed to bring the price of green products down. The need to survive what could be a prolonged downturn might be enough to end the era of premium pricing of these products. If the product is truly green and eco-friendly, they should be using less energy to make the product, less packaging to contain the product, and less fuel to ship the product. These operational cost savings should provide the necessary room to adjust prices downward.
The news is not all bad for green products. A recent UK survey indicated that over 75% of all consumers consider environmental and societal benefits of the products they buy, although fewer than half of those are willing to pay more for them. In the US, a January survey found that a majority of New England residents would be willing to pay more for their gas or electricity if the cost increases were directly used to benefit the environment.
The numbers show that consumers will accept a very modest price premium to go green, even during the economic downturn. But many of the existing green products are currently priced well above what most of us would consider to be a modest premium. For the sake of the continued growth of the selection and availability of green products, let us hope that the pricing of these products becomes more competitive with their mainstream rivals.
Stephen Boles is co-founder of Kuzuka, a marketplace website that will bring a new level of convenience and confidence to carbon offset customers. Kuzuka also provides consulting services to organizations that want to assess and reduce their corporate carbon footprint.
The “problem” with many green consumer products is that they are also made under fair labor practices abroad or are US made and that environmentally safe production practices cost more. This results in the more than “modest” price increase. US consumers are accustomed to retail pricing based on production costs of exploited foreign labor as well as unenforced environmental regulations. This is particularly true with clothing, accessories, household and other personal consumer items. It is much greener to produce these items in the US – including lower transportation costs. However, almost every other cost of production will be higher – inclduing energy and packaging – because of more stringent environmental and labor regulations. Labor prices are absolutely MUCH higher in the US ($15 per hour for semi-skilled labor vs $15 per WEEK in Asia). Even using fair wage in Asia raises the costs of production greatly. Simply put, US consumers would have to adjust their consumption greatly if they were to buy US made/fairly made truly green products and this, overwhelmingly, is not what US consumers want to do – even those who want to be “green”. They do not want to buy less. This is why consumers will not pay much more for green products. THey would have to buy less of something.
Articles like this overlook 2 key issues in green business. The labor issue is the biggest of these. Sustainable consumption happens when the consumer and the producer are on relatively equal economic terms. US consumers have been conditioned to have a sense of entitlement to better economic terms than those people who produce what they consume. Until this mindset begins to change, fairly made green products will not be mainstream. What may happen is that more environmentally sustainable materials will be used, but products will still be produced in countries where labor and environmental laws are lax/unenforced. This is not green.
The second issue these type articles overelook is the cost of the raw materials. The great irony is that new raw materials are easier and CHEAPER to get than recycled/repurposed/reused raw materials. Paper products are a prime example of this. It is cheaper to clear cut a forest than to get post-industrial waste paper to recylce into toilet paper. The cost of the process of recycling paper is also more higher than the cost of creating paper from new raw materials. Then there is the distribution system, cost of shelf space, and numerous other issues with bringing a product to market that small companies face which will increase the cost of their product.
Articles like this do not help the green market. Rather than educating the consumer as to why green products are more expensive and that the consumer needs to adjust his/her thinking about what “value” is, this type of uninformed journalism furthers the call for producers to cut corners and greenwash rather than produce a truly green product. Green products do not need to get significanly cheaper. As the system changes to support green production practices and recyled materials become more readily available, consumer costs will decrease somewhat. But the thinking that green products can be produced for the same price as conventional products is erroneous, at best. What must change is the consumer mindset about how much to consume and the idea of “value”. “Value” should not be about what is cheapest for the consumer and therefore allows him/her to consume more. “Value” should be about what benefit the product offers in exchange for the ENTIRE cost of its production – human and environmental.
Green products can never be produced for the same price as conventional products and green advocates should be wholely supportive of this. Green advocates should be educating others about the true costs of conventional products, not whining about how “expensive” green is.
Lori,
Thanks for posting a great comment – all of which is true. One of my favorite blogs recently had a post with a video feed called 'The Story of Stuff' (http://myweboflife.kuzuka.com/2009/02/23/stuff/). This video does a great job of explaining similar points you made in your comment – I recommend it to everyone that has a few minutes to spare.
I know and understand the reasons for the cost of ethically-made products. The problem that I have is that I don't think the majority of the population knows the whole story, or even care to think about it. You brought up the point about consumer education, which is very much in need. I worry that education is a long-term strategy, and what is needed at the present is a quicker solution. With the forecasts of long-term economic woes, it may be some time before the general population is comfortable paying anything but the bare minimum for the products they buy.
I am a huge supporter of ethically-made products and I simply don't want to see them disappear during this recession, which is my concern.