Recession Could Make or Break Market for Green Products

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.

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