Ethical shopping & price


 

It’s commonly thought that buying ethically costs more. Tim Hunt put that belief to the test and finds the truth is more complex.

 

 

In most academic and market research there is a built in assumption that buying ethically is more expensive.

Academic paper after paper gives research findings on whether consumers are willing to pay more for ethical goods. And shoppers themselves perceive ‘ethically labelled’ products to be significantly more expensive even before they have seen the price).

However there are no references in these papers to studies into the actual price of ethical products. So we felt it was important to test the assumption that ethical goods are more expensive.

Price will, of course, always play an important role in people’s purchasing decisions. And most of the available research suggests that it's the factor people consider most important when purchasing a product.

With price playing such an large role in everyday shopping decisions it is important that ethical products are priced competitively in order to reach a mass market. Especially with the ethical market still only accounting for a tiny proportion of total sales.

For example, only around 5% of total UK food sales are for products with some ethical or environmental claims. According to DEFRA, 30% of UK consumers report that they are very concerned about environmental issues, but evidence from the ethical market demonstrates most fail to translate this concern into green purchases.

This is what’s known as the ‘attitude–behaviour gap’ or ‘values–action gap’

 

Speaking not spending
 

In 2008 research from the US found that 44% of consumers are willing to pay a premium price for green products, again suggesting that this gap exists, however the same research fails to identify whether ethical products really are more expensive.

A second study by Jorge Rivera in 2002 revealed a willingness to spend 20-50% more for hotel services. Again showing a belief that the ethical is always the more expensive as no actual price comparisons are given or referenced. So why is there this belief? Several academic studies conclude that ethical consumers are generally more affluent. a relatively high income, education, and social status.

In the last issue of Ethical Consumer, Luke Yates discusses a survey of 31,000 people in 21 European countries. It shows that in most EU countries those purchasing ethically come from higher social class, while boycotting is done by all classes. He comments that “this could reflect higher costs of ethical branded products and inequalities in access to good quality product labelling”.

 

A different story
 

However other studies have found the opposite to be true that income and social class had no impact on spending habits regarding ethical consumption. A study by Katherine Sammer and Rolf Wüstenhagen revealed that consumers are willing to pay more for ‘A’ rated washing machines. But even this study later revealed that price was the most important factor in the consumers decision making and that the energy rating reflects the use phase financial costs of the machine i.e. the more efficient/greener they are the cheaper they are to run. It is also important to note that the study presumes that the highest rated machines were the most expensive without providing evidence for this. 

One study actually quotes an interviewee noting that Ethical Consumer Magazine “…said that the stereo systems which are best are the expensive ones … and I didn’t have eight hundred pounds.” The study concludes that “price often reduced the in?uence of interviewees’ green values in their decision making process,”  

But again no mention of the actual price of ethical goods.

There are a number of other barriers to ethical purchasing beyond price - brand strength, culture, demographic characteristics, habit, lack of information, lifestyles, personalities or trading off between different ethical factors.

But if price is the most important consideration overall for consumers it must be concluded that this is the most important barrier for the purchase of ethical goods. But is it actual prices, or the perception that ethical equals expensive?

 

The Real Price Deal on Ethical Goods
 

We have taken a number of product areas - white goods, electrical, cosmetics, utilities, clothing and food - and compared the average price of three brands with the worst ethiscore, with the average price of three brands with the best ethiscores.

We always tried to use like for like products.

So, for instance we didn't include Agas in the cookers category, as they are very different from conventional ovens. In the TV category we compared 19” plasma screen TVs. In the food category we used the same cereal and flour types, and so on.

We also took the cheapest model for each brand. We also removed supermarket own brands for the same reason.

 

Results
 

In the electronic goods category we covered mobile phones, TV's, cameras and MP4 players. The more ethical cameras were considerably more expensive (32%). The more ethical MP4 players and mobile phones were slightly more expensive (19% more and 4.2% more respectively). On the other hand the more ethical TV's were 21% cheaper.

In the household cleaners category we looked at laundry detergent, washing up liquid and multi- surface cleaner. In the laundry detergent and washing up liquid there was very little difference in price between the best and worst brands, with the ethical brands coming out slightly more expensive.

There was only a 32p difference (9%) with laundry detergent and 1p (around 2%) for washing up liquid. In multi surface cleaners the more ethical options were far more expensive (nearly four times more costly). This figure was slightly skewed by an organic brand that cost around £20 per litre more than all the other brands. However with this removed the ethical brands still cost three times as much.

In the cosmetic section the ethical brands were  considerably more expensive.

Shampoo was 906% more £10.79 per 250cl for the ethical brands, ethical soap brands were 509% more or £2.54 per 100g, toilet rolls were 156% or 21p per roll more for ethical brands and tooth paste was £2.18 per 500ml or 291% more. Sun screen was the exception where the ethical brands worked out at £3.34 or 25% cheaper.

In the white goods section the more ethical options were generally cheaper. The more ethical cookers were on average very marginally cheaper - £1.67 less -than those at the bottom of the ethiscore table. Fridges were much cheaper - 29.1% or £136.31. While more ethical dishwashers worked out £16.61 or 5.77% cheaper on average.

Only the more ethical washing machines were slightly more expensive (£76.04), but in this particular case research shows people donb’t mind paying a premium price for the product, because better energy efficiency makes the product’s life-time cost lower.

Greener electricity tariffs certainly do carry a premium,on average £169.67 more expensive per year.

For clothes we compared the prices of plain white T-shirts and found that the ethical brands were around 149% more expensive than the lowest ranked brands.

 

The ‘Least Worst’ option
 

We then compiled a second set of results to see if ethical performance was reflected in price for the more mainstream, lower scoring brands, that don’t make any particular ethical claims. We compared the average prices of the best (or let’s call them the ‘least worst’) and worst scoring of these mainstream brands.

For example, with shampoo, for this second set of results we ignored all those high scoring shampoo brands that make some ethical claims (Yaoh, Organic Blue, Faith in Nature and so on ) until we got to the next best.

So we’re ignored Lush, with an ethiscore of 11.5, and took the brands with the next best three scores – Original Source (8), John Frieda (7.5), Avalon (7). None of these make ethical claims, but they score considerable better than the worst three brands – which come it at an ethiscore of 0.5.

For shampoo better ethics do indeed come with a price – the least worst shampoos were 95% or £1.13 per 250cl more expensive than the bottom of the ethiscore table. It was only possible to calculate this in certain instances.

For example there are no self identified ethical brands that produce MP4 players or fridges, while in other cases, such as laundry detergent, there was no middle ground, the scores jumped from 8 for the ethical brands to 3 for the other more mainstream brands.

We found ‘least worst’ sunscreen was actually 50% cheaper than the worst of the worst. And soap was 47% or 20p cheaper for the higher rated brands.

While the ’least worst’ toothpastes were 7% or 8p more expensive than the worst of the worst and ‘least worst’ toilet rolls were 40% or 60p more.

In the two other sections we looked at the ’least worst’ were more expensive. T-shirts were £6.33 or 18% more expensive for the higher rated brands while the higher rated multi-surface cleaners were 82.74% or £2.16 per litre more expensive.

 

Food Staples
 

We've also had a quick look at the prices in a few of our local stores in Manchester.

We investigated the prices at the closest supermarket to our office (Asda), an independent store (a stall on Hulme indoor market), an ethical store (Unicorn, an award winning worker’s co-op) and an ethical\organic box scheme that delivers around Manchester (Limited Resources).

We looked at the prices of a number of goods (see the table below) comparing organic with non-organic fruit and veg and some basic staples.

On the organic fruit and veg Unicorn came out cheapest (by around £4) while on non-organic produce Asda came out on top but only by 69p, with the stall coming second.

With the basic staples ASDA was again the cheapest, and was considerably cheaper than both the box scheme and Unicorn.

Overall, Asda was the cheapest with the local stall coming in a close second

 

 

 

 

Downturns
 

 During 2008, in the midst of the recession, Fairtrade sales actually increased by some 43% in the UK.

In the same period the value of sales for organic food rose by 1.7% to a little over £2bn. But as the Soil Association conceded inflation in food prices hid a slump in the quantity of organic produce sold, as food prices increased by 7% overall in this period, making goods with an organic premium pricier still.

In 2009 Fairtrade sales continued to increase, by 15% to £3.4 billion albeit a slow down from the previous year’s astronomical growth. In the same year sales of organic products in the UK fell by 12.9% to £1.84 billion.

  

Spread of ethical prices
 

We also looked at the comparative price research we have been running since July 2008 to see how ethical products fit into the broader spread of prices in a few markets.

There were 28 easily comparable reviews ranking products by price. In each report we tend to review between 10 and 20 companies and recommend two to three best buys.

A best buy was the cheapest of all the products in 14% of reports. (Cars - Citroen C1, Garden Centres - B&Q, Sportswear - Gossypium, Satnavs - Trafficmaster)

A best buy was the most expensive of all the products in 33% of reports. If you divide the products into two groups: the cheapest half and the more expensive half, there was an ethical best buy in the cheapest half for 61% of reports.

There was an ethical best buy amongst the top five cheapest products in 46% of cases.

This would appear to show that, for people looking to shop ethically on a budget, choosing a good ethical product relatively cheaply should be possible in more than half of cases.

 

Conclusions
 

Overall, it is true to say that the more niche ethical goods are more expensive. Most interestingly where the companies were not branded as ethical – for instance in the white goods sector - the companies with higher ethiscores were often no more expensive than the lower scoring ones.

In addition once the brands that identify themselves as ethical were taken out of the equation and replaced by the more ethical of the normal brands (the ‘least worst’) there was a more mixed set of results.

So when it comes to whether there’s a price premium for ethics in the mainstream brands the results are inconclusive. Its clear from our research that the assumption there is always an ethical premium is not correct.

Ethical Consumer helps to demystify all the “magic and necromancy” that surrounds products and their price by shedding light on the true cost of production. In our rating tables we often give negative scores to companies for stories relating to the costs of production, whether it’s the payment of obscenely low wages, to an abdication of environmental responsibilities by those seeking to drive down the costs.

You could be forgiven for assuming that this means that the more companies recognise these factors and begin to address them, the more their costs of production will rise and get passed on to the consumer as higher prices. However, this preliminary research suggests that this is not the whole story by any means.

 

Research with Michael Pooler and Rob Harrison

 

REFS
1 PATRICK DEPELSMACKER,LIESBETH DRIESEN, AND GLENN RAYP Do Consumers Care about Ethics? Willingness to Pay for Fair-Trade Coffee 2005
2 William Young, Kumju Hwang, , Seonaidh McDonald, and Caroline J. Oates Sustainable Consumption: Green Consumer Behaviour when Purchasing Products. Sustainable Development 2010,
3 www.foodnavigator-usa.com/On-your-radar/Organics/Recession-not-driving-ethical-spending-underground
4 Jeff Bray How Relevant are Ethical Retail Positionings in a Recession
5 www.marketoracle.co.uk/Article8327.html
6 www.guardian.co.uk/environment/2009/apr/06/organic-sales-soil-association
8 www.reportlinker.com/p079995/The-Next-Step-In-The-Ethical-Consumerism-Revolution.html
9 Nicole Darnall, Cerys Pointing and Diego Vazquez-Brust Why Consumers Buy Green
10 Jorge Rivera Institutional Pressures and Voluntary Environmental Behavior in Developing Countries: Evidence From the Costa Rican Hotel Industry 2004
11 Katharina Sammer and Rolf Wüstenhagen The Influence of Eco-Labelling on Consumer Behaviour – Results of a Discrete Choice Analysis 2005