Will consumers pay a premium for ethical transparent supply chains ?

Posted on August 26, 2013 by aviyer2010

An article in CNN (http://www.cnn.com/2013/08/26/living/aj-zady-ethical-fashion/index.html?hpt=hp_c3) describes two companies, Small Trades and Zady.com, who focus on providing all details of their supply chain – from the factory location to the employee sewing the apparel. The hope is that fashion conscious consumers would be willing to pay $50 for a Small Trades cotton shirt in order to know how the product was made, analogous to the premium for food tracking from farm to table. Will such a focus on supply chain transparency be rewarded with associated higher retail prices ? Can technology help with enabling the consumer to track the product in its journey along the supply chain ? Will the growth of consumer interest in ethical supply chains make domestic sourcing more competitive, will it increase the monitoring of global manufacturing or increase ownership of manufacturing by designers and retailers ?

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This entry was posted in Global Contexts, Operations Management, Supply Chain Issues and tagged Capacity, competition, Consumers, Cost, ethical, manufacturing, Margins, Outsourcing, Risk, Supply Chain, transparency. Bookmark the permalink.

4 Responses to Will consumers pay a premium for ethical transparent supply chains ?

Hamon says:

August 30, 2013 at 7:26 pm

Many companies are now turning towards ethical transparent supply chain with growing concerns from consumers. Companies like Patagonia and Lush have succesfully created a new space in market for sustainable goods. But the truth is that not lot of companies can afford to have ethical supply chain. Found another interesting article complementary to this:
http://www.theguardian.com/sustainable-business/truth-supply-chain-consumer-goods

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Christine Zhang says:

August 31, 2013 at 12:14 am

If I am the customer , I would not pay for 50 dollars for the shirts even though I want to know more about the details in this supply chain.I know a lot of companies are trying to involve customers into different parts of the supply chain. That is a good idea because if customer can join the design part ,the company will know more about the demand of customer.

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Prasun Bhansali says:

September 1, 2013 at 4:03 pm

It depends upon where the companies wanted to sell. In developed countries, it may possible but in developing countries, customer still care about cost. Who will pay for the Green supply chain is still a big question, should government pay and encouarge the comapines by giving tax break or Should customer reward the comapnies for thier effort or should the supply chain partners bear the cost.

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Irina Benedyk says:

September 1, 2013 at 6:25 pm

I would like to point out that marketing of that project have been done perfectly! Concept of the goods, I prefer to call it the “shopping religion” – have been developed in details. The process of buying this product is not just the acquisition of goods, this is a belonging to a some group of people who “do care…”. Products distribution channel is online-sale. It is in the spirit of the goods, as this channel requires the lowest cost, most “clean” from any additional costs in the customer’s point of view. The next step is advertising. The project’s owners continue to adhere to the “net” concept, i.e. the use of non-intrusive articles repeatedly telling a new life story. Reports about the trips on the company’s website, social network and no TV (except, perhaps, the news ever) perfectly fits the concept of the goods. As far as wide advertising can be the huge part of final cost it could ruin the idea of the goods in the buyers’ eyes.
The next step is the quality of the goods. Given the high price policy, the company cannot afford to do item only for “ten washings”. Clothing should serve for ages. This imposes certain limits on the design, but also limits the potential sales, as far as it does not stimulates to buy new products every season. This is the company’s choice. Maintaining a high level of quality of the goods – one of the main tasks to attract loyal customers, which in their turn will be able to replace the media in the advertising process. But since the concept of goods imposes a number of restrictions, plus the high prices – high sells is mostly unlikely.
This is a specific niche, covers quite a wide range of people, and the process of capture these customers will be prolonged.
Logistics is one of the sources to increase sales. Logistics can increase the value of the goods, without increasing its price (or increasing on a little bit). I think that dramatic rise of demand will not be possible, but it is still possible to make it better. One of the main characteristics of the goods, “…People care about where their clothes come from, and they want to know…”. The company’s representatives visit factories, meet with the owners, spread reports about the trips. The development of this point is a task for modern, technologically advanced logistics.
Eight years ago, the American journalist Thomas Friedman in his book “The World Is Flat” described the incredible journey of his laptop. The parts of it travelled over half the world. Organization of such a virtual journey for clients, starting from cotton fields in Kazakhstan may become the hallmark of the company, developing the motto of “customer cares..”. Already, many retailers in the fashion industry use information technology for tracking each individual pallet of their cargo. Starting from the factory in China or Bangladesh and finishing in any shop in Liverpool or Boston (or all steps in goods production are within the USA), the route of each batch of product, each pallet is monitored by special systems. Making the history of the goods routs available to the buyer, can expand the potential target group, (F.ex. some who will purchase the goods out of curiosity, for example – collecting “geographic” collection). Implementation involves: the tracking of finished goods, adding the history of travelling of raw materials and different accessories (buttons, castles and other) and marking it possible to trace the movement of goods. Because these goods are sold in the Internet, the last one is not difficult.
In case of considering the further development of selling the goods in regular stores, various applications on mobile devices will be in the spirit of the time and is concept of the goods. Because of the “buyer cares…!”

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