As the first and only Fair Trade certified company in Malaysia (we are a
member of the Netherlands based World Fair Trade Organization) this is a
question that we ask ourselves constantly. This question arises particularly
during our meeting with potential wholesale companies interested in retailing
our Indochine Natural products or having us manufacture under their own label.
For many companies, social
responsibility has become a big business, and large amounts are spent on doing
good things and then trumpeting these efforts to the public. But, does it reap
commercial benefits and boost profits?
The rationale applied here is
that consumers will pay a premium for products made with higher ethical
standards. The big question of course is how far does a company really need to
go to win people over?
What we have found over the years
we have been meeting with potential wholesale buyers is that even though we may
assume ethical production can lead to higher sales, some buyers prefer a lower
price even if they know a product is produced unethically. What we have learnt
out of this is that we should be very careful where we place Indochine Natural
products, because if we are associated with unethical products, while consumers
are willing to purchase, they will only do so at a significant discount.
What we have also found is that
increasing levels of ethical production do not necessarily correlate with
increasing price premiums. Once we have reached a certain ethical threshold, anything
beyond that point might reinforce our company image, but doesn’t encourage
people to pay more.
The bottom line at the end of the
day is that the expectations of the buyer….those with high ethical expectations
are willing to pay premiums for ethically produced products, while those with
low expectations are not willing to pay.
What have we learnt from these
experiences, and how do we implement these lessons in day-to-day business
practice? We have learnt to screen potential
wholesale customers from first contact, usually incoming phone calls or emails.
By putting our own ethical standards up front, and asking a few simple
questions, this initial screening aims to reach out to buyers with high ethical
standards. It these wholesalers who ultimately will deliver the biggest
potential profits on our ethically produced Fair Trade products. From this
initial screening we then move forward with a face-to-face meeting and tour of
our production facility, and if all goes well orders will follow. This way we
have been able to associate with similarly minded ethical wholesalers, and
obtain premium wholesale prices for our products.
