Worried About The High Cost Of Green Products? Inflation Will Help
One hurdle that many companies selling green goods face is convincing consumers to pay the difference between conventional and green or organic products. Recent health scares and increased interest in saving the planet aside, a recent article quoting a LOHAS survey states:
…many consumers’ purchasing patterns are affected by the phenomenon of trading up: a willingness to pay more for a product that is emotionally satisfying in terms of the perceived quality, performance, brand image, and the stature it provides.
Things could change.
As prices for a wide variety of commodities hit levels not seen before, the cost of everyday items from food to furniture and gasoline to gadgets is rising also. This is, of course, putting a bit of a strain on consumer’s pocketbooks.
As this inflationary pressure pushes up the price of conventional items, it also pushes up the price of premium green and organic products….just not as much. This means, the relative cost of green and natural products will be less. In other words, they’ll be more expensive, just not so MUCH more expensive according to Economist Tyler Cowen who appeared on Marketplace on NPR this week.
The economic logic is this: If all food becomes more expensive, what originally looked expensive suddenly appears cheap in relative terms. Consider a simple example: If food costs nothing to transport, say cheap milk would be $2 and organic milk would be $4. The organic milk costs twice as much. Now add on a $2 transport cost to each item. The price comparison is then $6 to $4. The organic milk seems only a little more expensive. If you are going to buy milk in any case, you might even switch to the organic product.
Ecopreneurs in the locally grown produce sector should fare even better as shipping prices don’t cut into profits anywhere near as much. The differential then should be even less.
As the cost of trading up becomes less more people may opt for it. This is, of course, counterintuitive thinking. Most people cut back during inflationary times as the household food budget gets tight.
It’s possible this time though consumers will shop smarter rather than just cheaper.
Photo Credit: tico24 at Flickr Under Creative Commons License
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