ethical consumer

School of Business & Governance

(INDIVIDUAL ASSIGNMENT)

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Student Name: Marilyn Yeo Kai Jun_____________________________________________

Student Number: 33348689___________________________________________________

Unit Code/Title: BBS301- Apply Mixed Methods Research to Business________________

Assignment Number and Name Systematic Literature Review (Individual)____________

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1.0 Introduction

Consumers are attaching more value to ethically sourced products in current days and have the choice to make informed decisions. This is largely due to the fact that firms are required by law to use hangtags to provide information on products that they are selling. Hangtags are mainly used to educate consumers about product attributes and production processes, and at the same time influence consumers’ attitude and purchase intention (Rashid, Sanuwar, and Sang, 2018). Commonly used terms that most consumers are familiar with are fair-trade labels, which guarantee a “better deal” for poor farmers in developing countries, as well as paying workers fair wages and maintaining good working conditions (Maaya, Leonard, Meulders, Surmont, and Vandebroek, 2018).

1.1 Research questions, aims, and objectives

Given the above discussion regarding ethically sourced products, the following are this study’s research question, aim, and objectives.

1.1.1 Research question

“Are consumers willing to pay more for ethically sourced and produced products? If yes, how much more?”

1.1.2 Aim

In light of recent high profile events, such as the Rana Plaza collapse in Bangladesh and the Uzbekistani cotton labour scandal, and subsequent consumer boycotts and public outcry, ShopHere has made a deliberate decision to move to ethically sourced cottons for their clothes, as well as banned the use of fur in order to meet the needs of the more ‘ethical consumer’. They currently have other products such as cosmetics and homewares which are sourced ethically and sustainably, respecting the environment from which they are gathered and the people involved in all stages of the supply chain. However, it is important for the investors to know if the strategy for the clothing line is profitable and justifiable as they have not seen a significant increase in revenue for the other sections. Therefore, the research aim is:

“To find out whether consumers take into account if the product is ethically sourced and produced when making a purchasing decision and what is the amount that they are willing to pay more for such products as compared to a product that is not ethically sourced and produced.”

1.1.3 Research Objectives

Research has found a relationship between price of ethically sourced products and willingness to pay for such products (Rashid, Sanuwar, and Sang, 2018) as well as percentage of price premium consumers will be willing to pay more for them. Thus, my group and I would like to explore the same relationships in Singapore context, and the following are our research objectives:

· To find out the effect of ethically produced products on consumer purchasing behaviour

· To determine a relationship between the price of ethically produced product and consumers’ buying behaviour

· To determine the percentage of price premium consumers are willing to pay for ethically sourced products

· To identity the major barriers for consumers who say they are concerned about the ethics of consumption but not turning these concerns into purchasing decision

· To make recommendations based on the findings of the above objectives on the viability of ethically produced products and strategies of increasing this market.

2.0 Search Process

This literature review consists of materials derived from a keyword-based search in the ProQuest database. The search terms used are: ethical consumers, ethical products, fair-trade(FT) products, purchase intention, price, price premium, willingness to pay(WTP), and sustainability. All articles used peer reviewed, in English language, and within two year recencey, from 2017 onwards. After screening of the articles found, 16 articles were deemed to meet the search criteria. A table of the articles are as seen in the appendix. Each article was screened based on their dominant content, with the focus on determinants of trade FT products purchase intention, and willingness to purchase.

Fig. 1 Search Process

3.0 Critical Analysis

3.1 Fair-trade and Ethically Produced Products

Due to the increasing knowledge of ethically sourced products, studies have shown that consumers perceived positively for such products (Rashid, Sanuwar, and Sang, 2018). This increasing knowledge has led to the massive research in the markets across countries, with some research examining consumers’ awareness and perception, willingness to pay, and factors contributing to the preference of the products. Even though consumer attitude towards ethically produced products and services have grown more favourable in the past years as mentioned, the market share of clothing produced under environmentally friendly and socially responsible ways is still lagging behind (Jacobs, Kathleen, Petersen, Hörisch, and Battenfeld, 2018). This is known as the attitude-behaviour gap, whereby there is a positive attitude towards these products but does not reflect accordingly to the consumers’ behaviour of their willingness to purchase. This was shown in studies whereby consumers’ intention to purchase is 45% higher for a product with fair trade message as compared to a product without, but is not willing to pay any more than an average of 15% for the fair trade product.

3.1 Willingness to Pay

Consumers are generally willing to pay higher for ethically sourced products, but there is an acceptable price range. Rashid et al. (2018) found that ethnocentric consumers are willing to pay 15-25% higher for local brand products than for global brand products, and are also willing to pay more for socks and t-shirts with hangtags that provide information regarding labour welfare rather than apparels without such information. A study showed that consumers in Belgium were willing to pay an additional 0.19 euros, which is an additional 10% of the market price of a 250g coffee packet(Maaya, Leonard, Meulders, Surmont, and Vandebroek, 2018). However, there is a study that found that higher price decreases demand and willingness to buy products with ethical labels, and some consumers frequent non-fair trade products due to its lower cost (Frey, Ulrich, and Pirscher, 2018).

3.2 Determinants of Willingness to Pay

The top 3 reasons in the articles reviewed for reasons that consumers actually relate their purchasing intentions to the action of buying ethically sourced products are: 1) perceived money availability, 2) store accessibility, and 3) ethical consumers’ emotional satisfaction. If the product is easily accessible when they are shopping for grocery, or if they have the ability to afford the premium priced ethical products, they would choose to buy ethically sourced products as compared to products that are not. Also, happiness was positively associated to repeated purchase of ethical products and fair-trades consumption as narcissism affected self-actualisation, which in turn elicited happiness, this posed as a moral motivation for ethical consumers.

This behaviour gap however, might not apply to every ethically sourced product in the market, with such example being the comparison between eco-friendly detergents and electric vehicles. One study reported that the interest and preference did not lead to the intention to use and intention to purchase of eco-friendly detergent but did partially influence the intention to use and purchase of electric vehicles. This is largely due to the emphasis of the high relative advantage for consumers for the usage of electric cars (Shim, Dongnyok, Shin, and So‐Yoon, 2018).

Unanticipated factors such as gender and age can interfere and change attitudes. A study on eco-labelled apples shows that women who have children and who care about the environment and food safety are more willing to pay greater price premiums for them (Kim, Hyunsoo, and Chang, 2018). However, the general price of an apple is relatively cheap, so the price premium is considerably small.

Another reason that may largely affect consumers’ willingness to buy is when companies are able to adopt strategies that enhance customers’ perception (Kim, Hyunsoo, and Chang, 2018). Tests were conducted for the sale of coffee using a label experiment. This experiment used 2 labels: 1) fair-trade label, and 2) generic label. The only difference is the fair-trade label included the source of product and the generic label only highlighted the name of the product. Results showed that sales did improve when fair-trade labels were attached to the coffee, while sales remained stable for the coffee with generic label (Maaya, Leonard, Meulders, Surmont, and Vandebroek, 2018). These are some ways where efforts can be attempted to raise awareness as well as an increase in intention to purchase.

4.0 Conclusion

The aim of this literature review was to understand the determinants of fair-trade product purchase intention and the willingness to purchase, as well as the price premium consumers are willing to pay for such products. Challenges such as certain moral values were hard to capture, and product quality were often not included when comparing between ethically produced products and non-ethically produced products. This literature review has concluded that price is a main determinant for the purchase intention for consumers, and that the general price premium they are willing to pay is 15%.

Word count: 1412 words

References

Balasubramanian, P., and SooryaSoman. "Awareness regarding fair trade concept and the factors influencing the fair trade apparel buying behaviour of consumers in Cochin City." Journal of Strategic Marketing (2018): 1-18.

Beldad, A., and S. Hegner. "Determinants of fair trade product purchase intention of Dutch consumers according to the extended theory of planned behaviour." Journal of Consumer Policy 41, no. 3 (2018): 191-210.

Chang, Hyo Jung, and KittichaiWatchravesringkan. "Who are sustainably minded apparel shoppers? An investigation to the influencing factors of sustainable apparel consumption." International Journal of Retail & Distribution Management 46, no. 2 (2018): 148-162.

Frey, Ulrich J., and FraukePirscher. "Willingness to pay and moral stance: The case of farm animal welfare in Germany." PloS one 13, no. 8 (2018): e0202193.

Herédia-Colaço, Vera, and Rita Coelho do Vale. "Seize the day or save the world? The importance of ethical claims and product nature congruity." Journal of Business Ethics (2016): 1-19.

Hill, Jessica, and Hyun-Hwa Lee. "Young Generation Y consumers’ perceptions of sustainability in the apparel industry." Journal of Fashion Marketing and Management: An International Journal 16, no. 4 (2012): 477-491.

Hwang, Kumju, and Hyewon Kim. "Are ethical consumers happy? Effects of ethical consumers' motivations based on empathy versus self-orientation on their happiness." Journal of Business Ethics 151, no. 2 (2018): 579-598.

Jacobs, Kathleen, Lars Petersen, Jacob Hörisch, and Dirk Battenfeld. "Green thinking but thoughtless buying? An empirical extension of the value-attitude-behaviour hierarchy in sustainable clothing." Journal of Cleaner Production 203 (2018): 1155-1169.

Kim, Hyunsoo, and Chang Lee. "The Effects of Customer Perception and Participation in Sustainable Supply Chain Management: A Smartphone Industry Study." Sustainability 10, no. 7 (2018): 2271.

Maaya, Leonard, Michel Meulders, Nick Surmont, and Martina Vandebroek. "Effect of environmental and altruistic attitudes on willingness-to-pay for organic and fair trade coffee in Flanders." Sustainability 10, no. 12 (2018): 4496.

Malik, Chirag, and Neeraj Singhal. "Consumer Environmental Attitude and Willingness to Purchase Environmentally Friendly Products: An SEM Approach." Vision 21, no. 2 (2017): 152-161.

Miranda-de la Lama, Genaro C., Laura X. Estévez-Moreno, Morris Villarroel, Adolfo A. Rayas-Amor, Gustavo A. María, and Wilmer S. Sepúlveda. "Consumer Attitudes Toward Animal Welfare-Friendly Products and Willingness to Pay: Exploration of Mexican Market Segments." Journal of Applied Animal Welfare Science 22, no. 1 (2019): 13-25.

Moon, Heekang, and Hyun-Hwa Lee. "Environmentally friendly apparel products: The effects of value perceptions." Social Behavior and Personality: an international journal 46, no. 8 (2018): 1373-1384.

Musova, Zdenka, Hussam Musa, and Lenka Ludhova. "ENVIRONMENTALLY RESPONSIBLE PURCHASING IN SLOVAKIA." Economics & Sociology 11, no. 4 (2018): 289.

Nassivera, Federico, Stefania Troiano, Francesco Marangon, Sandro Sillani, and Iskra Markova Nencheva. "Willingness to pay for organic cotton: Consumer responsiveness to a corporate social responsibility initiative." British Food Journal 119, no. 8 (2017): 1815-1825.

Park, Kendall Cox. "Understanding ethical consumers: willingness-to-pay by moral cause." Journal of Consumer Marketing 35, no. 2 (2018): 157-168.

Rashid, Md Sanuwar, and Sang-Eun Byun. "Are consumers willing to go the extra mile for fair trade products made in a developing country? A comparison with made in USA products at different prices." Journal of Retailing and Consumer Services 41 (2018): 201-210.

Shim, Dongnyok, Jungwoo Shin, and So‐Yoon Kwak. "Modelling the consumer decision‐making process to identify key drivers and bottlenecks in the adoption of environmentally friendly products." Business Strategy and the Environment 27, no. 8 (2018): 1409-1421.

Tilikidou, Irene, and Antonia Delistavrou. "Fumbling the Greek Ethical Consumers' Profile." Journal of Research for Consumers 32 (2018): 32-69.

Appendix

Table 1: Studies identified from the review (lead author alphabetical order)

No.

Author(s)(Year)

Article Title

Research method/ size/ discipline

Content

1

Balasubramanian, P., and SooryaSoman. (2018)

Awareness regarding fair trade concept and the factors influencing the fair trade apparel buying behaviour of consumers in Cochin city

Quantitative method/ n= 163 respondents across various ready-made shops in the city

Determinants of consumers’ purchasing decision

2

Beldad, A ; Hegner, S (2018)

Determinants of Fair Trade Product Purchase Intention of Dutch Consumers According to the Extended Theory of Planned Behaviour

Quantitative method/ n=499 fair-trade product consumers in the Netherlands

Determinants of consumers’ purchasing decision

3

Chang, Hyo Jung, and KittichaiWatchravesringkan (2018)

Who are sustainably minded apparel shoppers? An investigation to the influencing factors of sustainable apparel consumption

Quantitative method/ n=235 college students who attended a south-eastern university

Fair-trade

4

Frey, Ulrich J., and FraukePirscher. (2018)

Willingness to pay and moral stance: The case of farm animal welfare in Germany

Quantitative method/ n= 1591 online survey mailed out via university mailing list and n= 69 offline survey conducted in public spaces

Willingness to pay

5

Herédia-Colaço, Vera, and Rita Coelho do Vale (2018)

Seize the Day or Save the World? The Importance of Ethical Claims and Product Nature Congruity

Quantitative method

Fair-trade

6

Hwang, Kumju, and Hyewon Kim (2018)

Are Ethical Consumers Happy? Effects of Ethical Consumers' Motivations Based on Empathy Versus Self-orientation on Their Happiness

Mixed method/ n=471 regular purchases of at least 1 cup of fair-trade coffee weekly or fair-trade coffee beans monthly

Focus group interviews

Determinants of consumers’ purchasing decision

7

Kim, Hyunsoo, and Chang Lee.(2018)

The Effects of Customer Perception and Participation in Sustainable Supply Chain Management: A Smartphone Industry Study

Quantitative method: online survey/ n= 367 smart-phone users aged 20 and above

Fair-trade

8

Maaya, Leonard, Michel Meulders, Nick Surmont, and Martina Vandebroek (2018)

Effect of environmental and altruistic attitudes on willingness-to-pay for organic and fair trade coffee in Flanders.

Quantitative method: online survey and discrete choice experiment/ n= 262

Students from the Master of Science in Business Engineering at the university

Willingness to pay

9

Malik, Chirag., Singhal, Neeraj., and Vision, Gurgaon. (2017)

Consumer Environmental Attitude and Willingness to Purchase Environmentally Friendly Products: An SEM Approach Consumer Environmental Attitude and Willingness to Purchase Environmentally Friendly Products: An SEM Approach

Quantitative method: Questionnaire/ n = 300 respondents in Delhi NCR.

Convenience sampling method was also used to collect the primary data from the fast-moving consumer goods

(FMCG)

consumers in the Delhi NCR region.

Determinants of consumers’ purchasing decision/ Willingness to pay higher price

10

Miranda-de la Lama, Genaro C., Laura X. Estévez-Moreno, Morris Villarroel, Adolfo A. Rayas-Amor, Gustavo A. María, and Wilmer S. Sepúlveda (2018)

Consumer Attitudes Toward Animal Welfare Friendly Products and Willingness to Pay: Exploration of Mexican Market Segments

Mixed method/ Questionnaire for sample of n= 84 and personal interview for n= 843 consumers who purchased most of the animal food products in their home

Willingness to pay

11

Moon, Heekang., and Lee, Hyun-Hwa. (2018)

Environmentally Friendly Apparel Products: The Effects Of Value Perceptions

Quantitative method: online survey/ n = 593 female consumers aged from 18 to 34 years old living in the 25 most populous metropolitan areas of the USA

Determinants of consumers’ purchasing decision/ Willingness to pay higher price

12

Musova, Zdenka., Musa, Hussam., and Ludhova, Lenka. (2018)

Environmentally Responsible Purchasing In Slovakia

Quantitative method: survey/ n = 274 consumers in slovakia

Determinants of consumers’ purchasing decision/ Willingness to pay higher price

13

Nassivera, Federico., Troiano, Stefania., Marangon, Francesco., Sillani, Sandro., and Iskra Markova Nencheva. (2017)

Willingness to pay for organic cotton: Consumer responsiveness to a corporate social responsibility initiative

Quantitative method: questionnaire/ n = 364 shoppers at sports department store

Determinants of consumers’ purchasing decision/ Willingness to pay higher price

14

Park, Kendall Cox. (2018)

Understanding ethical consumers: willingness-to-pay by moral cause

Quantitative method/ n= 2109

Willingness to pay

15

Rashid, Md Sanuwar, and Sang-Eun Byun. (2018)

Are consumers willing to go the extra mile for fair trade products made in a developing country? A comparison with made in USA products at different prices.

Quantitative method / n= 185 students attending in a major southeastern university in the U.S

Fair-trade message/ Willingness to pay

16

Tilikidou, Irene; Delistavrou (2018)

Fumbling the Greek Ethical Consumers' Profile

Quantitative method/ n= 564

Determinants of consumers’ purchasing decision

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