Monday, February 4, 2008

Green Memo: Innovative 'Bags Of Change' Uses Market-Based Loyalty Marketing Scheme to Encourage Green and Ethical Shopping Behavior

The Back-Story: Plastic Bag bans and legislation, reusable shopping bags, ethical retailing and ethical consumerism.

As we've discussed here often, the international movement to ban, tax and legislate against plastic grocery bag use at retail is blazing full steam ahead. The biggest news on the plastic bag ban front comes most recently from China. The world's most-populous country announced just last month it will ban the giving away by all retail stores of free, thin-plastic shopping bags later this year, shortly before the start of the 2008 Summer Olympic Games, which are being held in China in August.

China's ban follows similar bans all over the world. In the U.S., the cities of San Francisco and Oakland, California have banned retail food stores over a certain square footage from using plastic grocery bags. (The San Francisco ban is in effect. The Oakland ban is currently being challenged in court.) Other cities and states throughout the U.S. are considering similar bans. States like California, New York and New Jersey have past laws which require supermarkets to place plastic grocery bag recycling bins in their stores and to sell reusable shopping tote bags in-store.

Many countries in Africa have banned the use of plastic shopping bags. A potential ban also is being discussed in the United Kingdom and in India, the second most-populous country in the world. In Australia and Canada, local governments have either banned plastic bags outright, are in the process of doing so, or are considering either taxing the bags' use, like Ireland is doing, or similar legislation.

Even food retailers are getting in on the banning (self-banning) of plastic grocery bags, which seldom get recycled and more often than not end-up being tossed into landfills, where they take decades to degrade. Whole Foods Market, Inc. announced recently it will stop using non-biodegradable plastic bags at all its stores in the U.S., Canada and the UK in April of this year, on Earth Day. Other retailers like German grocer Aldi charge customers extra if they want their purchases packaged in plastic bags in its UK and U.S. stores.

Trader Joe's, the U.S. specialty grocer owned by Aldi, doesn't offer plastic bags at all in its nearly 300 U.S. stores, and gives customers a discount for every reusable bag they use instead of having their groceries packaged in one of TJ's paper grocery bags. Most Trader Joe's stores have never offered plastic bags as an option. The retailer also was one of the first to sell reusable canvas bags and offer shoppers a discount for bringing them with them to shop.

Trader Joe's is today far from alone in offering incentives to shoppers for using reusable bags. This is a growing trend throughout the world. Just five years ago, it was difficult to find more than a handful of supermarkets that gave shoppers a discount if they brought their own bags (BYOB) to the store. Today, grocers across the board, from big-box discount stores, to upscale lifestyle food retailers, offer discounts of five -to- 10 cents per bag for BYOB and sell a variety of reusable shopping bags in their stores.

A Big Idea: Bags of Change. It's more than an anti-plastic bag approach. It's a pro-reusable bag, carrot without the stick, market-based incentive approach, with a loyalty marketing basis.

It's with reusable shopping bags that British company Bags of Change is creating change in the UK. And its using market-based methods to do so. The company has created a loyalty scheme in which shoppers can get a discount in over 50 stores (and growing) simply by using their organic hemp-cotton or latex tote bags rather than excepting a paper or plastic bag from the store for their purchases.

Further, as part of the loyalty program, shoppers also get extra discounts on locally-produced, organic and Fairtrade goods in the paticipating stores when they shop using one of Bags of Change's' reusable shopping tote bags.

Instead of focusing on sticks--laws, bans, taxes and the like--Bags of Change is taking a decidedly market-oriented approach by offering carrots in the form of discounts on goods at participating stores.

The company's goal is to get more people to use reusable bags regardless of whether or not plastic bags are legal, illegal, banned or not banned. Secondly, the green bag company wants to promote organic, local and Fairtrade shopping, along with the eco-friendly bags. As a result, their program is designed to reward and encourage ethical shopping behavior by offering economic incentives and appealing to UK shoppers' pocketbooks in addition to appealing to their hearts and minds.

Bags of Change, which was founded by school teacher Faith Simpson and researcher Dr. Hugh Willbourn, recently won the "Best Green Company" award in the 2007 Green England Green Awards, a major environmental competition designed to reward the "greenest" companies in the UK.

The loyalty scheme process is simple. Bags of change provides the buyers of its bags with a list of participating stores. The list is constantly updated on their website. Additionally, participating stores post signs in-store indicating they are part of the program. Shoppers just show the store clerk the tote bag to get their discount. It's a simple yet powerful market-based program. The company says its signing up more stores each week.

For the stores, the Bags of Change program provides them with a new group of shoppers who might not otherwise ever set foot in their stores. It's also a select group of shoppers, who by their very participation in the Bags of Change program have indicated a commitment to green and ethical shopping and retailers. These retailers benefit by associating with the loyalty program since in addition to the new business, they also get to position themselves as ethical retailers.

The Future Story: More market-based programs like Bags of Change, along with more retailer-based incentives, are needed to ensure proactive use of reusable shopping bags by shoppers.
One of the major problems with focusing on the plastic bag issue from only a legislative standpoint is that it does nothing to encourage positive behavior like convincing shoppers to use reusable shopping bags rather than paper bags, which remain an alternative in those places where plastic bags are being eliminated. Programs like Bags of Change are addressing that aspect using a positive, market-based approach.

We see food retailers creating similar programs. For example, instead of just giving customers five cents for every reusable bag they use, perhaps grocers who use store loyalty cards could offer a program where they give customers a credit for every reusable grocery bag they use instead of taking a paper or plastic store bag, in addition to the five or so cents per bag discount. When shoppers reach 25 or 50 credits, for example, they would get 5% off their total grocery order for that one time. Then they get to start banking the credits once again for next time. There are many similar, creative schemes that can be developed to encourage increased use of reusable shopping bags.

In other words, we believe market-based incentives are needed, along with laws, to ensure that over time the use of reusable shopping bags becomes the norm, rather than just a behavior practiced by a minority of "green" or ethical shoppers.

We like Bags of Change's approach in the UK, and look forward to seeing similar programs pop-up all over the world--along with innovative programs from retailers like the one we offered above, designed to eventually make shopper use of reusable shopping bags the norm rather than the exception. It's social, market-based marketing that's good for people, good for the earth, and good for the economic bottom-line as well.

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