Retailers Learn It's Not Easy Being Green, But Continue Investing

By Debbie Hauss, Executive Editor

Retailers are treading lightly in the green marketplace, taking note that consumers are skeptical and reticent to commit to trading much of their “green” for green merchandise. Although a large percentage of consumers (81.9 percent) say they have incorporated some level of green activity into their lives, most of their efforts do not translate to dollar signs at retail, according to a recent survey of more than 6,000 consumers conducted by Burst Media.

It turns out that the consumers respond most positively to green messages about recycling and healthy recipes, then alternative energy sources, natural remedies, eco-friendly cleaning products, green technologies, nature/outdoor recreations, tips for simple living, gardening/organic gardening, and organic foods, Burst reports. The bottom line is that the retailers offering products related to these subject areas are most likely to be successful.

A new Benchmark report from RSR Research also validated that retailers are moving forward with green initiatives, despite the fact that many respondents are not yet seeing a big shift consumer spending toward green products and services. The RSR Research report, 62% of retail respondents said consumers are not yet spending on green products, however 44% said green initiatives are still strategic initiative in their company. The motivations for the green practices include ethical obligations as well as cost concerns.

Green food is a Natural
Supermarket retailers, in particular, are faring well in this area by offering more organic and whole foods, as well as environmentally friendly programs. This is a trend that has been in place for a number of years and is growing. It started with brands like Whole Foods and Trader Joe’s but is slowly infiltrating more mainstream grocers, such as Kroger, Supervalu and Safeway.

The mainstream supermarket retailers are hoping to benefit from offering lower prices for their organic goods compared to the specialty stores, which should be especially palatable to consumers in 2008 who are struggling with higher food prices, as well as increasing gas prices and other financial issues related to the current recession economy.

Some recent activity in this segment includes:

· Kroger introduced a plastic recycling program and is promoting is through an online contest called “Design Kroger’s Next Reusable Bag.”

· Safeway is banking on its line of private label organic products and some new Lifestyle store formats

· Supervalu-owned Acme Markets opened the first environmentally friendly supermarket in the Philadelphia, Pennsylvania area in April. The new store was built according to Leadership in Energy and Environmental Design (LEED) form the U.S. Green Building Council. For the Supervalu stores, the company is adding private label organic food products after failing with a small line of organic markets, introduced in 2005 under the Sunflower Markets brand.

· Tesco entered the U.S. market with its Fresh & Easy chain which focuses on healthy, reasonably priced prepared foods.

In a recent report, released in March by Citibank Global Markets, analyst Deborah Weinswig noted Kroger and Safeway as the stores best positioned to gain share from bigger, national brands.

Sustainability the word of the day
While “organic” has been the term most closely associated with healthier, better choices for food products, the term “sustainability” is taking over as the all-encompassing term that may help to attract consumers to other types of retailers.

Touted as Wal-Mart’s largest “sustainability” campaign to date, the retail giant’s Earth Day 2008 effort used advertising, in-store displays and featured products to reinforce Wal-Mart’s goal of making sustainable products available to customers at affordable prices, the company reported. Wal-Mart also has micro sites available for consumers including walmart.com/sustainability, walmart.com/green and walmart.com/earth. The company is selling more than 50 green products in-store and more than 500 online.

Home Depot introduced its Eco Options label in 2007, which includes 3,000 products from compact fluorescent lights to organic plants. The brand sold as well or better than similar products, exceeding sales goals and reaching $3 billion, the company reported.

The Marketing Challenge
A number of barriers are stalling retail sales of green products, including limited product availability due to uncertain consumer demand, and inconsistent product standards. In addition, consumers are less-than-confident in the green marketing messages from advertisers, according to Burst Media. The Burst survey found that 22.7 percent of respondents say they seldom or never believe green claims made in advertisements, and 65.3 percent said they “sometimes” believe the claims.

To help steer consumers in the right direction, one third-party source, called thepurplebook green, is offering a guide to green shopping online. Companies that sell their green products online are invited to submit their site for inclusion in the guide at www.thepurplebook.com. The sites and the products are then reviewed by thepurplebook staff and consumer feedback is considered to determine if that site will be included in the book as a recommended retailer.

Is green a viable, long-term market segment or a passing trend? The jury is still out.