Less may be more

Patag­o­nia, the out­door cloth­ing com­pany, is putting sus­tain­abil­ity ahead of profit and ask­ing con­sumers to ‘buy less’. It’s a bold strat­egy which may just prove to be a smart way of do­ing busi­ness.

Element - - Enterprise - By Eric Lowitt Eric Lowitt is the au­thor of The Fu­ture of Value

Con­sumers ac­count for the bulk of GDP. As con­sumers spend more, com­pa­nies pros­per, and the global econ­omy ex­pands. And so does our level of en­vi­ron­men­tal im­pact. Re­cently the out­door cloth­ing com­pany Patag­o­nia con­tin­ued its ef­fort to break this chain of cause and ef­fect. The com­pany is now en­cour­ag­ing con­sumers to buy less of its new ap­parel with the in­ten­tion of in­flu­enc­ing con­sumer be­hav­iour in or­der to lower the en­vi­ron­men­tal strain from ever-grow­ing con­sump­tion lev­els. But could a pro­gramme en­cour­ag­ing con­sumers to buy less ac­tu­ally lead to growth for the com­pany and a re­duc­tion of en­vi­ron­men­tal im­pact? If so, could other com­pa­nies fol­low a sim­i­larly counter-in­tu­itive ap­proach to growth? The an­swers are yes and maybe.

To put the idea into ac­tion, Patag­o­nia has part­nered with ebay to pro­vide con­sumers a way to re­sell their used Patag­o­nia ap­parel via the Com­mon Threads Ini­tia­tive site on ebay. In ad­di­tion con­sumers can also re­sell their used Patag­o­nia ap­parel on a ‘used’ sec­tion on Patag­o­nia’s web­site.

Those fa­mil­iar with Patag­o­nia’s mis­sion will con­clude the com­pany’s cam­paign is both gen­uine and bor­der­line heroic. As a fam­ily busi­ness with a strong track record of en­vi­ron­men­tal and so­cial stew­ard­ship, the com­pany is fa­mous for putting sus­tain­abil­ity ahead of profit. Com­pa­nies might now be ask­ing them­selves how Patag­o­nia’s ap­proach can re­solve the con­scious cap­i­tal­ist’s para­dox all for-profit busi­nesses face. That is, how can for-profit busi­nesses grow while ac­tively lob­by­ing in­di­vid­u­als to buy less?

One tac­tic to be con­sid­ered is chang­ing a com­pany’s tax sta­tus. A shift from for-profit to not-for-profit re­moves pres­sure to grow, thereby break­ing the cap­i­tal­ism-en­vi­ron­men­tal­ism Gordian Knot. A sim­i­lar but less dra­co­nian tac­tic would be a shift in cor­po­ra­tion struc­ture. Most for-profit com­pa­nies are le­gal en­ti­ties with a fidu­ciary re­spon­si­bil­ity to max­imise share­holder value. There is a move­ment to en­cour­age cor­po­ra­tions to adopt a new struc­ture de­signed for profit-driven com­pa­nies to sig­nal to the mar­ket their in­ten­tion to man­age their busi­ness for the ben­e­fit of stake­hold­ers, not just share­hold­ers. While this can re­duce the pres­sure share­hold­ers place on com­pa­nies to grow, it doesn’t com­pletely elim­i­nate it. The para­dox re­mains.

Can Patag­o­nia’s ‘buy less’ cam­paign pro­vide an es­sen­tial tool to solve the para­dox? And is rev­enue growth for the ap­parel maker pos­si­ble? There are three tac­tics avail­able to com­pa­nies that fo­cus on high qual­ity goods. Com­pa­nies that aren’t known for high qual­ity will have a much more dif­fi­cult time em­ploy­ing the first tac­tic in par­tic­u­lar.

In­crease prices

An un­der­cur­rent of Patag­o­nia’s mes­sage is that con­sumers should buy high qual­ity ap­parel that will last a very long time. Such ap­parel should com­mand a pre­mium price rel­a­tive to lower qual­ity sub­sti­tutes. So, in the­ory, Patag­o­nia can qui­etly raise its price per item to a point that would off­set (and then some) the po­ten­tial de­crease in quan­tity sold as a re­sult of their cam­paign. Sell more new prod­uct Sounds strange to say that en­cour­ag­ing cus­tomers to buy less new ap­parel could ac­tu­ally lead to in­creased sales vol­ume for Patag­o­nia. Yet this sce­nario is pos­si­ble. Two types of cus­tomers could be more in­clined to buy new Patag­o­nia ap­parel as a re­sult — cus­tomers who make de­ci­sions based on sus­tain­abil­ity con­sid­er­a­tions and cus­tomers who can now sell their used Patag­o­nia ap­parel in or­der to have the cash to buy new ap­parel. Ex­pand into new cat­e­gories Patag­o­nia could seek to sell both up­stream and down­stream. Typ­i­cally when we con­sider who cus­tomers are, we think ‘down­stream’. In other words, we fo­cus on the vol­ume of fin­ished goods sold to con­sumers. But what if we chal­lenged this as­sump­tion by adding ‘up­stream’ (ie sup­pli­ers) when we con­sider ways to in­crease quan­tity sold? Patag­o­nia’s prod­ucts are po­si­tioned as high qual­ity, en­vi­ron­men­tally con­scious items.

What if it works with re­tail­ers and con­sumers to re­cy­cle cloth­ing that has been too worn to be resold and then sells the used ma­te­ri­als back to its up­stream sup­pli­ers at a lower price than com­pa­ra­ble ‘vir­gin’ ma­te­ri­als? For this to work, Patag­o­nia’s price to sup­pli­ers would need to be lower than the price sup­pli­ers pay for vir­gin ma­te­ri­als — a dis­tinct pos­si­bil­ity given com­mod­ity price ap­pre­ci­a­tion in re­cent years.

Is the com­pany’s po­ten­tial suc­cess with this strat­egy repli­ca­ble by other ap­parel com­pa­nies? Maybe. It’s likely that only the com­pa­nies that share in com­mon with Patag­o­nia three build­ing blocks — lower pres­sure from share­hold­ers to sell more now (Patag­o­nia is pri­vately held), long-stand­ing and well known com­mit­ment to sus­tain­able ideals, and high-qual­ity prod­ucts — will have a pos­si­ble shot at coun­ter­in­tu­itive growth as a re­sult of this kind of strat­egy. If this ap­proach leads to growth, sus­tain­abil­ity will be­come more closely aligned with busi­ness suc­cess as a re­sult.

Patag­o­nia is part­ner­ing with ebay to pro­vide con­sumers a way to re­sell

their used Patag­o­nia ap­parel.

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