University of Vaasa - Vaasan yliopisto

Price difference in organic and
conventional cotton t-shirt (per
Kg equivalent to 4 t-shirts)
supplier’s stage
Additional cost of
organic cotton finished
fabric required to
produce 1 Kg of organic
cotton t-shirt
$ 6. 16 $ 3. 53 $ 2. 63
Table 12: Value addition at the garment stitching stage
The Retailing Stage
Value addition at
garment stitching
stage
168
Once a garment has been made, the price difference between an organic and
conventional cotton t-shirt is approximately $ 1. 54. However, retailers are then able
to achieve a significant price differential simply because of market factors such as
reputational effects and consumer demand, and are typically able to charge a
considerable premium for an organic cotton t-shirt.
Our research indicates that there are two different categories of retailers, with
different pricing strategies for organic cotton goods. Category C (cheaper) includes
high street retailers that sell organic garments, but it is not their core range. Retailers
in this category include Gap, Marks and Spencer and HandM. Category E (expensive)
are mainly ethical goods’ retailers, for whom organic cotton garments form a core
range. Retailers in this category include People Tree, Natural Store and Green Apple.
These two categories of retailers tend to configure their value chains differently. The
Category C retailers buy organic fibre and fabric, and then process it according to
their own standards. The products thus made are sold as ‘made from organic cotton’.
The retail price of these t-shirts on average was around $30, $14 more than a
conventional cotton t-shirt.
Profits achieved by these retailers is high. They are able to charge high prices while
not paying premium prices for truly organic products which are certified at all stages
of the supply chain; the raw material they buy is only certified at the farming stage.
Category E retailers certify their products at all stages of production. Some also
obtain additional certificates such as Fair-trade. Their t-shirts are priced at an average
of $44, $28 higher than conventional cotton, and $14 higher than Category C
retailers’ products. For these companies, value is added through reputational effects;
a price premium is charged for their ethical products, whilst costs are relatively low.
However, because of their high prices, demand is relatively low (Table 13).