soleRebels – Targeting the Ethical Consumer Case Author: Breda McCarthy Online Pub Date: August 16, 2016 | Original Pub. Date: 2016 Subject: Consumer Marketing, Ethical & Sustainable Marketing Level: Intermediate | Type: Indirect case | Length: 3572 words Copyright: © Breda McCarthy 2015 Organization: soleRebels | Organization size: Small Region: Ethiopia | State: Industry: Manufacture of wearing apparel Originally Published in: Publisher: SAGE Publications Ltd DOI: http://dx.doi.org/10.4135/9781473937499 | Online ISBN: 9781473937499© Breda McCarthy 2015 This case was prepared for inclusion in SAGE Business Cases primarily as a basis for classroom discussion or self-study, and is not meant to illustrate either effective or ineffective management styles. Nothing herein shall be deemed to be an endorsement of any kind. This case is for scholarly, educational, or personal use only within your university, and cannot be forwarded outside the university or used for other commercial purposes. 2017 SAGE Publications Ltd. All Rights Reserved. This content may only be distributed for use within Deakin University Geelong Wate. http://dx.doi.org/10.4135/9781473937499 SAGE SAGE Business Cases © Breda McCarthy 2015 Page 2 of 12 soleRebels – Targeting the Ethical ConsumerCase Learning Outcomes This case explores the rise of a successful brand in a third world economy and prompts discussion and learning about sustainable marketing, the principles of Fair Trade and green market segmentation. Introduction Founded in 2004, soleRebels is an organisation that recycles truck tires to produce a range of shoes and sandals that are marketed to ethical consumers in the Western world. The company is based in a food-insecure, drought-prone region in Ethiopia and it helps alleviate some of the problems faced by the local community. These problems are enormous. The extremely poor, living on less than a dollar a day, have few assets and need humanitarian aid. Although there are several relief and development organisations, such as Oxfam, that focus on the needs of people in developing countries, finding solutions to poverty, hunger and social injustice is not easy. Bethlehem Tilahun Alemu, the founder of soleRebels, operates with the fundamental belief that locally informed, community-driven solutions to poverty alleviation are the most appropriate and effective approaches. She strongly feels that “trade is better than aid” and that African people need to solve their own problems. Her motto is “making the world a better place, one step at a time”. The company exports to over 45 countries. It employs 45 full-time workers and creates business for more than 200 local suppliers. It is estimated that revenues will exceed £6m by 2016. Alemu is a business women as well as a humanitarian and her goal is to develop a successful global brand, become the Nike of Africa and explore entry into new countries (soleRebels, 2014). Figure 1. soleRebels footwear: A red sandal and brown shoe. Source:http://www.solerebelsfootwear.co SAGE SAGE Business Cases © Breda McCarthy 2015 Page 3 of 12 soleRebels – Targeting the Ethical ConsumerThe North-South Divide The disparity in living standards between the developed countries (“the North”’) and the developing and poor countries (“the South”) is stark (Wells, 2011). Ethiopia has a population of over 90 million (World Bank, 2014) but millions can be described as “food-insecure”. The World Food Summit of 1996 defined food security as existing “when all people at all times have access to sufficient, safe, nutritious food to maintain a healthy and active life” (Food and Agriculture Organisation of the United Nations, 1996). Ethiopia was ranked 173 out of 187 in the UN Development Programme's 2014 Human Development Index (United Nations Development Programme, 2014). The country's per capita income is estimated to be $470 (World Bank, 2014). Like other developing countries, Ethiopia is grappling with challenges such as extreme poverty and hunger; child mortality; maternal health; HIV/AIDS, malaria and other diseases; gender inequality; and lack of access to universal primary education. It has made good progress in achieving United Nations Millennium Development goals for child mortality, gender parity in education, HIV/AIDS and malaria. Climate change poses new challenges for a country that is already mired in poverty. Most of the population is dependent on agriculture; crops are dependent upon seasonal rains and droughts have tremendous impacts on Ethiopia's economy. Droughts used to occur about once every decade, but today they afflict the region as frequently as every couple of years. Increased weather volatility jeopardises not only the wellbeing of individuals but Ethiopia's progress as a nation (Oxfam, 2010). Over-consumption in the North has resulted in unsustainable farming practices in the South. Environments in the South are often degraded in the process of producing primary commodities for export to the North. Fishing grounds are depleted, forests destroyed, soil eroded, wilderness areas despoiled. A strong case seems to exist for a transfer of capital from North to South, not as aid, but as compensation for environmental damage (Wells, 2011). The founder of soleRebels has helped change the discourse on African development from one of poverty alleviation orchestrated by external actors, to one about wealth creation driven SAGE SAGE Business Cases © Breda McCarthy 2015 Page 4 of 12 soleRebels – Targeting the Ethical Consumer1. 2. 3. 4. 5. 6. 7. 8. 9. by local Africans maximising their talents and resources. Fair Trading Bethlehem Tilahun Alemu founded soleRebels with just $10,000 in start-up capital. She spotted an opportunity to use recycled materials to create her products and, in the process, bring sustainable jobs to her community. soleRebels became the world's first Fair-Trade certified footwear company. One problem that arises from free market forces is that, when small commodity producers (i.e. cocoa beans, tea and cotton) are faced with large, powerful buyers, the result can be very low prices. This can bring severe economic hardship to the producers who are often situated in developing countries. According to the World Fair Trade Organisation (2014), the path to Fair Trade means changing practices in the supply chain and adhering to ten principles: Creating Opportunities for Economically Disadvantaged ProducersPoverty reduction through trade forms a key part of the organisation's aims. Transparency and AccountabilityThe Fair Trade organisation is transparent in its management and is accountable to all its stakeholders. The organisation finds appropriate ways to involve employees, members and producers in its decision-making processes. It ensures that relevant information is provided to all its trading partners. Communication channels are open at all levels of the supply chain. Fair Trading PracticesThe Fair Trade organisation trades with concern for the social, economic and environmental well-being of marginalised small producers and does not maximise profit at their expense. Fair Trade buyers recognise the financial disadvantages producers face and will make pre-payments on request. Buyers consult with suppliers before cancelling or rejecting orders. They seek to increase the volume of the trade. Fair Trade promotes and protects the cultural identity and traditional skills of small producers as reflected in their craft designs, food products and other related services. Payment of a Fair PriceA fair price is one that has been mutually agreed by all through dialogue, which provides fair pay to the producers and can also be sustained by the market. Ensuring no Child Labour and Forced LabourThe organisation adheres to the UN Convention on the Rights of the Child, and national laws on the employment of children. The organisation ensures that there is no forced labour in its workforce. Any involvement of children in the production of Fair Trade products (such as learning a traditional art or craft) is always disclosed and monitored and does not adversely affect the children's well-being, security, educational requirements and need for play. Commitment to Non-Discrimination, Gender Equity and Women's Economic Empowerment, and Freedom of AssociationThe organisation does not discriminate in hiring, remuneration, promotion and so forth based on race, religion, disability, gender, sexual orientation, union membership, political affiliation, HIV/Aids status or age. The organisation promotes gender equality. The organisation respects the right of all employees to form and join trade unions of their choice. Ensuring Good Working ConditionsThe organisation provides a safe and healthy working environment for employees. It complies, at a minimum, with national laws and the International Labour Organisation conventions on health and safety. Providing Capacity BuildingThe organisation helps producers improve their management skills, production capabilities and access to markets. Promoting Fair TradeThe organisation raises awareness of the aim of Fair Trade and SAGE SAGE Business Cases © Breda McCarthy 2015 Page 5 of 12 soleRebels – Targeting the Ethical Consumer10. of the need for greater justice in world trade. The organisation provides its customers with information about the producers that make or harvest the products. Honest advertising and marketing techniques are always used. Respect for the EnvironmentOrganisations that produce Fair Trade products maximise the use of raw materials from sustainably managed sources in their ranges. They seek to buy local, use organic or low pesticide production methods, reduce energy consumption, use renewable energy technologies where possible and minimise waste. All organisations use recycled or biodegradable materials for packing and goods are dispatched by sea wherever possible. soleRebels has set high standards of ethical practice. The company employs locals and pays four to five times the legal minimum wage and over three times the industry average; this allows workers to earn a respectable income and support their families. Workers are paid a straight wage without regard to individual quotas. Most workers live within walking distance of the factory, but transportation is provided for disabled workers. The company has also created an education fund for the employees' children. Workers and their families are provided with complete medical coverage, including site visits by qualified medical practitioners (such site visits are especially important as competent doctors are few and far between in Ethiopia). Furthermore, the production process preserves an ancient craft, cuts down on electricity bills and minimises the company's carbon footprint (soleRebels, 2014). Figure 2. How soleRebels promotes sustainability: People making the product (top); the company emphasises it is “uniquely green by heritage” and has a “zero carbon” policy (bottom). Source:http://www.solerebelsfootwear.co SAGE SAGE Business Cases © Breda McCarthy 2015 Page 6 of 12 soleRebels – Targeting the Ethical ConsumerThe Marketing Mix Although soleRebels is far from cosmopolitan centres and the catwalks of Paris, Milan or New York, the company is building a large number of brand devotees thanks to its fashionable designs and value-for-money proposition. The price ranges from $35 to $95. The founder has a very hands-on approach to the business and she is in charge of designing the shoes and sandals. She was inspired by the traditional Selate and Barabasso sandals worn by local fighters and Ethiopian rebels. The eco-friendly shoes and sandals are hand-crafted; the sole of the shoe is made from recycled materials such truck tires and natural fibres such as jutem, koba and organic cotton are used. In Ethiopia, the art of hand spinning cotton dates back millennia and the cotton is grown in an authentic, organic environment. All materials are sourced locally (within 60 miles of the company). The packaging is made from recycled shipping cartons and the shoes are wrapped in re-useable, hand-loomed cotton bags. The company has expanded its product range over time, with a children's range of shoes, handspun bags and a “b*knd” range of bags crafted for vegans. Adapting the product to suit the needs of the international customer is vital to success. For example, Japanese consumers have distinct preferences and certain colours and designs suit their needs. Figure 3. The company has expanded its ranges: The b*knd logo for vegan shoes; an invitation to order custom-made shoes. Source:http://www.solerebelsfootwear.co SAGE SAGE Business Cases © Breda McCarthy 2015 Page 7 of 12 soleRebels – Targeting the Ethical ConsumersoleRebels does not undertake any conventional advertising. The company has its own website and uses this and social media (i.e., Pinterest, Twitter, YouTube and Facebook) as its main promotional strategy. Publicity is another useful tool; it means that information about the business and its products are communicated to potential customers through the media and the founder does not have to pay for the time or space directly. The founder is comfortable being the face of her brand. She is a well-respected speaker at professional conferences and at events dealing with global trade. She has won numerous awards and accolades. She featured in the Forbes list of the World's Most Powerful Women to Watch in 2012 (Forbes, 2012) and was named Social Entrepreneur of the Year at the 2012 World Economic Forum (Africa). In 2011, she was selected as a Young Global Leader by the World Economic Forum. In 2014, she was named as one of the Most Influential Africans (Schneider, 2014). These awards, and speaking engagements, are a bonus for a company that has to market on a shoestring budget. Distribution channels include the website, online footwear retailers (such as Amazon, javari.co.uk, Endless.com, Spartoo.com) and company-owned retail outlets. In 2014, the company opened its first flagship US store in Silicon Valley, California. soleRebels places a strong emphasis on the online shopping experience and seeks to inspire trust in the online shopping process. The site handles over 2,000 items and they are categorised in a customerintuitive way. For example, the user can browse for products according to age (shoes for children) or gender (shoes for females). There is a strong focus on the products since this is the type of information that customers access most frequently. A size template allows users to check their foot-size. Customers are guaranteed satisfaction and if they are not happy with the shoes they can return them without question. Customers also have the option of ordering a custom-made shoe. SAGE SAGE Business Cases © Breda McCarthy 2015 Page 8 of 12 soleRebels – Targeting the Ethical ConsumerNiche Marketing – Targeting the Eco-Friendly Consumer Footwear is an extremely competitive business with several leading brands such Gucci, Nike and Adidas. Today there is a shoe for almost every occasion: sports, work, leisure and special occasions. The global footwear industry has witnessed a decline in sales due to recession. Outsourcing of production to low wage, low-cost countries such as Indonesia, China and Vietnam is expected to continue. In the developed world, competition from cheap imports has led to price discounting at retail level. Consumers are increasingly seeking value for money and durability. Niche segments include designer shoes and eco-friendly shoes (Transparency Market Research, 2013). When Bethlehem Tilahun Alemu founded soleRebels in 2004, she was aware that the ethical consumer was an emerging segment in the developed world, but this segment did not exist in her own home country. As a result she decided to target the international marketplace right from the start. Today, demand for eco-friendly shoes is driven by consumer concern for the natural environment and anxiety over world poverty, hunger and social injustice. There is growing concern about the treatment of workers in clothing and footwear supply chains. In the western world, footwear has major sustainability impacts and this includes the resources used in the manufacture of the product and the amount of waste generated by old shoes that end up in landfill. In addition, fashion has a strong influence on footwear and many shoes become obsolete long before they reach the end of their lifecycle (Belz & Peattie, 2012). Studies that track consumer attitudes about the environment have found that environmental knowledge and understanding has grown markedly. The GfK Green Gauge® Report is a long-term study of consumer attitudes and behaviours towards the environment. GfK have found that key aspects of “green” culture, such as the purchase of organic food and recycling, have become mainstream. Consumers are active in seeking out information that guides them in buying or avoiding certain products. They are willing to share their experiences with others through social media and word-of-mouth (GfK, 2012). Firms that do not position themselves on ethical dimensions can experience negative publicity and consumer boycotts. GfK Roper published a study in 2008 which divided the US population into six segments; “genuine greens” make up 17% of the population. These consumers are environmental activists, committed to pro-environmental behaviour and perceive no barriers to action (GfK Roper Consulting, 2008). Likewise, researchers in other countries, such as Australia, have found that ethical consumption is no longer purely associated with fringe politics or hippie lifestyles. Ethical consumption covers Fair Trade, animal rights and employee welfare (Humphery, 2010). Ethical consumers are often called “cultural creatives” as they are educated consumers who make conscientious purchasing and investing decisions based on social and cultural values (Ray & Anderson, 2000). They are also called the LOHAS segment (Lifestyles of Health and Sustainability). The LOHAS segment is a values-driven segment of consumers who are interested in personal development, health, the environment, sustainable living and social justice. The LOHAS segment is different from earlier green consumers in that a concern for self-improvement is combined with a concern for saving the planet. These types of consumers buy Fair Trade coffee; take yoga classes; are interested in slow food and locally produced and organic food; seek out ecotourism travel; and consume nutritional products, dietary supplements and mind-body-spirit products. Although the LOHAS segment was initially recognised in the US, LOHAS consumers have been identified elsewhere (LOHAS, 2008). SAGE SAGE Business Cases © Breda McCarthy 2015 Page 9 of 12 soleRebels – Targeting the Ethical ConsumerGreen consumers are difficult to profile since green consumption often reflects values and lifestyles (i.e., psychographics) rather than demographics. However, education and income are two of demographic variables that are often associated with ethical products such as organic food (Yiridoe, Bonti-Ankomah, & Martine., 2005). Ethical consumers must have the capacity to understand environmental claims and the income to pay premium prices for green products. Demand for green products and services, such as soleRebel shoes, is still confined to a niche. Some writers argue that the ethical consumer is a myth – consumers behave in contradictory ways and are unwilling to pay for more for ethical goods (Devinney, Auger & Eckhardt, 2010). Consumers want to get the most value for their money, regardless of their ethical beliefs. They believe that institutions such as the government should have responsibility to regulate what products can be sold. Finally, they feel that some unethical behaviours on the part of corporations must exist in order for macro-level economic development to occur. Writers conclude that ethical consumption is simply an ideal to which people can aspire and it is a level of behaviour that people seek to achieve (Eckhardt, Belk & Devinney, 2010). Others argue that the sense of caring and desire to preserve the environment is genuine and ethical consumerism is growing (Humphery, 2010). Despite the difficulty in profiling the green consumer and the debate in the literature over whether the ethical consumer actually exists, soleRebels has been successful. It is clear that that the emergence of the ethical consumer has benefited this company. It has managed to position its product so that it is competitive, in terms of quality, price, design and green credentials. Summary SoleRebels is a successful African footwear brand and the first global footwear brand to emerge from a developing nation. In a continent such as Africa, where most of the population struggles to survive, job creation is critical to the empowerment of the local community. soleRebels is an example of a sustainable business and one that presents a dynamic face of African creativity to the global market. There are many reasons why soleRebels has been successful: the passion and drive of the founder, the marketing strategy pursued and the targeting of the ethical consumer. Figure 4. soleRebels presents a dynamic face of African creativity: The company's customer service guarantee. Source:http://www.solerebelsfootwear.co SAGE SAGE Business Cases © Breda McCarthy 2015 Page 10 of 12 soleRebels – Targeting the Ethical Consumer1. 2. 3. Discussion Questions What role do you think soleRebels's internal emphasis on sustainability has played in helping the company maintain a competitive market position? How can this company use sustainability to create greater competitive advantage in the future? Identify two segments that soleRebels could target. Explain why you have chosen these segments and craft a positioning statement that will tap into the segment's core values. References Belz, F. M., & Peattie, K. (2012). Sustainability marketing: a global perspective. (2nd ed.) Chichester, UK: Wiley. Devinney, T., Auger, P., & Eckhardt, G. (2010). The myth of the ethical consumer. Cambridge, UK: Cambridge University Press. Eckhardt, G. M., Belk, R., & Devinney, T. M. (2010). Why don't consumers consume ethically? SAGE SAGE Business Cases © Breda McCarthy 2015 Page 11 of 12 soleRebels – Targeting the Ethical ConsumerJournal of Consumer Behaviour, 9, 426–436. Food and Agriculture Organisation of the United Nations (1996). World food summit. Retrieved from http://www.fao.org/wfs/index_en.htm Forbes (2012). W o m e n t o w a t c h. Retrieved from http://www.forbes.com/specialreport/2012/power-women/women-to-watch.html. GfK Roper Consulting (2008). Green gets real…current economic environment subduing g r e e n e n t h u s i a s m b u t d r i v i n g p r a c t i c a l a c t i o n. R e t r i e v e d f r o m http://www.gfk.com/cgi/site_active.pl? TEMPLATE=/gfkcr/infopool/pr/index.en.htms&REVERSE=1&SORT=publish_date_en&FROM= 104&MAX=5&FILTER=business_field&FILTERVALUE=%28Company|Custom%20Research%2 9&SEARCH=&SEARCHVALUE= GfK (2012). Green purchasing still faces price barriers according to new GfK report, 4 September, 2012. Retrieved from http://www.gfk.com/news-and-events/press-room/pressreleases/pages/green%20purchasing%20still%20faces%20price%20barriers%20according%2 0to%20new%20gfk%20report%20.aspx Humphery, K. (2010). Excess: anti-consumerism in the west. Cambridge, UK: Polity Press. LOHAS (2008). The LOHAS marketplace: $209 billion strong (and growing). Lifestyles of health and sustainability. Retrieved from http://www.lohas.com/ Oxfam (2010). Climate change increasing poverty and vulnerability in Ethiopia. Retrieved from http://www.oxfam.org/en/pressroom/pressreleases/2010-04-22/climate-change-increasingpoverty-and-vulnerability-ethiopia Ray, P. H., & Anderson, S. R. (2000). Cultural creatives: how 50 million people are changing the world. New York, USA: Harmony Books. Schneider, J. (2014). M o s t i n f l u e n t i a l A f r i c a n s o f 2 0 1 4. R e t r i e v e d f r o m http://newafricanmagazine.com/influential-africans-2014/ soleRebels (2014). About us. Retrieved from http://www.solerebels.com/pages/about-us Transparency Market Research (2013). Footwear market – global industry size, market share, t r e n d s , a n a l y s i s , a n d f o r e c a s t , 2 0 1 2 – 2 0 1 8. R e t r i e v e d f r o m http://www.transparencymarketresearch.com/footwear-market.html United Nations Development Programme (2014). Human development index. Retrieved from http://hdr.undp.org/en/content/table-1-human-development-index-and-its-components Wells, G. (2011). Sustainability in Australian business — fundamental principles and practice. Milton, Queensland, Australia: John Wiley & Sons Australia. W o r l d B a n k (2014). E t h i o p i a – o v e r v i e w . R e t r i e v e d f r o m http://www.worldbank.org/en/country/ethiopia/overview World Fair Trade Organisation (2014). Ten principles of Fair Trade. Retrieved from http://www.wfto.com/our-path-fair-trade Yiridoe, E., Bonti-Ankomah, S., & Martin, R. (2005). Comparison of consumer perceptions and preference toward organic versus conventionally produced foods: a review and update of the literature. Renewable Agriculture and Food Systems, 20, 193–205 Web Resources http://www.fta.org.au/ Fair Trade Association http://www.ethical.org.au/ Ethical Consumer Group http://www.locavored.com/ Locavore edition http://www.sustainabletable.org.au/ Sustainable Table http://www.sustainabilityconsortium.org/cft/ Clothing, Footwear and textiles working group http://dx.doi.org/10.4135/9781473937499 SAGE SAGE Business Cases © Breda McCarthy 2015 Page 12 of 12 soleRebels – Targeting the Ethical Consumer