Integrating Fair Trade Certified and Organic Cotton into L Brands Should Victoria’s Secret transition to 50% Organic and Fair Trade Certified? Organic and Fair Trade Certified cotton have been successfully adopted into 6% of Victoria’s Secret’s (L Brands) intimate apparel and the management team is considering expanding the combination equal to 50% with conventionally sourced cotton. Other industry leading apparel companies such as American Apparel and The Gap have already undertaken similar transitions. This paper identifies current trends in price and consumer desire through a literature review and a revealed preference survey to derive a reasonable market expectation for organic or Fair Trade Certified intimate apparel. A cost-benefit analysis (CBA) was then constructed using the company’s 2013 performance and considers multiple primary costs and benefits for the L Brands shareholders. The CBA concluded that the benefits of improved reputation and market share do not exceed the cost to the company in annual revenues lost from increased costs incurred to procure and market the organic or Fair Trade Certified cotton.
SUMA K4020 Cost-Benefit Analysis May 8, 2014 Prepared by: Maria A Fernandez Besada (maf2253) Guy Tucker Brooks (gtb2108) Marjorie Lau (ml3384) Alexander M VandenBroek (amv2153)