Donating 'portion of the proceeds' to a charity? Take a step back, expert says
Anyone who engages in a little retail therapy knows it's tempting to round up that purchase at the register to give to a food bank or a girl's empowerment program. After all, if you're at the mall to feel better, why not try to help someone else out, too?
The same's true, of course, when it comes to buying a T-shirt, tote bag or a pair of shoes and the retailer or brand promises to make a donation to a charity. Aren't you doing good by buying more? Buy more, save more whales or see more girls take the next step on their journey to grow up to become CEOs.
I spotted a local ad for a real estate agent that declared that 5% of their proceeds would would go to a pet rescue of your choice.
"Consumers are pretty focused on trying to do good for others," said Aradhna Krishna, marketing professor at the University of Michigan’s Ross School of Business.
All sorts of causes, including skilled trades, highlighted
The war in Ukraine put extra emphasis on giving in 2022. Many companies disclosed donations, sometimes by their foundations, to the Red Cross and nonprofit relief organizations working to help people in Ukraine, according to the Boston College Center for Corporate Citizenship.
Often, the nonprofit chosen connects with consumers who favor a given brand or shop at frequently a specific retailer.
Dearborn-based Carhartt will be once again teaming up this August with Tennessee-based Tractor Supply Co. to sell limited edition Carhartt T-shirts with the words “Support the Trades" and a portion of the proceeds will support SkillsUSA. The national, nonprofit serves teachers and students who are preparing for careers in trade, technical and skilled service occupations.
Last year, the donation amounted to $100,000 once target sales numbers were hit. This year, the goal is $150,000. The pricing for the shirts will range between $24.99 and $34.99 each. The "Support the Trades" hat is a new addition this year and will retail for $24.99.
Amy Hellebuyck, Carhartt’s senior public relations manager, said supporting hard-working people has been at the core of Carhartt for more than 130 years.
It's been a priority to partner with organizations, she said, of that work to close the skilled trades gap and elevate the perception of a career in the trades. The company, she said, has been supporter of SkillsUSA for more than 20 years.
If you like the look of a tote or the feel of a shirt, and the price seems reasonable, you might not care how many dollars will go toward the charity. Some items we wear, after all, build awareness of challenges.
But you shouldn't be motivated only by the marketing of a cause.
"Before you think of a company doing a lot of good," Krishna told me, "you have to step back."
Questions you might ask
The problem, as Krishna sees it, is that many times standards and disclosures can be all across the board and leave consumers at a point where they're just guessing at how much money a nonprofit might receive.
Some promotions can be straightforward. Several years ago, for example, shoppers saw a breast cancer awareness promotion indicating that $10 from the purchase of a $38.50 cotton tote from the Finnish Marimekko went to the Breast Cancer Research Foundation, with a minimum donation of $10,000 being set by the company.
Many times, though, companies use vague terms to indicate that a portion of the "profits" or "proceeds" will go to a charity. They also might not state the total dollar amount that will be given.
Krishna has long asked important questions regarding how for-profit firms donate part of their sales revenue to nonprofits to drive up their sales and build brand awareness. The programs often fit under a label called "cause marketing." It's important, she says, for regulators to monitor cause-marketing activities.
Thousands of companies are telling consumers that they will donate some money from sales to charitable causes. Firms in North America spent about $2.14 billion in 2018 on cause marketing.
Yet Krishna noted in a phone interview that consumer protections can be all over the map with some states requiring companies to disclose the exact amount they donate and other states having no regulations regarding transparency.
New York, for example, requires strict disclosures, such as stating that $1 will be donated per item sold or 5% of the sale price will be donated to a charity.
Michigan does not have specific cause marketing laws, according to the researchers.
What are the rules in Michigan?
Generally, the Michigan Department of Attorney General does not regulate these types of marketing arrangements unless the partner to the charity is receiving compensation or consideration, said Lynsey Mukomel, press secretary for Attorney General Dana Nessel.
If the partner receives compensation or consideration, she said, then the partner must register with our office as a professional fundraiser.
Mukomel said it is important to note that some issues are watched through a consumer protection lens.
The Michigan Consumer Protection Act prohibits the making of false or misleading statements in the marketing of a consumer good or service.
She said anyone who is aware of an unmet charitable commitment used in consumer marketing — including perhaps a current or former employee — is encouraged to file a complaint with the AG's office.
Other states, like Florida and California, lack transparency and make it difficult for a consumer to know how much is being donated to a cause, the research indicated. Firms can use terms such as "a portion of the purchase price" or a "percentage of our net profits."
But what does that mean? Are we looking at 50 cents going to a charity when you buy a $50 item? Who knows?
"Even a concrete-sounding disclosure such as '50% of net profits' allows a firm a lot of room to determine which items to include as costs in determining the profit from a product," the report stated.
Disclosures aren't always clear
Krishna and other researchers — including Uday Rajan, professor of finance at U-M's Ross School — determined that cause-marketing practices can be inconsistent. Some firms disclose specifics — such as Ethos Water, which states that 5 cents of every bottle purchased goes to its charitable fund benefiting programs in “water-stressed countries.”
But others offer less clarity. The researchers highlighted Gap’s pledge to donate 50% of profits from selling Product Red items to fight AIDS. The consumer, the researchers said, doesn't know what the exact profits on that product's sales will be. When marking the 10th anniversary of (RED) in 2016, Gap said it had contributed $10 million for the Global Fund to Fight AIDS, Tuberculosis and Malaria since 2006.
Krishna said cause marketing has the potential to contribute to doing good. But she noted that laws in many states are weak, which means that firms that want to exploit a consumer's good-hearted nature may be able to do so.
While putting more laws on the books can help, there's a balance that needs to be struck. It can become a question of how much are state regulators willing or able to spend to monitor whether such laws are being followed or broken?
Consumers shouldn't feel pressured into giving on the spot or start feeling better about buying an item because of a charitable halo. It's OK to ask specifics — just as you might on the phone when someone calls requesting a charitable donation.
When visiting family in Virginia in May, my niece and I went shopping at a fun boutique with a huge sale. After scoring all sorts of deals, I easily gave an extra dollar to a group called Girls on the Run when the woman at the register asked if I'd like to donate. My niece's daughter had belonged to the group once, I was already spending a chunk of change and I figured why not?
But frankly, it never hurts to ask for a few more specifics. You might ask the person at the counter but they might not necessarily know. Or you might try to look online to see if a company gives more details. Unfortunately, you're not always going to get a clear answer because disclosures vary.
Consumer watchdogs suggest that consumers should be easily able to know the name of the charity that will receive the money, how much money from a purchase will be donated, and the limits on how much will be donated overall. Is the contribution going to be an in-kind donation to the charity? And not money given directly?
Also the New York Attorney General's Charities Bureau notes online that companies should not saturate the market with products, if they're going to set a cap on the amount to be donated to a charity when a purchase triggers a donation.
Krishna said consumers shouldn't be swayed into buying something just because they think they will be doing good. It pays to consider how any purchase — or donation — might really help.
Contact Susan Tompor via stompor@freepress.com. Follow her on Twitter @tompor. To subscribe, please go to freep.com/specialoffer. Read more on business and sign up for our business newsletter.
This article originally appeared on Detroit Free Press: Shopping for a shirt and a cause: Why details should matter to you
