Friday March 30, 2007

Green business strategy

I was talking to shooperman about those new Punggol Treetops "eco" flats, and how the prices are so much higher than "conventional" flats, at $370-380K for a 5-room, when normally the usual price would have been, say, $200-250K in the Sengkang/Punggol area. That's a $130-170K, or 50-80% "green premium". It's unusually high.

And what does that premium get you - a bit more greenery, recycling rubbish chute, some rainwater collection, a limited set of solar panels for corridor lighting at night (which implies batteries, which implies maintenance costs), and motion sensors in the carpark. Is that worth $100+K huh? Per unit? Hmm. I don't know.

I said that you *could* look at it as some kind of reverse psychology thing. "Green costs more", so developers rush to build more of these, so that they can earn a bigger, fatter cut. The consumers clamour to live in the more pricey green buildings so as, well, not really to "save the earth", but to be "cool" and "in it".

Meanwhile, these early adopters sponsor the next generation of more useful green technology. It's happening in the IT world. I mean, people buy the latest and fastest AMD64x2, C2D, etc. not to save energy, right? Who's thinking about the green angle when shopping?

This reminds me of a story a Chinese colleague once told me. This fella in Beijing was trying to sell a batch of 100 shirts at RMB5 each. He waits one day, nobody buys. The next day, he changes the sign to say "luxury shirts", ups the price to RMB200, and he sells the whole lot in less than half a day. I forgot the exact numbers, it's something along these lines.

Question : "Would you buy green if you know it will cost you more?"
Consumers : "Hmmm, nahhhh"

Question : "What if it's the ultimate in luxury and it will raise your social status, etc."
Consumers : "Lemme at it!!!"

Case in point : the Lexus RX400h, it's a darn SUV, but people get excited about it because it's the ultimate top end in performance of its class, and oh, by the way it's a hybrid.

The Tesla Roadster - it beats Ferrari's with its 0-100 in 4 sec performance, it costs US$100K and, oh, by the way, it's electric.

It's something about the social animal angle.

So a viable "green business" strategy might be to target the affluent consumers who can actually "afford green", as opposed to greenies who are into saving money, getting out of debt and so on. Or worse, as opposed to the doomers who absolutely aren't going to buy anything. Tesla is pulling it off, with orders reportedly stretching into 2008, and Toyota/Lexus is pulling it off with their RX400h having record-setting orders.

So, yeah, why not. Green business strategy : Target the social animal.

We can only hope that the green tech at the high end eventually trickles down into the mass market. It will take 20, 30 years to replace the global vehicle fleet, even if all those advanced lithium-ion battery prototypes go into production right now. And it will take even longer to replace "conventional" buildings with "green" buildings.

Hmm. I wonder if there is enough time.

(2007-03-30 17:08:54 SGT) [Musings] Permalink

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