The New York Times - November 13, 2006
Michael Barbaro

After decades of treating charity as an afterthought - and using cheap trinkets as an incentive for shoppers to give - retailers across the country are putting philanthropy at the center of their product lines, whether it is clothes, books or shoes.

In the process, executives say, stores are transforming charity from a crush of donation requests every season into a sustainable, year-round business model.

Saks Fifth Avenue is selling a leather jacket from Kenneth Cole this holiday season for $795, and a percentage of the sales price will be donated to Help USA, a group that fights homelessness.

Bath & Body Works is selling an Elton John scented candle for $16.50, with 10 percent of each sale, or $2, going to the Elton John AIDS Foundation.

Gap, Apple Computer and Motorola are offering limited-edition red-colored products to benefit the AIDS charity (Product) RED. Gap gives 50 percent of the profits from sales; Apple gives $10 for each iPod Nano; and Motorola $17 for each phone.

Retail executives say that consumers, shocked by a series of high-profile business scandals, are putting greater value on corporate citizenship. So in a weak retail climate, philanthropy, and the image it projects, has suddenly become a competitive advantage.

As a result, retail executives and philanthropy experts said, charity is no longer an option - it is a requirement for stores. "It is a cost of doing business today," said John Morris, a stock analyst at Wachovia Securities who tracks retailers.

It is not just customers who are giving away the money at the checkout counter. Retailers have never been more philanthropic, donating more than two times as much as their corporate counterparts.

In 2005, retail companies gave away 1.7 percent of their profits before paying taxes, compared with about 0.9 percent for companies in other industries, according to the Committee to Encourage Corporate Philanthropy, a nonprofit group in New York.

This holiday season, Wal-Mart is expected to help the Salvation Army raise more than $20 million (the chain gave $245 million in 2005); and Toys "R" Us will collect $4 million for the Toys for Tots charity.

Retail executives said the money was a priceless investment in their reputation. Philanthropy, said Michael Gould, the chief executive of Bloomingdale's, "defines us more than anything else."

"Intimate apparel and sportswear defines you for a moment in time, but this defines you forever," he added.

Bloomingdale's, for one, wants to make sure it is defined as magnanimous. Every year, it sponsors the National Colorectal Cancer Research Alliance, the Juvenile Diabetes Research Foundation, the Susan G. Komen Foundation, Broadway Cares/Equity Fights AIDS, Mentoring USA and Autism Speaks.

Then there are Bloomingdale's seasonal fund-raisers. For Christmas, it will auction off luxury travel packages on its Web site - one trip for $25,000 promises a backstage meeting with Giorgio Armani after his fashion show in Milan, with the purchase price passed on to the disaster relief organization AmeriCares.

That is just at the national level. Each local Bloomingdale's store contributes to a list of charities, like the Boston Symphony Orchestra and the pediatric cancer program at the University of California, San Francisco.

Perhaps nothing highlights better the prominence of philanthropy in retailing than the decision to link charitable causes to merchandise. The trend can be traced back to 2004, when millions of Americans bought $1 Livestrong bracelets to benefit the Lance Armstrong Foundation.

Retailers were stunned by the response. Customers not only wanted to support a charity, but they also wanted to broadcast their philanthropy to the world with a product worn on their wrists.

MAC Cosmetics achieved success with a line of lipsticks and greeting cards that has raised $40 million for AIDS treatment.

So retailers ordered scores of charitable products. Macy's, for example, has developed an $18 T-shirt, sold under the store brand American Rag, that benefits LifeBeat, an AIDS-prevention group ($10 from each purchase is donated to the cause). The store created a new $15 book, "Kiss and Tell" - recounting various celebrities' most memorable kisses - that will benefit Go Red for Women, a program educating women on the risks of heart disease. (Ten percent of the profits will go to the charity.)

In several Macy's stores and on its Web site, the retailer is offering hand-woven baskets made by widows in Rwanda who survived the genocide. So far, 8,000 baskets - which cost $24 to $100 - have been sold, earning the women $85,000.

Ronnie Taffet, Macy's vice president for corporate marketing, said that by selling such products, instead of asking for a handout, the store has created a self-sustaining business. "It's not just writing a check," she said.

That is the idea behind the (Product) RED campaign to raise money for AIDS prevention and treatment in Africa. At least four major retailers have developed products for the program, which began in Britain last year and was introduced in the United States this fall.

Gap has designed more than 20 products, including jeans, a hooded sweater and a book. It has also sponsored an expensive advertising campaign featuring celebrities like Chris Rock and Steven Spielberg, who rarely lends his image to marketing efforts.

Instead of being in the store for a single season, (Product) RED items will be sold for five years, with new clothing introduced every season. "There have been one-offs before at Gap," said Trey Laird, the creative director for the retailer. "This is a sustained way for us to get involved."

Charles Moore, executive director of the Committee to Encourage Corporate Philanthropy, said that in retail, "more and more companies are aligning their philanthropy with their business."

Just a decade ago, retailers resisted developing and selling products that would link a brand name to a potentially controversial cause, preferring to keep their distance by asking consumers to contribute individually to a cause.

When Harry Slatkin, now head of the home division at Limited Brands, helped create a scented candle to benefit the Elton John AIDS Foundation, "it was hard convincing people" to sell it, he said. "The question was, Does this mean we support AIDS?" But the retailers (Neiman Marcus, Bergdorf Goodman and Barneys New York) that carried the original version of the candle, which cost about $50, have sold thousands of them. Bath & Body Works is selling a new version at the lower price.

If there was any hesitancy about offering the candle, it evaporated when executives saw the response from customers. Just days after Bath & Body Works made the it available on its Web site, the chain received 85,000 orders.

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