From Lands' End to fair trade

(FORTUNE Magazine) -- Fair trade is a hit with coffee drinkers. By guaranteeing a living wage to their Third World growers, sellers of fair-trade-certified java are growing revenue by an average 70% a year, not to mention scoring contracts with chains like Starbucks (Charts) and McDonald's. (Charts) Now one entrepreneur thinks the idea will work in a new market: fair-trade clothing.

Bill Bass, the former e-commerce chief at Lands' End, launched Fair Indigo in September. The Middleton, Wis., startup has a website, a catalog, and a retail store in nearby Madison, and it buys directly from cooperatives and locally owned factories in countries like Costa Rica, Nepal, and Peru instead of via wholesalers. That means it can afford to pay a worker in Dongguan, China, say, $123 a month as opposed to the $88 he would be paid by middlemen. "Given the option of the same price, quality, and style," Bass says, "who would choose to have their clothing made in a sweatshop?"

Indeed, while fair-trade coffee is usually sold at a premium, Fair Indigo's wholesale-free business model means it can sell its merchandise at the same price as comparable retailers Chico's, (Charts) Forth & Towne, and J. Jill. As a result, Bass estimates fair-trade garments could take up to 15% of the $250 billion U.S. apparel market by 2016. JupiterResearch senior retail analyst Patti Freeman Evans says Fair Indigo needs to deliver fashionable clothes, on time. "But if anyone knows how to deliver on that, it's Bass," she says. "He's really thought this business through for the long term."