The Warehouse will switch from plastic bags to compostable bags in all of its stores by the end of the year - and give the proceeds of their sale to charity.
The retailer introduced a charge for plastic bags in 2009, and they say more than $4 million has been given to New Zealand community projects since then.
The move will include all 254 Warehouse stores, Warehouse Stationery, Noel Leeming and Torpedo7.
The compostable bags at Noel Leeming would be offered at no cost.
"We've worked really hard to find a solution that reduces the impact of plastic bags on the environment, while continuing to support the community, and being able to offer customers the option of a bag," Warehouse CEO Nick Grayston said.
The compostable bags disintigrate in compost within 12 weeks "with no toxic effects".
The Warehouse is also expanding their range of re-usable bags, and encourages people to bring their own.