The Warehouse Group has announced it will phase out single-use plastic bags from all its stores by the end of 2018.
On Friday chief executive Nick Grayston announced all 254 stores will transition to compostable bags.
The retailer recently conducted a survey asking customers for their views on plastic bags. Sixty-nine percent wanted to have some option available.
Group head of environmental initiatives Greg Nelson says compostable bags, which "disintegrate within 12 weeks in compost with no toxic effect", were the most popular option.
"We're also expanding our range of reusable bags, so customers will have lots of options, and of course customers are welcome to bring their own bag," Mr Nelson says.
The move will be implemented by the entire company, including Warehouse Stationery, Noel Leeming and Torpedo 7 stores.
The company has been charging 10 cents for single-use plastic bags at The Warehouse checkouts since 2009. Compostable bags will carry a 15-cent cost, with all proceeds going to charity. Noel Leeming stores will offer a compostable bag at no cost.
The latest announcement follows the lead of New Zealand supermarket chains Countdown and New World, which both received high praise for their decision to get rid of the single-use bags.
Last year Warehouse Group stores used around 21 million plastic bags.