Retail Ethics: Do you Measure Up?

The idea of retail ethics occasionally pops into my head when I read an ad that unfairly maligns competitors or when I see an online review of a retailer that consumers have branded as unethical. Also, when I pick up any metropolitan newspaper, and see ads touting “everything 50 percent off!,” I get to thinking about transgressions of an ethical code retailers should observe and live by.

What Are Retail Ethics?

Wikipedia gives a rather ponderous definition of “ethics” as follows. “Ethics or moral philosophy is a branch of philosophy that involves systematizing, defending, and recommending concepts of right and wrong conduct.” Expanding this definition, retail ethical behavior might be defined as, determining and pursuing right or correct behavior in a retail operation versus pursuing wrong or evil behavior in the same enterprise.

Obviously, the definitions given above are not a very helpful guide to modeling ethical behavior. Most mature, adult observers, would say that they intuitively know right from wrong. If it is that easy, then why don’t all retail players act ethically all the time?

Here is my guess. Aside from basic human foibles such as vanity and greed, the temptation to work around the edges of ethical behavior is driven by the problem of competition. Every retail enterprise has competition. You can talk all you want about “cooperation” between different stores offering similar products and how they should all get along. But, we all know that this rarely, if ever, happens in the real world. For many, it is dog eat dog at retail.

Ethical Capitalism

Businesses in the United States have flourished in a culture that champions the idea of free enterprise, which is the hallmark of our commercial culture. It means anybody, anywhere, and at any time can open and operate pretty much any business he or she wants; take any associated personal or financial risk, and rise or fall solely on merit and initiative (within the legal framework of our society). Our free enterprise system also depends on a large, strong middle class, from which both customers and entrepreneurs spring.

This culture naturally breeds competition, often unfettered and ruthless.

In this competitive environment, ethically-minded people recognize the necessity of having a complimentary code of ethics that defines proper and fair conduct. In our industry this would take the form of a code of ethics for operating a retail business in an environment rife with competition.

Let’s digress for a moment and consider an alternative, government controlled system, where free enterprise supposedly does not exist. Would the retail code of ethics be the same as in a capitalist state? Probably not. In the days of centrally planned, non-privatized societies, retail business often went underground or devolved to use barter. My point is that ethical business practices are affected by the systems under which they operate, and are not a standard code of accepted behavior in every culture.

A Very Short History of Ethics

So, where did the idea of business or retail ethics get started?

The late Professor Robert Lopez made the following observation concerning the origin of fair dealing in the Middle Ages. In his book “The Birth of Europe.” He noted that during this time, trade guilds took measures “to guarantee quality and limit price." He also observed that these rules "sprang less from a regard for honesty than the fear of antagonizing difficult customers.”

A contrasting view is that most people have an innate sense of fair play as embodied in "The Golden Rule" that suggests we should treat others as we would want to be treated. It's an idea that probably goes back farther than human memory.

So, which is correct? Are business ethics born more often out of self-interest and fear of being swamped by the competition, a desire to do what's right, or a bit of both?

Laws Enforcing Ethics

Our legal system is active and occasionally even aggressive in policing good business behavior. For the most part, laws have been passed to protect consumers, employees, the environment and the broader society for good reasons.

When unfettered by rules, it doesn’t take long for big dogs to devour smaller dogs. Laws have, therefore, been implemented to stifle unfair business practices from creating monopolies or commercial oligarchies. While we certainly have our share of multi-billion dollar conglomerates, the vast majority of business concerns are still smaller and family operated.

There are many federal, state and local laws against unfair, deceptive and fraudulent business practices, but there aren’t laws for everything. That is probably a good thing. At some point, the role of ethics in business has to find a place.

To Whom Are Retailers Responsible?

for not only following laws, but also an ethical responsibility to our fellow citizens, especially in areas where the law is not clearly defined. This is especially true for retailers, who depend on the public trust for their livelihoods. These responsibilities include moral behavior toward:

• Shoppers and customers.
• Employees and contractors.
• Vendors, including furnishings manufacturers and their suppliers.
• Society, and the communities in which they operate.

Without going into the weeds about ethical philosophy, the province of weighty, unreadable university text books, let us talk about some specific issues of ethical behavior.

What Do Retailers Owe Their Customers?

Certainly, customers should be treated fairly. But, what is fair? For example, Is it unethical or unfair to set a price too high? My guess is that any price that is out of line with the “current market” will be quickly exposed, and need to be adjusted lower if the seller wants to remain in business. Every retailer must decide pricing levels that make sense for their specific operation. In my opinion, setting an unusually high, out-of-marketrange price is probably unwise, but not unethical.

So, what do retailers owe to their customers?

1. The first retail responsibility is to simply live up to the promises made to customers. Some promise same-day delivery. Some promise “always in stock”. Not every retailer has the same bundle of promises. But, whatever the promise, ethics dictate that those promises must be kept. It isn’t illegal to promise same day delivery, and then deliver three weeks later. It may not even be unethical, it may just be carelessness, but it is bad behavior that will ultimately cost you.
2. The second responsibility of a furniture or bedding retailer is to be truthful in advertising, promotion and sales presentations. Since every customer expects honesty from the stores he or she buys from, it's an implied promise every retailer makes to every customer.

What Retailers Owe Their Employees

In our society, workers/employees have freedom of action. No one is bound to a job. Employees may decide to stay employed or leave. They are free to act in their best interests.

1. Again, I think it is fairly simple. Retailers owe their employees what they have promised. Many retail employees work on commission. The distribution of commissions earned is controlled by the employer. Some stores share commission between employees, some have other, more exotic commission structures. The ethics violations come when an employer cheats the employee out of their commission. This kind of illegality is very difficult to nail down. But, it is definitely unethical because it violates the promise to the employee of correct payment.
2. Does the employer owe good working conditions? Good pay? Humane treatment? Complimentary parking? Retirement benefits? Free lunch? While these may be good ideas, the failure of an employer to offer some of these benefits, in my opinion, may be a poor and unwise choice, but not necessarily an unethical one. Just like a retailer's responsibility to the customer, it is the ethical responsibility of the employer to live up to promises made to employees. If workers were promised free lunches, they should get free lunches. Anything short of that is unethical. If an employee feels treated unethically or illegally, he or she has the remedy of quitting, filing suit and or airing his or her complaints online.

When we say “legal system” we also mean the various governments; local, state and federal, that oversee all retailers and citizens. It is in this relationship where ethics and law pretty much go hand in hand. It is probably unethical to disobey the law. It is definitely illegal.

Every retailer must be aware of the obligations and implied promises that are owed to all government entities. And, there are quite a few of them, some of which can be pretty obscure. The fact of their opacity and obscurity will not be considered an escape from governmental punishment, if violated. “Ignorance of the law is no excuse;” a statement that I think I heard in the first grade.

Let’s Test Some Examples

Early in this article, I cited a couple of examples of likely unethical behaviors.

We’ll start with the TV promotions of some of the “Bed in A Box” companies. I won’t comment on the quality of their products. My beef is the way they treat brick and mortar establishments. I’ve seen ads that suggest conventional retailers are unfairly overcharging for their products. They are misleading. Any retailer can beat their prices, and some are now starting to figure that out.

These ads violate the implied promise of honesty to their customers. They are lying about much of their competition to gain advantage.

Next, let’s talk about the old, traditional newspaper and TV ads that loudly proclaim; “Everything is on sale at HALF OFF!” Nobody sells at half off, even when going out of business. When they say “half off” they mean half off of the old four times cost equals the furniture store regular price. Taking half off of that price gets it back down to the “tagged price.” Again, this is a violation of the implied promise of honesty to customers. How do they keep getting away with it? In some states, the law has recognized this grievance and has remedied it by government statute.

Sadly, that is when the government has to intervene. When unethical, dishonest behavior becomes so extreme, they have to pass a law to control it.

And, there are many more ethical issues furnishings retailers face. I've known many that have strong and conflicting views about the ethics surrounding the presentation of different types of financing and protection plans.

Ethics And Your Business

Earlier in this article we asked if business ethics are born more often out of competitive self-interest, a desire to do what's right, or a bit of both?

Whatever the motivations, retailers are wise to consider their ethical responsibilities to customers, employees, family members and their communities.

As well, they must consider the consequences, in this time of social media, of having their ethics challenged in a court of law or the court of public opinion.

In an imperfect, human world, ethical grey areas can and will arise, so it's important for every furniture and bedding retailer to think about their behavior in their businesses, then draw an ethical line in the sand.

Define the explicit and implied promises you choose to make to your customers, employees and communities. Model this behavior, then hold everyone in your organization to a high standard.

Fortunately, there are a spectrum of acceptable and business- savvy ethical behaviors furnishings retailers may adopt, thrive, and still sleep well at night.

By the way, if you sell bedding, read my book, “The Bed Seller’s Manual, How to Win the Battle for Mattress Sales” you’ll have pretty much all the information you need to beat the competition in an ethical manner.

Role Model

Editor's Note: Finally, it seems appropriate to quote from the 64-page code of ethics booklet published by of one of the most notoriously unethical companies of our time, Enron. These were excerpted by Michael Miller in his 2012 article in "Columbus Business First".

• "Respect: We treat others as we would like to be treated ourselves. Ruthlessness, callousness and arrogance don't belong here."
• "Integrity: We work with customers and prospects openly, honestly and sincerely. When we say we will do something, we will do it."
• "Communication: We believe that information is meant to move and that information moves people."
• "Excellence: We are satisfied with nothing less than the very best. We will continue to raise the bar for everyone."
• Compensation: "We believe in offering our employees fair compensation through wages and other benefits."
• Consequences: "We have all worked hard over the years to establish our reputation for integrity and ethical conduct... We cannot afford to have it damaged."