Retail Marketing
Magic Solutions
RetailLecture3RetailEnvironment2EthicalIssues.pptxLecture 3 – Retail Environment 2
NBS-7030B
Retail Marketing & Management
Professor Ratula Chakraborty
Director MSc Management Programmes
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Legal and Ethical Issues in Retailing
Lecture 3 – Retail Environment 2
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Lecture Outline
How Retailers Must vs Should Behave
Legal Obligations on Retailers
Business Ethics
Ethical Consumerism
Marketing Ethics and Sharp Practices
Case Study: Fairtrade
Purpose: Contrast retailers’ legal and moral responsibilities towards customers, employees, suppliers and rivals
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Legal vs. Ethical Obligations
Retailing is a highly regulated sector, subject to licensing, planning rules, and specific legislation affecting operations
Legislation recognises the need to protect retail customers and employees, dictating how retailers must behave
Yet, retailers have scope to exploit their pivotal role as the intermediary between consumers and producers
Can retailers exploit this pivotal role by behaving unethically? If so, in what ways? How should retailers behave?
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Yes, by providing wrong leading information through incorrect advertising and promotion
Sharp pricing practices ; confusing pricing tactics....show dvd at the end...
The way they should behave is first of all – not to misuse the trust of the customer; treat the customer – the loyal customer with respect ; provide the goods and services at th ebest most competitive price possible etc...
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Legal Obligations
Legislation and legal rules applying to retailers include:
Consumer Protection
Sale and supply of goods and services
Product safety and quality
Selling age-restricted products
Price marking
Marketing and selling techniques
Employee protection
Competition rules
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Sale and Supply of Goods
Key legislation in UK: The Sale of Goods Act 1979; The Supply of Goods and Services Act 1982; The Sale and Supply of Goods 1994; Misrepresentation Act 1967
Goods sold must satisfy three broad requirements:
correspond with the description
be of satisfactory quality
be fit for the purpose
Remedies for the consumer when the requirements are not met:
Reject the goods provided and claim a full refund
With breach of contract, claim compensation from the trader
Demand a repair or replacement
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Product Safety and Quality
Key legislation in UK: Consumer Protection Act 1987
When goods are sold to consumers, the goods must be safe
Strict liability for damage caused by defective products
Liability for damage applies to producer, vendor, supplier or anyone else in the supply chain
Specific legislation for food products covering quality, safety, packaging, shelf-life, and labelling:
Food Act 1984, Food Safety Act 1990, Food Hygiene (General) Regulations 1970 and Food Hygiene (Amendment) Regulations 1990, Food Standards Act 1999; The Packaging (Essential Requirements) Regulations 2003; Food Labelling Regulations 1996
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Selling Age-Restricted Products
Retailers have a legal obligation not to sell certain products to consumers below a certain age
Age-restricted products include tobacco, alcohol, fireworks, knives and other weapons, aerosol paints, videos, and lottery tickets
Penalties for non-compliance include fines, imprisonment (jail), and/or revoking licenses
Key legislation in UK: Children and Young Persons (Protection From Tobacco) Act 1991, Children and Young Persons Act 1933, Intoxicating Substances (Supply) Act 1985, Licensing Act 2003, Anti-Social Behaviour Act 2003, Offensive Weapons Act 1996
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Penalties for supplying age-restricted products
| PRODUCT | SUPPLY ONLY TO THOSE AGE: | MAXIMUM PENALTY Fine or imprisonment term |
| Tobacco products | 18 and over | £2,500 |
| Offensive weapons/knives | 18 and over | £5,000 & up to 6 months |
| Caps, cracker snaps, novelty matches, party poppers, serpents and throwdowns | 16 and over | £5,000 & up to 6 months |
| Fireworks and sparklers | 18 and over | £5,000 & up to 6 months |
| Videos and computer games: Age 12+ | 12 and over | £5,000 & up to 6 months |
| Videos and computer games: Age 15+ | 15 and over | £5,000 & up to 6 months |
| Videos and computer games: Age 18+ | 18 and over | £5,000 & up to 6 months |
| Volatile substances/solvents | 18 and over | £5,000 & up to 6 months |
| Crossbows | 18 and over | £5,000 & up to 6 months |
| Lighter refills containing butane | 18 and over | £5,000 & up to 6 months |
| Lottery tickets/Instant Win cards | 16 and over | £5,000 & up to 2 years |
| Aerosol paint | 16 and over | £2,500 |
| Alcohol | 18 and over | £5,000 & forfeit of licence |
Source: http://www.tradingstandards.gov.uk
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Price Marking
Key legislation in UK: Weights and Measures Act 1985, Consumer Protection Act 1987, Price Marking Order 2004
All pricing information must be clearly legible, unambiguous, easily identifiable and inclusive of VAT and any additional taxes
A unit price (e.g. price per kilogram or per litre) must be given when food products are sold loose from bulk (e.g. fruit and vegetables, meat and fish)
Otherwise food products to be marked with an indication of quantity or to be made up in a prescribed quantity (e.g. jam)
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Marketing and Selling Techniques
Key legislation in UK: Consumer Protection from Unfair Trading Regulations 2008
Price comparisons must be fair, meaningful, and must not mislead
Ticket prices deemed misleading if they make false comparisons, hide extra costs, or do not make clear any conditions on purchase
Discounted prices drawing comparisons with former higher prices (e.g. “25% off”, “save £x”) should apply to previous prices applying for at least 28 consecutive days in the last six months
High-pressure selling, including harassing, badgering and threatening consumers, is prohibited
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Employee-Related Legislation
Retailers have legal obligations to protect employee rights:
Limit of an average of 48 hours per week required to work
A right to a day off each week
A right to four weeks paid leave each year
Equal rights for part-time workers
Not to be obliged to work on Sundays
A minimum hourly rate of pay
Unlawful to discriminate on race or gender basis
Key legislation in UK: Employment Rights Act 1996; Sunday Trading Act 1994; National Minimum Wage Act 1998; Part-time Workers (prevention of Less Favourable Treatment) Regulations 2000; Race Relations Act 1976; Sex Discrimination Act 1975 & 1986
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Competition Law
Key legislation in UK: Competition Act 1998, Enterprise Act 2002
Prohibits practices and concentrations (mergers) that prevent restrict, or distort competition
General presumption of legality unless challenged by UK/EU competition authorities (i.e. Office of Fair Trading or European Commission) or law courts
Notable exception: Strict ban on price collusion and resale price maintenance to fix prices facing consumers, enforced by fines of up to 10% of global turnover and imprisonment for offenders:
Price collusion: Rival retailers tacitly or overtly agree to fix retail prices
Resale price maintenance: supplier and retailer agree to fix retail price
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Questions for Discussion #1
Give an example where you bought a faulty product not fit for purpose or of unsatisfactory quality. Did you complain to the retailer? If so, did the retailer provide a suitable remedy?
Has there been an occasion where a retailer refused to provide a suitable remedy for a faulty product? What action did you take?
How does your experience compare between store-based retailers and internet retailers in respect of returning faulty or unsuitable products? Has this affected your shopping behaviour?
How susceptible are you to claims about discounted/cheaper prices? Have you ever investigated to see if a price comparison is genuine?
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Business Ethics
Concerns about ethical business practice include:
Corporate social responsibility (“CSR”): covering ethical rights and duties existing between companies and society
HRM ethics: discrimination (e.g. based on weight/attractiveness), employee privacy (e.g. workplace surveillance), employee representation (e.g. union busting)
Ethical sourcing: fair trade, child labour, health and safety standards, “sweat shops” (e.g. Primark 2013, Bangladesh)
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Business Ethics (cont.)
...and also applies in the following contexts:
Ethical selling: transparency (e.g. clear prices/labelling), honesty (customer information), autonomy (non-pressure selling), privacy (use of customer data)
Product ethics: animal testing, carbon emissions, genetic modification
Ethical image: concern about corporate ethics policies as merely marketing instruments
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Ethical Consumerism
Buying things made ethically to minimise harm to or exploitation of humans, animals or the natural environment:
Positive buying: favouring ethical products, and businesses that operate on principles based primarily on benefit for the greater good rather than self-interest
Moral boycott: refusing to buy non-ethical products or use non-ethical retailers
Ethical product categories: “fairtrade”, “organic”, “free-range”, “recycled”
Retailers based on ethical principles: The Co-operative, Body Shop, WholeFoods
http:// www.retailresearch.org/retailethics.php
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Marketing Ethics
Adopting practices that manipulate and/or exploit consumers and undermine fair trading:
Pricing: price fixing, price discrimination, price gouging (exploiting vulnerable consumers), predatory pricing (to eliminate competition)
Anti-competitive practices: these include but go beyond pricing tactics to cover issues such as manipulation of loyalty and supply chains
Specific marketing strategies: greenwash, bait and switch, shill/plant, viral marketing, spam (electronic), planned obsolescence
Content and target of advertisements: attack ads, subliminal messages, sex in advertising, products regarded as immoral or harmful, marketing to children
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1ST DEGREE PRICE DISCRIMINATION – WHERE PRICES ARE OFFERED TO INDIVIDUALS
2ND DEGREE – QUANTITY OR QUALITY DISCOUNTS ...OR BULK BUYING – KIND OF SELF SELECTION, BIG FAMILIES BUY IN BULK ETC; QUALITY DISCRIMINATION...YOUR CHOICE
3RD DEGREE DISCRI BASED ON GROUPS – GENDER, COLOUR OF HAIR; FOREIGNERS ETC – IDENTIFIABLE DIFF– HAIR DRESSERS PAY MORE THAN ME; NIGHT CLUBS – WOMEN MAY GET IN FREE AND MEN PAY
4TH DEGREE – PRICE DISCRIMINATION TIME VARIANT – OFF PEAK ETC.
Price gouging – practice where you exploit short term supply problems...sudden boost in demand like power cuts leading to candle prices going up or water supply affecting bottled water prices
Greenwash – marketing spin used to cover yourself in environmental cloak to show how good you are...
Bait and switch – you hook people in to a bargain and switch them to something else....so they buy something else...so baiting them then switching them...normally into own label substitute.
Shill/plant – somebody standing there and showing excitement....actors in the audience – con trick
Planned obsolescence – like apple iphone etc...built in obsolescence into a product where you end up buying he next one up and so on and so forth...
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Sharp Practices
Examples of how retailers can bend/ignore rules or behave unethically to suit their own ends include:
Misleading consumers: phoney price wars; price establishing; product origin, labelling
Flouting rules: planning permission
Stealing or undermining intellectual property: trademark infringement, copycat products, passing off, rip-off designs, sourcing from grey markets
Exploiting suppliers’ economic dependency: retail buyer power practices including terminating contracts at short notice and renegotiating terms at time of supply
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Lying about where the product originates from
Phoney price wars – when it is all to dupe the public with collusion
Rip off brands, copycat designs of major brands like Fairy liquid....
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Sharp Practices - Example
Source: “Tesco accused of sham 'half price' veg”, Daily Mail, 5 December 2007
Example of misleading price claims involving price establishing to frame offers
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Questions for Discussion #2
Do you trust retailers to behave ethically?
Give an example where you think you were misled or duped by a retailer. What did you do?
What ethical aspect bothers you the most: retailers exploiting vulnerable consumers, employees or suppliers? Why?
What measures might encourage retailers to behave more ethically?
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FAIRTRADE ETHICAL CONSUMERISM
Case Study
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Fairtrade Grocery Products
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What is Fairtrade? (4 mins) https :// www.youtube.com/watch?v=PLKTGWH398Q
How is it being encouraged in the UK? (2 mins) https :// www.youtube.com/watch?v=OtJkrabmaTE
What is the difference between Ethical, Fair-trade and organic food? (3:40mins) http :// www.youtube.com/watch?v=NrxORopKYQQ
Who benefits?(3.11mins) http :// www.youtube.com/watch?v=9WqIP3w5qNs
Who is the ethical consumer? https:// www.retail-week.com/customer/consumer-2019-how-to-serve-the-ethical-shopper/7030520.article
UK shoppers – only a third happy to pay the premium…for buying Fair Trade products!!
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How does the Fairtrade system work?
Who is the ethical consumer? https:// www.retail-week.com/customer/consumer-2019-how-to-serve-the-ethical-shopper/7030520.article
In a nutshell: Top six ethical trends of 2019
Plastic-free produce
Plastic-free packaging
Compostable carrier bags
Plant-based foods
Natural fabric clothes
Clothing re-sale and recycling schemes
What about premium for the above?
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What is ethical consumption?
Fairtrade UK Sales 2013
Fairtrade UK sales
In the UK, sales of Fairtrade products in 2013 crossed £1.5 billion – an 18 per cent increase on the previous year
78 per cent of consumers recognise the FAIRTRADE Mark
One in every three bananas sold in the UK is Fairtrade
44 per cent of bagged sugar sold in the UK is Fairtrade certified
25 per cent of all roast and ground retail coffee in the UK is Fairtrade certified
Fairtrade products are now sold in more than 125 countries
The FAIRTRADE Mark is the most widely-recognised ethical label globally
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Fairtrade Product Category Sales
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Sainsbury’s Move to 100% Fairtrade Bananas
Source: Kantar Worldpanel
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Fairtrade Shares in UK Grocery Retailing (2011)
Source: Kantar Worldpanel
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Beyond Fair Trade (9.58mins)(10mins)
http:// www.youtube.com/watch?v=rsjaoQsuDPg (part 1)
http:// www.youtube.com/watch?v=uZDIokt6kA8 (part 2)
The Windward Islands: setting the course for fair trade in the banana industry – (5mins)
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Questions for Discussion #3
Do you frequently, occasionally or never buy fairtrade products? Why?
Does the fairtrade scheme really help suppliers?
Do retailers exploit the fairtrade scheme to make more profit from gullible consumers?
Apart from food and clothing, on what other products might a fairtrade scheme work well?
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Thank You!
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