Ethics in Retail: Importance and Ethical Practice towards consumers

Ethics in business have become an essential topic of discussion. In retailing, retailers want to earn maximum profit by providing satisfaction to their customers with ethical means. Some certain laws and regulations govern the retail sector.

Following these laws are important and beneficial for the organizations. In this article, you will learn about ethical behavior in the retail sector and its importance.

Ethics can be defined as the moral principles for the behavior of a person or an organization to conduct activities. Business ethics tell the difference between right and wrong activities. However, ethical conduct in business is not as simple as it seems. There are various complexities when It comes to ethical conduct.

Ethical order ensures a sense of order and justice in an organization. The concepts like Corporate Social Responsibility is introduced in the retailing sector. The CSR is related to the ethical expression to conduct business. Retailing is the end unit of the Supply chain.

Customers directly interact with retailers. Therefore, it is important that retailers act ethically as they impact the lives of many people. Ethical practices are not only moral responsibility of a retailer, but it has great importance for the retail business. Let us learn about them one by one.

Table of Contents

Importance of Ethics in Retail

#1 Build a Positive Image in society

People who have not much knowledge about the business ethics and rules of business conduct usually prefer to associate with those organizations which have a positive image in society.

Take the example of an IT company Infosys. Infosys is known for its charitable work, good corporate governance, and social responsibility initiatives such as providing scholarship to deserving children and providing medical help to poor elderly people.

People, when learning all about this they built a positive perception about the company.

#2 Ethics helps in satisfying human needs

People, whether they are employee or customers, want to associate with an organization which works with honesty and in a fair manner.

Therefore, the following ethical practices are important if you want to retain customers as well as employees for a long period of time.

#3 Ethics plays an important role in decision making

In everyday life, retailers need to take important decisions for the well-being of the organization. If an organization believe in ethical practices, it tends to make decisions which are in favor of the organization, its employees as well as customers.

A retailer can take fierce decisions in the absence of ethical practices. For example, an organization which does not follow ethical practice can take fierce decisions to tackle competition.

#4 Bringing People together

Employees love and respect organization whose actions are influenced by ethical practices. The organization which practices ethics will never only think about its own but also think about its employees and customers. In this way, a healthy relationship establishes between employees and the owner.

A healthy relationship is important for the well-being of the organization. A happy employee will never betray his organization and consistently take actions to make his organization successful.

#5 Makes society a better place to live

Society will become a better place to live if everyone follows ethical practices. A society where everyone thinks about themselves and take selfish decisions is not a suitable place for people to live. There will always be contradictions between the people.

However, we know very well that no two people can be the same. There will always be people who will indulge in unethical practices. At that time, ethical laws come into action and restrict unethical practices.

#6 Long-term profits

Organizations which practices malice activities might get profit for short period of time, but can’t retain that success for longer period of time and, on the other hand, Organizations which are driven by values and ethics are expected to be profitable for a long time though they might lose money in a short time.

For example, the Tata group faced a great loss of business in the initial 1990s,’ but soon it turns into one of the most profitable organization by not indulging into unethical practices. The company is one of the most successful companies in India and also known for its ethical conduct in business.

In simple words, it can be said that ethics shows the path of right doing to the organization and let it make decisions which are both in favor of its employees as well as customers.

Various areas of ethics in the retail business

1. Proper practice of Laws, rules, and regulations:

There are different laws, rules, and regulations such as labor laws, shops and establishment laws, Companies’ act, and weight and measurements act, etc. related to the retail sector in every country.

All organizations and their employees are required to follow them in their conduct with the customers and with each other.

2. Protection of interests of customers and their rights:

The first and foremost obligation of an organization and its employees is to protect the rights and interests of customers, and they are liable to ensure for the customers’ safety and security. An organization can’t practice unethical practices by violating the consumer’s rights to make a profit.

There are various deeds such as deceiving advertising, sharing wrong information with customers, misbehavior with customers, invading customers’ privacy, lack of quality control on the products sold by the organization, questionable pricing policies, etc. violates the customers’ rights and interests.

3. Conflict of interest between the employees of the organization and retailer:

Conflict of interest occurs when the personal interest of an individual does not match with the interest of the organization. Employees need to abide by the laws and rules set by the organization, and on the other hand, retailers must always take actions which are in favor of their employees or at least doesn’t violates the employees’ rights and interests.

Various examples of conflicts between employees and employers in retail:

Sharing confidential information of employers with the third party without the consent of the employer.
Getting employed by a competitor without relieving current job with the current employer.
Making the use of customer’s information for personal benefit.
When an employee provides personal benefits to family members and friends by making the use of his/her position in the company.

4. Confidentiality:

When employees are employed, they are given access to some confidential information of the organization. If an employee shares that information with competitors or with anyone outside the organization, then it is called the unethical practice.

5. Receiving gifts in exchange of favors:

Employees are usually asked not to receive gifts from the people outside the organization.

People give gifts to employees to make the use of the position of the employee, and if employees accept expensive gifts, then they might feel obliged to return the favor. This can also cause conflict between employer and employee.

In the next section, you will learn about the ethical practices followed in the retail environment. The retailer should practice ethical behavior towards employees, customers, and investors.

Ethical Practice towards consumers

Ethics are important if an organization wants to stay in the market for a long period of time. In the current dynamic and competitive environment, it is very important for an organization to follow ethics.

The retailer should charge a fair price for the products they sell to consumers.
The consumers have the right to get the precise and right knowledge about the products sold to them. They should be told about all things related to products such as guaranty, warranty, usage, ingredient, and price, etc.
Selling poor quality products to consumers.

Unethical practices of an organization towards its consumers:

Selling the item at full prices even when they are on sales without the knowledge of consumers.
Hide the complete truth about the products and their characteristics.

Ethical Practice towards Employees:

An organization should not only follow ethical practice towards consumers but also towards its employees. In a retail store, a large number of retail employees work at different levels. If employees are treated badly in the organization, then they will speak wrong about it in front of others.

Which will create a wrong image of the organization in the eyes of the common public? In addition to this, this will also lead to low productivity, low staff morale, low profit, and high labor turnover, etc.

Therefore, an organization must follow ethics to avoid such issues which will impact the reputation and profitability of the organization in the long run.

Ethical practices towards employees:

Giving fair and equal treatment to employees.
Providing fair salaries as per their position and job role.
Treat employees with respect and courtesy.

Unethical practices towards employees:

Unfair treatment to employees working at the same level.
Paying them less or not paying them as per the salary mentioned in the employment act.
Making them work overtime without paying for overtime work.
Abusing them at the workplace.

Ethical practice towards shareholders and investors of a company

Don’t forget that your business has started because of the investment made by your investors. The shareholders and investors are also the owners of your business.

Therefore, it is your obligation to give fair returns on the basis of their investment in the organization at regular intervals.

It is the ethical duty of an organization to let its investors known about the accurate financial status about the business of the organization. It should practice business in such a way that it is both in favor of organization as well as its shareholders and investors.

If an organization fails to do this, it might lose the faith of its investors forever, which is not good for the organization.