ABSTRACT

Ethics in retailing pose certain critical issues. Retailers may use certain ethical standards that

guide decision making when confronting questionable situations that may not be covered by law.

Retail sales has been selected as an important frame of reference as the retail salespeople are

likely to encounter situations that could be ethically troublesome. The aim of this report is to

investigate the ethical and unethical practices of retailers and the ethical beliefs of retail sales-

force.

Ethics in the retailing sector has some certain critical issues. Retailers may use certain ethical

standards which help them in decision making. The report investigates the growth of retailing

industry in India. It examines the growing awareness and brand consciousness among people

across different socio-economic classes in India and how the urban and semi-urban retail markets

are witnessing significant growth.

1

1. INTRODUCTION

Ethical decisions ensure society’s sense of order and justice. But trying to determine what falls

into that sense of order and justice can be difficult. One department that is frequently maligned

for unethical acts in business is marketing.

A major reason for this negativity is that marketing tends to be the most visible or conspicuous

department to the public at large. For example, fictitious pricing, deceptive advertising and false

sales pitches from sales personnel often become cannon fodder for aggrieved customers and the

media. Studies have confirmed that unethical marketing decisions can engender considerable

personal, organisational and social costs. There are moral constraints built into the very

dynamics through which marketing works. For example, contemporary marketing practitioners

often argue that dishonest marketing will be unsuccessful marketing, that the market will weed

out those who violate the common morality. After all, ethics functions as a form of social

control, something that is especially critical to customers, salespeople and the organisation.

The concept of Corporate Social responsibility (CSR) is often associated with the concept of

corporate ethics and according to many definitions, CSR appear to be the ethical expression of

the business. Consequently retailers’ ethics may be focussed on the notion of ethical

responsibility to contribute to sustainable economic development; working with employees, their

families, the local community and society at large to improve their quality of life. The retailers’

ethics may be analysed from the standpoint of ethical practices, seen as “Good Actions”.

Retailing plays a vital role in the economy. The retail industry is the first link in the distribution

chain, from the customer’s point of view. It is therefore vital for retailers to act in an ethical

manner because they affect the lives of many people.

One area in marketing where ethical misconduct can easily occur is the selling area. Sales

personnel tend to be guided by their professional demands for bending ethics. Marketing

personnel are the unfortunate victims of the ethics gap. Institutional support for encouraging

ethical behaviour is more useful than a punitive or reformatory approach. If ethicality is

measured, sales and marketing personnel may be as ethical as other groups in the organisation.

This however needs to be reinforced organisationally. Failure to structure supportive ethical

work environment is a case of managerial malfeasance.

2

1.1 DEFINITION OF RETAIL

In 2004, The High Court of Delhi defined the term ‘retail’ as a sale for final consumption in

contrast to a sale for further sale or processing (i.e. wholesale), a sale to the ultimate consumer.

Thus, retailing can be said to be the interface between the producer and the individual consumer

buying for personal consumption. This excludes direct interface between the manufacturer and

institutional buyers such as the government and other bulk customers. Retailing is the last link

that connects the individual consumer with the manufacturing and distribution chain. A retailer is

involved in the act of selling goods to the individual consumer at a margin of profit.

1.2 THE ETHICALLY FREE SITUATIONS

There are a number of important scenarios that retailers’ salespeople believe are not ethically

troublesome.

i) Persuading a customer to make purchase was considered acceptable. Convincing potential

consumer and making a sale is considered as an objective of communication strategy.

ii) Making use of a sales contest for salespeople in order to generate sales to customers is also

considered to be acceptable. Sales contests are often used as an incentive to help salespeople and

managers to persuade potential customers to make a purchase. In terms of achieving sales

targets, the retail sales personnel and the store manager work as a team towards achieving the

target. They do not come across ethically troublesome situations.

iii) Socialising with management and fellow employees is considered an acceptable scenario by

the respondents. Socialising is part of corporate culture of the retailers and helps teamwork.

Ethical beliefs of the retail organisation’s staff at different levels are important and therefore

have to be understood for the emerging practices in retailing today. There is an increasing trend

towards greater empowerment of employees and towards flatter organisational structures. In

retailing where managers and sales personnel are working closer together, unlike field

salespeople who work long periods without their managers, the different culture between

salespeople and managers may not exist.

1.3 CONCEPT OF ETHICS IN RETAILING 

Ethics is a branch of philosophy that deals with values relating to human conduct, with respect to

right or good and wrong or bad actions. Here ethics relates to retailers moral principles and

values.

3

Ethics is derived from the Greek word ‘ethos’ which means character. Ethics in retailing pose

certain critical issues. Retailing plays a vital role in the economy. The retail industry is the first

link in the distribution chain, from the customer’s point of view. It is therefore vital for retailers

to act in an ethical manner because they affect the lives of many people.

The unethical practices used by the retailers towards consumers are:

i. They charge full price for a sale item without the customers’ knowledge.

ii. Don’t tell the complete truth to a customer about the characteristics of a product.

a. Ethical practice towards consumers:

The retailers should charge fair price for the products offered to them. The consumers have the

right to get correct and precise knowledge about the products sold to them in respect of warranty,

guaranty, price, usage, ingredients etc. Ethics is essential for the long run of the business. Ethical

business is essential in today’s competitive and dynamic environment.

b. Ethical practice towards investors/shareholders:

The shareholders are the owners of the business. Shareholders must be given fair returns on their

investment at regular intervals. The share holders should be disclosed with correct information

about the financial status of the business organisation. The business organisation must act in the

interest of the shareholders.

c. Ethical practices towards employees:

Ethical practices must also be followed towards the employees. The retail industry employs large

volume of retail staff. Therefore proper policies and procedures must be framed for the

employees regarding recruitment, selection, training, promotion, welfare etc.

Negative issues relating employment relations in the work place can lead to loss of reputation

and customers, it leads to poor staff morale, low productivity, and high labour turnover. To avoid

these confrontations the retail manager should follow ethical practices towards employees.

4

2. ETHICAL PERCEPTION OF THE RETAIL SALESPERSONS IN

ORGANIZED RETAILING

While many consumers may question the ethics of their local retail salesperson, most companies

have policies and procedures in place that dictate appropriate sales behavior. At the same time,

each salesperson is different and sales managers often interpret company policy from various

vantage points. That you practice ethical selling techniques in your business often isn't as

important as the perception of your honesty that your customers retain.

2.1 CONSPICUOUSNESS

Your marketing and sales efforts are the most conspicuous part of your business. Your customers

typically don't see your backroom operations, the time you spend poring over your books or

finding the best deal to supply your inventory. The perception of your honesty is revealed in how

you compete in the market, your pricing strategies and the tone with which you approach clients.

Every salesperson has a different meter by which he gauges his honesty and integrity. If you

have salespeople working for you, you need to maintain standard practices so they don't alienate

customers and foster negative perceptions.

2.2 CONSUMERS

You can make the same pitch to two different customers and receive entirely different

perspectives on your honesty. While salespeople bring varying levels of integrity and

presentation to the sales process, customers also bring preconceptions and stereotypes to the

organized retail environment. According to the University of Mississippi, for example, older

female customers tend to be more trusting as a whole, while younger male customers have a

more skeptical attitude when it comes to retail salespeople. At the same time, educated

consumers with higher incomes tend to be more trusting than low-income clients, while single

customers tend to be more skeptical than those who are married.

2.3 DETAILS

It doesn't take a huge public scandal to build a negative perception about you and your business

in the public's eye. It's often the small mistakes or seemingly insignificant situations that end up

justifying a customer's perception of your integrity. When a sales clerk gives a customer the

wrong change, some may take that as a purposeful act. If you make excuses for your product,

5

don't deliver on time or charge full price for an item that is supposed to be on sale, you risk

losing credibility in your customers' minds. The public perception of your ethics may be

questioned if you don't accept returns when warranted or if you sell a customer on a more

expensive option when the cheaper model would have sufficed.

2.4 BENEFITS

In both the short and long run, maintaining ethical sales practices in your retail operation ensures

you will have a steady supply of customers. According to the Assam Institute of Management,

unethical sales practices ultimately cost your business, your employees and your community.

Keeping your sales practices honest helps to sustain your economic stability as well as the

gratitude of your community and subsequent client base. Employees benefit knowing that you

are an honest businessperson. Since organized retailing plays such a dominant role in society,

positive perceptions affect the lives of many people.

2.5 PERSONAL ATTRIBUTES AND WORK ETHICS OF RETAIL SERVICE

EMPLOYEES

Retail employees require a comprehensive range of skills and qualities in order to interact

effectively with customers. These qualities include:

Attendance and punctuality – ensuring that you arrive at work for your shift on the

correct day and time. This also requires the sales assistant to return from lunch breaks on

time to ensure that the store operates efficiently.

Ethical behaviour – this refers to doing the “right thing” at work. For example, not

giving discounts to friends or stealing from your employer.

Honesty – the moral obligation for an employee to tell the truth in all situations.

Work performance – a sales assistant should always perform their work duties to the

highest standard.

6

Taking directives – being able to correctly follow the directions and instructions given

by supervisors and managers.

Attention to detail – this involves being thorough in all work activities. For example,

completing documentation correctly and ensuring all stock is arranged as required and

placed in the correct area of the store.

Personal presentation and grooming – wearing the correct attire according to store

policy which may include the wearing of a name badge. Personal hygiene is very

important, so shower before work and ensure your uniform is washed and ironed.

Attitude – demonstrating a positive approach towards the workplace.

Discretion – being able to make decisions on what to do in a variety of situations, for

example, giving a regular customer store credit, and making judgements on how much to

discount damaged goods.

Confidentiality – keeping personal details of work colleagues and customers private. Do

not disclose personal details or credit details.

Consistency of service –all customers should be treated the same.

Safe work practices – perform all work duties following OHS regulations, including

safe manual handling techniques and use of personal protective equipment when

required.

7

3. ETHICAL ASPECTS OF RETAIL INDUSTRY

3.1 FDI IN RETAIL: MNC RETAILERS TO SELECT PARTNERS WITH SUITABLE

CAPABILITIES

India's retail market promises to be among the top retail destinations in the world, thanks to

rising consumption.

International brands and retailers will gain access to a substantial market, following Cabinet's

decision to allow up to 51% foreign direct investment (FDI) in multi-brand retail sector and

100% FDI in single-brand retail.

FDI in single-brand retail currently is 0.03% of cumulative FDI of around $149 billion from

April 2000 to September 2011. The relaxation is likely to result in an increase in FDI in retail

sector, especially in greenfield and brownfield investments.

Indian retail market, which was around $220 billion in 2005, is now expected to hit $700 billion

by 2015, with a CAGR of about 12%.

Within retail, modern, or organised, retail is growing at a fast clip, with CAGR of about 21%.

Though the industry was expected to grow at a much faster rate 5-7 years ago, the actual growth

rate was much lower. Lack of retail expertise and experience has been the main reason for this

subdued growth.

FDI in retail will pave the way for inflow of technical expertise and knowledge and this, in turn,

can boost the overall growth of the industry. The announcement is expected to generate 10

million jobs over three years, without impacting smaller and domestic retailers.

The sophisticated front-end that international players are likely to bring will boost investment in

infrastructure by retail players, third-party supply-chain companies and the government. This

will improve efficiencies in the supply chain, cut wastage, increase efficiency and bring down

consumer prices.

8

Fact is, farming community in India has shown one of the lowest efficiencies in terms of

production. Our productivity in food and agriculture is among the lowest in the world and there

is a significant opportunity to raise output, with investment in better farming practices.

FDI in retail will provide the farming community a new support group with a common interest

that is expected to give a big push to productivity.

Foreign multi-brand retailers, who did not want to enter India through cash-and-carry route, may

now explore Indian presence, as they would be able to directly own stake in multi-brand

retailing. Foreign retailers such as Sainsbury's, Lawson and others may now explore Indian retail

market.

Multi-brand foreign retailers that have already invested in India under cash-and-carry

arrangements, such as Walmart, Metro, Carrefour, Tesco, and Woolworths, now have an option

to invest in Indian companies undertaking direct retailing.

In existing single-brand retail joint ventures, the foreign multinational joint-venture partner

would have the flexibility to raise its stake in the venture beyond 51%. For existing Indian retail

players, such as Reliance, Trent, Shoppers Stop and the Future Group, this could provide further

options to raise long-term capital for expansion and to attract partnerships with some global

players.

This will help bring capital as well as global best practices and retail expertise to the Indian

businesses.

Single-brand foreign retail players, who have so far restrained themselves from entering the

country for reasons such as wanting the entire stake or ownership in an Indian single-brand retail

entity, may now want to explore the Indian market.

One may also potentially see present licensing, distributor or franchise arrangements being

converted to either joint ventures with respective foreign retailer or brands, or foreign retailers

completely buying out the Indian licensee, franchisee or distributor.

In multi-brand retailing, as the foreign retailer can own a maximum stake of 51%, the retailer

would have to scout for an Indian partner to enter Indian multi-brand retail sector.

9

Further, one will have to wait for clarification on whether the entire amount of minimum

capitalization of $100 million is to be invested upfront or over a period of time. Also, would such

a condition be too onerous for certain categories of multi-brand retailing such as sport goods,

watches, stationery, apparel and electronics.

Also, to comply with the norm of minimum 50% investment in back-end infrastructure, retailers

would need to have a precise interpretation of the term back-end infrastructure. Another key

condition is that foreign retailers should source certain minimum percentage from micro, small

and medium enterprises. This could provide an impetus to the growth of the small-scale sector.

With this relaxation of FDI in multi-brand retailing, it remains to be seen whether the

government will also relax the restriction on cash-and-carry companies that are barred from

supplying more than 25% of their turnover to group companies.

While FDI in retail sector has been relaxed with conditions, potential foreign retailers would

assess customer dynamics, competition, supply chain, infrastructure and import regulations.

They would also typically want to select a partner with complementing capabilities and cultural

fitment, adapt products for the diverse Indian micro-markets, use appropriate sourcing models to

manage costs and appeal to the Indian customer, and understand the tax and regulatory landscape

in India.

3.2 SOCIAL COMPLIANCE

Social Compliance / Social Accountability is an important parameter in international business

today, and buyers from major markets global markets, are increasingly insisting on adherence to

social compliance norms.

Social Accountability is the measure of an organization's state of being mindful of the emerging

social concerns of internal & external stakeholders (community, employees, governmental and

nongovernmental organizations, management, and owners). It is reflected in the organization's

verifiable commitment to certain factors (which may or may not be tied directly to its processes)

such as (1) willing compliance with employment, health and hygiene, safety, and

10

environment laws, (2) respect for basic civil & human rights, and (3) betterment of

community and surroundings.

Social Compliance is the result of conformance to the rules of social accountability by the

extended organization including not only the organization's own policies and practices but also

those of its supply and distribution chains. It is a continuing process in which the involved

parties keep on looking for better ways to protect the health, safety, and fundamental rights of

their employees, and to protect and enhance the community and environment in which they

operate. A social compliance program is usually based on adherence to rules of social

accountability, established by certified conformance to international standards such as SA8000.

Importance of Social Compliance for Leather Products & Footwear - Leather Products like

Garments, Accessories, Small Leather Goods, & Footwear are termed life-style consumer

products. In recent years, through the efforts of Human Rights Organizations and media,

consumers have become increasingly aware of suspected unethical labor practices throughout the

world. This knowledge has put pressure on retailers and manufacturers to ensure that they supply

ethically manufactured products. 

Until recently, the assumption that the manufacturers complied with local legal requirements was

assumed to be monitored by local authorities. But retailers and manufacturers are beginning to

act independently to ensure that fair and ethical labor practices are employed in the manufacture

of their products. Doing so helps these companies ensure that their reputation is not tarnished by

forces previously assumed to be out of their control. 

India is a sourcing destination for many international brands for leather products and as sourcing

by some large American and European Buyers increased, it necessitated the advent of social

compliance programs in the leather goods factories. All compliance programs are aimed at

ensuring legal compliance to laws of the country/ region and going beyond that for improving

workers’ conditions in the export-oriented factories. This is a relatively new business challenge

for our industry, although major disturbing issues like child labor, minimum wages and health &

safety at the workplace have been tackled quite successfully.

11

Major international players (Footwear Retailers, Dept Stores, Chain Stores etc) who insist on

Social Compliance/Audits, are well-known retailers Like Levis, Puma, Adidas, Decathlon,

Artsana, Inditex, who have also developed their own policies/ Code of Conduct (CoC). Many

retailers request third party organizations to audit their suppliers’ for compliance to the COC.

Some clients like Marks and Spencer, Tesco, Debenhams follow Sedex (Supplier Ethical Data

Exchange) Methodology, if the facility is already certified for SA 8000, WRAP etc they wave

off the Sedex audits. Retailers like Esprit, Migros, Metro follow the Business Social Compliance

Initiative (BSCI) audit methodology, and Carrefour, Siplec and some French clients follow ICS

certification.

IMPORTANT SOCIAL COMPLIANCE PARAMETERS:

Compliance with all national laws and regulations - Organisations are required to abide by all

applicable laws, regulations and standards applicable to its particular industry under the national

laws of the countries where the organisation is doing business. Should the legal requirements and

the standards of the industry conflict, organisations must comply with the laws of the country in

which the products are being manufactured. Organisations should, however, strive to meet

industry standards whenever possible. If state or local legal requirements apply to the

organisation’s manufacturing activities, they must comply with the state and local requirements.

Employment practices - Organisations are to respect its employees and to strive to improve

conditions whenever possible but in all instances to be in compliance with the specific

requirements relating to employment conditions.

Wages & Benefits - Organisations shall provide wages, overtime compensation and benefits at

not less than the minimum levels required by applicable laws and regulations or which are

consistent with the prevailing local industry levels, whichever is higher.

Working Hours - Organisations shall maintain employee work hours in compliance with local

standards and applicable laws of the jurisdictions in which they are doing business. Unless the

national law is different, the maximum standard working time is 48 hours per week or 60 hours

per week including 12 hours of overtime work

12

Child Labor -Exploitation of child labor or any vulnerable group (illegal immigrants for

example) is totally unacceptable. No person shall be employed at an age younger than the legal

minimum age for working in any specific country and in no circumstance shall any worker be

younger than 14 years of age. In general, all children under the age of 18 must not be employed

in hazardous work; not work night shifts; and are entitled to more breaks than adults.

Forced Labor - The use of forced or involuntary labor is unacceptable. Organisations shall

maintain employment on a voluntary basis. They are not to directly or indirectly use in any

manner, forced labor or prison labor.

Nondiscrimination / Human Rights - Cultural differences exist and different practices apply in

various jurisdictions. However, all terms and conditions of employment should be based on an

individual’s ability to do the job, not on the basis of physical characteristics or beliefs.

Employees must not be exposed to physical punishment, threats of violence or physical, sexual,

psychological or verbal harassment or maltreatment.

Freedom of Association - Organisations must recognize their employees’ rights to choose

whether or not to associate with or establish any organization including labor organizations.

Working Conditions - Organisations must provide adequate working conditions for employees

and comply with all applicable worker safety laws and regulations.

3.3 GROWTH OF FUTURE GROUP LOGISTICS – INDIAN RETAIL

COMPANY

Purpose – The purpose of this paper is to develop material for classroom teaching in the subject

area of general management with retail industry focus.

Design/methodology/approach – The approach is a case study approach with an emphasis on

building relevant issues for class discussions and providing opportunities for students to analyse

using additional resources from the library, company web site and news paper articles.

13

Findings – The case research enabled us to understand the challenges faced by organised retail

companies in Indian subcontinent with reference to logistics and sourcing. Organised retail is an

emerging industry in India and it provides an interesting analysis for growth and entrepreneurial

ventures. The case research also provided important insights into growth of retail industry, extent

of consolidation happening within the industry due to the unorganised retail industry players

aligning themselves as out sourcing partners for major retailers, etc. To this extent, there is scope

for further research in this area of research.

Research limitations/implications – There are issues related to ethical practices in sourcing. This

issue did not probe into this aspect of the retail industry.

Originality/value – This case is originally developed by conducting interviews with company

officials and collecting information using qualitative approach. The details provided are true to

the timeline given in the case – 2011 in Indian setting – Mumbai.

3.4 RETAIL ETHICS AND GREEN RETAILING

Retailers are keen to show that they are green, recycling-friendly, fair-trading, waste-conscious,

socially-responsible and energy-conserving. Whilst they are often condemned for 'greenwash'

they have spent £millions on improving their merchandise, systems and stores to make

themselves greener and more ethical.

Green Retailers Need Green Customers

Green retail involves both supply and demand.

Retailers want to be greener operationally, to sell more green merchandise, and to gain a

commercial advantage by being green.

Customers often want to be green(er) and do their best for animal welfare, the

environment etc and their families (or many want this). But they are not expert, they can

be cynical about what might be considered as greenwash, and even those who want to

do the best need better information to make sensible decisions.

14

Online Retailing

There is evidence that many consumers believe that online purchases are more ethical or more

environmentally friendly than going shopping. The argument is that online stores do not have the

same expensive superstructure and operating costs as the high street. Although there is an

additional cost paid by the retailer or by the retailer+customer for delivery, online purchasing

may be less costly in overall terms than driving in one's car to a town centre or shopping park.

The delivery van loaded with purchases triumphs over the private car.

However this cannot be an axiom of retail life. People who buy a number of things from different

shops will often find it cheaper to buy in person than online, depending on circumstances. Many

online retailers may make no or only a small charge for delivery; this may influence one's

purchasing decision but it does not affect whether online is greener. The costs of transport will

vary from person to person. The economic and the green cost of online retailing may be quite

different. People who live near shops or use public transport for their journeys may find that

online retailing is not best for them; the same issue is faced when purchasing small or

inexpensive items. For people who live in the country, paying a small delivery charge can be

cheaper than driving into to a nearby town, but if this means that different vans are driving up

and down country roads every day to deliver to your door this may be less green than your

driving to town once and buying a few things that you need.

The Centre is not trying to make a case for or against: the answer to whether online is greener is,

'it depends'.

Energy Saving

According to the Carbon Trust, UK retailing accounts for 7% (only 7%) of UK carbon emissions

and it should easily be able to cut these by 10% to 20%. Retailers have to make payments for

waste sent to landfill; emissions are monitored and charges are levied if these are not reduced;

and rising energy costs including an increasing green premium all make it unprofitable to be

wasteful and a polluter.

There has been increasing concern about stores operating in winter with their door open and

other wasteful use of energy. The Carbon Trust suggests that the open-door policy costs the retail

sector £1 billion and notes that some US towns now ban this practice. The Carbon Trust also

15

estimates that retailers could cut their lighting bills by 20% using refurbishment, lighting

management and sensor-based controls.

The CRC Energy Efficiency Scheme (CRC stands for Carbon Reduction Commitment) is the

CO2 emissions trading programme that covers businesses of all kinds, not only retailers. It is

mandatory for the 5,000 organisations that used more than 6,000 megawatt hours of electricity in

2008 (and are not subject to EU control over 'major polluters').

The 2010/2011 - CRC Performance League Table gives a list of companies that perform well

(organisations of all kinds, not only retailers) in weighted rank order:

The best retailers in the rankings: no. 43, Kesa (ex- Comet); East England Coop; no

56, Morrisons; Home Retail; John Lewis; no 82, M&S; no 93, Tesco; Dunelm; ScotMid

Coop; no 153, Lincoln Coop; no 153, Debenhams.

Bottom of the League: (all 1301=), Zara; Westfield; Wing Yip; UK Greetings;

Carphone Warehouse; Dixons; Diago; DFS; Kelko; BMW; Beales; Amazon and

Allders; Kingfisher and IKEA both performed poorly.

It is important to note that this is just one measure, and it may be wrong.

What are we to say of the fact that HMRC and the Home Office are among the worst rated, or

that the Treasury and the Cabinet Office are among the best?

Reducing Waste

There to be no new landfill sites to be commissioned. The landfill tax will increasingly force

retailers to use other methods of disposing of their waste. Waitrose plans to divert 95% of its

operational waste from landfill by 2013, Asda had a zero landfill target by the end of 2010 and

M&S planned by 2012 to reduce its operational waste by a quarter and construction waste by

half.

No Sainsbury's supermarket sends food waste to landfill. Instead the emphasis is on anaerobic

digestion. But they need greater UK capacity before they can do this. Waitrose intends to obtain

all its electricity from green sources by expanding its anaerobic digestion programme. Food

waste from 115 of its branches is being sent to an anaerobic digestion plant in Bedford. The

Bedford plant converts it into renewable energy, which is sold to the national grid.

16

This raises an important issue that cuts across many of these great ideas. The

environmentally-sound processing systems need to be there, in the right place and with the

right capacity before the desired changes can be made.

Before M&S, for one, could produce more packaging using recycled material it needed to obtain

a better quality of recycled plastic. To get this it had to invest £1.3 million in Somerset's waste

operations to improve the quality of its recycling facilities, bigger wagons, and a plastic and

cardboard kerbside collection with one-quarter of the output being made available to M&S. And

you thought they just ran shops.

New, explicitly ethical entrants to retailing

Whole Foods Market. Whole Food Market now has five stores (all in London), the

largest being the former Barkers store in Kensington. 40 are projected, although it has found the

going very tough. The US-owned group has 194 stores globally with sales of £2.9 billion.

Green Baby (www.greenbaby.co.uk)

Set up by Canadian mother Jill Barker in the UK, eco-award winning Green

Baby provides organic products, washable nappies, wooden toys, toiletries, maternity wear from

four London stores and a mail order business. Their Merino knitwear is produced by a Women's

Fair Trade cooperative in Uruguay. They use luxurious natural merino fibres sourced via

MANOS, who economise on water use and other resources and avoid using harmful chemicals

during the kettle dyeing process. Ethical baby products have been a major growth area for

retailers.

17

Fairtrade

The Fairtrade system has achieved astonishing success. The Coop, which supported Fairtrade

from its inception, stocks a core range of key Fairtrade products such as coffee, tea, sugar,

chocolate, bananas and wine. Its own-label chocolate is 100% fair-trade. Sainsbury's has taken

over the mantle of being the biggest Fairtrade retailer, both own label as another brand.

Carrefour also has impressive Fairtrade credentials, being the largest Fairtrade (le commerce

équitable) retailer in France.

Over 4,500 products have been licensed to carry the FAIRTRADE Mark in the UK and

according to the Fairtrade Foundation sales reached £1.17 billion in 2010, a 40 percent increase

on the previous year. By the end of 2010, the number of producer organisations selling to the UK

was 560 from 54 different countries. The UK is the largest Fairtrade country, responsible for

more than 50% of Fairtrade globally.

Other Ethical labels

FSC (Forest Stewardship Council)

Major retailers have switched to sustainable wood, a prohibition on endangered species,

discontinuing teak, etc.

MSC (Marine Stewardship Council) 

Slowly major retailers are attempting to shift their fish stocks to sustainable sources,

ensuring that the fish are caught or reared with minimal impact on stocks, eco-systems,

and the wider environment. The biggest issues seem to be with salmon and cod, using

line-caught methods.

Freedom Food 

Agreed standards for UK-sourced food involving humane treatment for animals. There

are problems here with pork sourced from the Netherland and Poland apparently given a

UK label because it is sourced here.

Red Tractor Label

Assured food standards umbrella for UK product, covering 6 different programme areas

and 6 related schemes responsible for £10 bn sales.

Organic standards for rearing pork actually provide far more space for pigs than Red Tractor or

Freedom Food

18

You Can't Always Win

Product non-availability. Even where retailers want to stock more environmentally suitable

products these are not always available. In electrics has have been a lot of progress with energy

efficient washing machines, fridges and cars but little progress on hairdryers, TVs and

computers.

The green claims. Criticisms that much supermarket food makes you fat has led most chains to

produce low-calorie lines or low-fat lines, although these have often been criticised by

nutritionists, 'Which?' and others, for having large amounts of salt and often being little better

than normal processed foodstuffs.

Which? Has also attacked the bio 'green' claims of many of the environmentally-friendly

detergents and cleaners arguing that many of them are little better than standard products.

Retailers do not have a stance on this. They would prefer a small number of universally-accepted

standards to be used when sourcing and describing merchandise.

Plastic Carrier Bags. Many people use a retailer's position on plastic bags as a measure of its

overall greenness. Ireland claims to have reduced plastic bag use from 27 per person per month

in 2002 to 2 in 2009 by charging 15¢ for each bag, but this figure is based on bag tax revenues.

In the UK, retailer-issued bag use has fallen from 11 per person per month in 2002 to 7.2 in 2009

and then 7.7 in 2010. The WRAP target of a 50% reduction in single-use carrier between 2006

and Spring 2009 was just missed (a 48% reduction).

WRAP found that retailers used 6.8 million bags in 2010 compared to 10.9 in 2006 (-37%). The

trend towards thin gauge bags meant that the total weight of bags provided was 57,900 Tonnes in

2010 compared with 95,000 Tonnes in 2006. Between 2008-09 and 2010 there were reductions

in the bags distributed but the reductions were even higher in Northern Ireland, Wales and

Scotland.

Plastic bags are a cost and retailers would gladly avoid that cost if customers brought their own.

Some research has shown that the HDPE bags (high density polythene) may be up to 500 times

less damaging than cotton or linen bags often used as a substitute. Retailers fear that not issuing

bags will inconvenience customers, reduce trade, and increase breakages and, whilst they try to

reduce bag use, it should be left to customers to make their own decisions. If you break a bottle

of wine because you drop it on the way out of the shop, the cost is far greater than a plastic bag

19

and store staff have to clear it up. But it is true that many people get worked up about plastic

bags and the last government threatened legal changes to force retailers to cut bag use.

The Courtauld commitment signed by most food retailers commits them to reducing waste,

packaging, household waste and carbon impact of packaging. Phase I (four years to 2010) saved

1.2 million Tonnes of food and packaging worth £1.8 bn.

Organics. Sales of organic food were growing at 30% pa in the early 2000s. As we have seen

sales have been falling since 2008, but it still accounts for around £1.7 bn of sales, a fall of 5.9%

compared to the previous year. The scale of organic farming is increasing (by 2010 there were

680,000 hectares compared to 500,000 hectares in 2006), but the land in conversion to organic

has fallen from 158,000 Ha in 2007 to 51,000 Ha in 2010. The number of organic producers (and

many are small) has fallen from 7,896 in 2008 to 7,567 in 2010. There can be little growth in this

sector over the next few years because there is little land becoming organic to replace the farms

that cease to be organic.

The same pattern can be seen in livestock. Organic poultry has fallen from 4.5 million birds in

2006 to 4 million in 2010 and there are only 47,000 organic pigs compared to 71,000 in 2010.

Scotland has been particularly affected: there were 429,000 ha in organic use in the early 2000s

but now there is only 189,000.

But the sector has seen a small rise in box schemes (a producer or retailer delivers a changing

box of vegetables [depending upon availability]) directly to customers. These now have sales of

£156 million. There have also been continued increases in cattle reared organically.

Why the fall in organics?

Organics are more expensive and less likely to be on promotion. People still buy organic

food but they may do so less frequently.

A significant number of shoppers have switched from organic to Fairtrade. They can stick

tick their personal 'ethical' box and feel they are doing something for poor overseas

farmers.

The Food Standards Agency and other commentators have stated that there were no

observable nutritional differences between organic food and non-organic, though an

20

article in the RSS's journal showed that this was not true for organic milk (it convinced

me anyway).

There have also been some frauds with 'organic' eggs, pies and meat being found to be

ordinary foodstuffs not produced in accordance with the Soil Association requirements.

This does nothing to help consumer confidence. The problems are mainly in the

restaurant and hotel sector, but they affect people's perceptions.

There is no agreed organic label (apart from the Soil Association) whilst supporters of

organic food condemn the new EU organics label which allows organics to contain up

to 0.9% GM.

Organic can be seen as too abstract and goody-goody for hard-pressed consumers.

Only 9% of shoppers look for organic products (according to MMR Research Worldwide) whilst

Organics as a brand is thought to be weak, difficult to understand and having brand values that

are more about being difficult than things they associate with. MMR Research showed that

consumers were five times more likely to relate to terms such as 'healthy', 'natural', 'free from

artificial colours, flavours and preservatives' than to the word 'organic'. Shoppers were looking

for evidence of natural food that had not been tampered with, 43% looked for healthy and low fat

evidence, 30% for low sugar, and 34% for low salt.

The argument is that organics should change their name and reposition themselves as traditional

values (think Hovis), healthy, free from chemicals, natural etc.

It's obviously not easy, being green

3.5 REDUCING WASTE IN RETAIL STORE OPERATIONS

Waste is an issue for all retail operations, given the need to take in and unpack large numbers of

individual items and then display and package them up in a way that customers will appreciate.

CalRecycle (California’s Department of Resources Recycling and Recovery) suggests that

retailers consider the three R’s—reduce, reuse and recycle—when setting up their sourcing,

packaging and related procedures. As for reducing, CalRecycle encourages retailers to ask their

suppliers to provide items without excess packaging and to reuse whatever packaging they can.

21

Also, stores can give customers the choice of having their purchases bagged—or give a discount

to those who bring their own or go without.

For reusing, CalRecycle recommends donating old merchandise to charities rather than throwing

it in the trash, and looking for schools or institutions that would take display racks and other

decor elements from the previous sales season. Posting such items to a materials exchange is a

quick way to find takers. The U.S. Environmental Protection Agency (EPA) maintains a state list

of material exchanges on its website.

Retailers can maximize the amount of recycled packaging in their stores by demanding their

suppliers use it. And if a store has enough recyclables it may be able to sell it to an industrial

recycler periodically. If a store is in a mall, there may be other opportunities for greening. “Mall

property managers and anchor stores can provide leadership by coordinating waste prevention,

recycling and purchasing programs at multitenant complexes,” says CalRecycle. “Mall managers

can consolidate efforts among businesses to generate large amounts of recyclable material,

thereby making recycling more cost effective.”

All big retail chains have sustainability challenges, but the Gap has made great strides in the last

decade in reducing waste and its overall environmental footprint. They recently completed a

green makeover of their corporate offices in San Francisco, diverting as much as 75 percent of

the waste stream there. While the Gap has limited control over what goes on at its retail stores

given local rules and systems for waste management, it is partnering with other retailers through

industry groups to facilitate recycling in mall store environments and establish lease templates

that support waste reduction and other environmental goals. The company is also part of

the Clean by Design program, an initiative of the Natural Resources Defense Council (NRDC)

to marshal the buying power of multinational corporations (including Wal-Mart, Levi’s, Nike

and others) to reduce waste and emissions among suppliers abroad.

But just because the company is on the case doesn’t mean new suggestions aren’t welcome.

Corporate leaders at companies like the Gap often encourage feedback from workers, especially

when it could benefit the company’s bottom line or image. Offering some concrete, succinct

examples of ways the company could reduce waste would most likely be the best approach.

22

4. UNETHICAL ASPECTS OF RETAIL INDUSTRY

4.1 RETAIL CONCERNS FOR INDIA

With over one billion people and an expanding middle and upper class, India is one of the

world’s fastest-growing retail markets. But retailers seeking opportunity in India face challenges

that range from convoluted foreign direct investment rules to cultural differences that affect

buyer habits and preferences.37 Foreign companies, for example, can own up to 51 percent of a

“single-brand” retailer like a Nike outlet, but cannot invest in other kinds of direct-to-consumer

multi-brand retail outlets. This restriction covers supermarket chains and big-box stores like

Walmart.38

The restrictions are popular among Indians who are concerned that giant retailers like

Walmart will destroy India’s small family-owned stores and force Indians to change from their

familiar shop-based shopping patterns to a more Westernized experience. These traditional shops

account for 95 percent of India’s retail commerce39 and are both popular and familiar. For

example, Kishore Biyani’s supermarkets in Mumbai, India, were initially designed like most

Western-style supermarkets.40 But customers walked down the wide, well-lit aisles, past neatly

stocked shelves, and out the door without buying. Biyani recognized that his target markets did

not like the sterile, unfamiliar environment, so he redesigned his stores to make them more like a

public market. The approach worked: His company, Panaloon Retail (India), Ltd., is now one of

the country’s largest retailers.

Although family-owned stores (left) currently account for 95 percent of…

However, traditional approaches have their downsides, including an intricate web of

middlemen, which reduce profits and drive up consumer prices. Experienced retailers like

Walmart can introduce modernization and efficiency, two factors that can help in important areas

like controlling food-price inflation and improving the quality of food.41

Each year, retailers in India experience perishable inventory losses, such as grains and

produce, due to supply chain inefficiencies. In other countries, supermarket chains and big-box

stores reduce those losses through careful supply chain management. Strong relationships with

vendors and bulk purchasing help these large retailers keep prices low while helping to ensure

that food is fresh when it reaches shelves.

23

Walmart could provide all those benefits to India, but its interest in the country isn’t entirely

altruistic. The largest retailer and grocery retailer in the world42 also sees an opportunity for

global growth in the emerging economy. Walmart solved its regulatory problem in India by

forming a joint venture with Indian business conglomerate Bharti Enterprises. Under this

arrangement, Walmart contributes its supply chain and back-end logistics expertise while Bharti

owns and manages the wholesale and retail stores where merchandise is sold.43 The arrangement

isn’t ideal for Walmart, which loses control over an important aspect of operations, but it does

establish a foothold in the country.

Walmart has backtracked to the beginning of the produce supply chain in India—local

farmers—to improve productivity.44 Initiatives include improved insect control and germination

and growing practices and a more informed approach to fertilization. These practices have

helped increase crop yields by 25 percent. Benefits don’t stop there: Farmers are seeing 5 to 7

percent higher income from Walmart than from local wholesale markets. They are also avoiding

transportation costs since Walmart collects its produce from the fields,45 but this practice cuts out

Indian distributors who rely on farm business for their livelihood.

4.2 NO DELIGHT FOR RIL'S NON-VEG BUYERS

RIL move to exit the non-vegetarian food business is in deference to the wishes of a large section

of consumers, shareholders and investors who had requested Mukesh Ambanito get out of the

meat segment as it hurt their religious sentiments. The non-vegetarian foods business, said to be

growing at a CAGR of 25-30%, is estimated to comprise 10% of the company's total retail

business and is also a profit-making venture.

Given that Ambani himself is a strict vegetarian, it is a clear sign that business decisions cannot

be separated from an individual's dietary and lifestyle choices.

RIL had earlier picked up a 45% equity stake in Two Sisters Foods India (TSFI), which belongs

to 2 Sisters Food Group (2SFG). 2SFG, the third largest food company in the UK, supplies

poultry, red meat, fish, and bakery and chilled/frozen products to the retail, food service and food

manufacturing sectors. RIL was also planning to set up quick service restaurants (QSRs) named

'Chicken came First'.

RIL sources pointed out that RIL has annulled the joint venture with 2SFG and even decided to

forgo investments to the tune of Rs 50 crore made in Delight stores and potential future profits

24

from it. RIL shares on BSE closed down marginally at Rs 863 in a volatile Mumbai market on

Friday.

Delight, a chain for non-vegetarian products with presence in 11 states and 25 cities with over

100 stores, was introduced as an independent network of stores for non-vegetarian offerings in

select geographies. A completely dedicated and fully segregated supply chain was maintained for

Delight in order to cater to the distinct preferences and ideologies of different customers. The

company initially had plans to scale up Delight stores to over 1,000 as non-veg products deliver

a margin of over 20-25% compared to 10-15% margins in food and grocery retailing.

"Despite this sensitive balance of availability and convenience, it was felt that certain sections of

customers were still hesitant to shop at our other stores. Reliance Retail has therefore decided to

focus on vegetarian offerings only, within its retail portfolio," said the source quoted earlier

adding that the company believes that this decision will help them to fully leverage their core

competencies and remain relevant with a wider section of consumers.

Investment advisor S P Tulsian, who closely watches the conglomerate, said fear dominates

greed in many cases for business families. "Tradition, culture and ethos of Mukesh Ambani

prevailed over economic, finance and commercial considerations,".

4.3 HOW ETHICAL ARE HIGH-STREET CLOTHES?

Saved from the rubble: rescuers lift a young woman from the ruins of the Rana Plaza factory in

Savar, near Dhaka, in April this year. Photograph: AP

25

Never mind exactly what Rihanna is wearing, or where Alexa Chung got her new bag: the

pressing news on the high street is about ethics. It's now six months on from the Rana Plaza

catastrophe, in which a garment factory collapsed in Bangladesh, killing at least 1,133, with a

further 2,500 injured and many left severely disabled. Tragically, Rana Plaza wasn't a unique

accident. Fires and building collapses are endemic in the assembly part of the fashion-supply

chain (at least 112 workers were killed at the Tazreen factory fire in Dhaka in November 2012).

Campaigners and analysts have highlighted the dangers in today's "fast fashion" supply chain

that increase the probability of such catastrophes.

"Fast fashion" desperately needs to reinvent its supply chain. With business worth £44.5bn, the

UK high street is a world leader in fashion: now it's time to add substance to our style. And as

consumers, it's our responsibility to understand a bit more about supply-chain ethics, and act on

that information. Report after report shows that members of the cut, make and trim army (the

millions who toil in China, Bangladesh, India and Cambodia – the hubs of high-street fashion

production) work for wages that barely cover necessities. Meanwhile the economic perks for us

as consumers are unbelievable: we've never had access to fashion this cheap.

The pressure on workers is enormous. In the speed to fulfil contracts for hundreds of thousands

of units of a single design to a short deadline, gambles are taken with human rights and worker

safety. A recentPanorama   programme, "Dying for a Bargain", once again showed the total

fallacy of factory audits as finish times for workers were falsified and workers locked into

factories. Research also shows how many western fashion buyers base their calculations on

misleading industry standards set on 100% efficient factories. The sorry garment production

facilities in some cities are worlds away from efficient, so the workers cannot but fail. 

For Fashion Revolution Day a coalition of fashion experts and campaigners will commemorate

the victims of Rana Plaza on the first anniversary of the collapse, 24 April 2014. Ideas to prevent

such disasters happening again include creating more slack in supply times. If brands extend

their deadlines and increase lead times (even by seven days) this could save lives. But my

research (distilled into the list below) shows little appetite for that sort of let-up from any of the

main retailers.

So who on the high street is facing up to these problems? To find out, I waded through the

research and spoke to NGOs, and I sent a questionnaire to the main high-street brands to gauge

26

their position on supply chain ethics. Some chose to engage, some did not. You can find their

responses below.

'The pressing news on the high street is about ethics'. Pictured: the pedestrian crossing at

London's Oxford Circus. Photograph: Corbis

Below is a list of some of the retailers and retail groups which are, I believe, doing the most to

tackle the supply-chain issue. Size matters in fast fashion, so my list concentrated on the big

players in terms of sales and volume market share. I have a bias: I believe the Bangladesh Fire

and Safety Accord is the best hope we have of improving safety in that country. Essentially built

from the rubble of Rana Plaza, it is a contract between the retailers and the trade unions in

Bangladesh. It's a legally binding, five-year pact that makes independent safety inspections of

factories and public reporting on them mandatory. The first list of 1,500 Bangladesh factories to

be inspected has just been published. It is also the first-ever multi-buyer collective agreement

(brands like to act as lone wolves, which is part of the problem) – but 93 have signed so far. A ll

the retailers that feature here have signed up.

Finally – a huge caveat – none of these brands can guarantee that they won't be involved in a

Rana Plaza tragedy tomorrow. Even for our top-tier retailers, there is a very long way to go.

27

CONCLUSION

Ethics in the retailing sector has some certain critical issues. Retailers may use certain ethical

standards which help them in decision making. The report investigates the growth of retailing

industry in India. It examines the growing awareness and brand consciousness among people

across different socio-economic classes in India and how the urban and semi-urban retail markets

are witnessing significant growth.

The retailers should charge fair price for the products offered to them. The consumers have the

right to get correct and precise knowledge about the products sold to them in respect of warranty,

guaranty, price, usage, ingredients etc. Ethics is essential for the long run of the business. Ethical

business is essential in today’s competitive and dynamic environment.

The shareholders are the owners of the business. Shareholders must be given fair returns on their

investment at regular intervals. The share holders should be disclosed with correct information

about the financial status of the business organisation. The business organisation must act in the

interest of the shareholders.

Ethical practices must also be followed towards the employees. The retail industry employs large

volume of retail staff. Therefore proper policies and procedures must be framed for the

employees regarding recruitment, selection, training, promotion, welfare etc.

Negative issues relating employment relations in the work place can lead to loss of reputation

and customers, it leads to poor staff morale, low productivity, and high labour turnover. To avoid

these confrontations the retail manager should follow ethical practices towards employees.

28

BIBLIOGRAPHY

Concept of ethics in retailing 

http://www.yourarticlelibrary.com/retailing/notes-on-the-concept-of-ethics-in-retailing-

explained/7576/

Ethical perception of the retail salespersons in organized retailing

http://smallbusiness.chron.com/ethical-perception-retail-salespersons-organized-retailing-

13386.html

Personal attributes and work ethics of retail service employees

http://www.hsc.csu.edu.au/retail/compulsory/240/interact/3823/personal_attributes.htm

FDI in retail: MNC retailers to select partners with suitable capabilities

http://www.ey.com/IN/en/Newsroom/News-releases/Published-editorial---FDI-in-retail---

MNC-retailers-to-select-partners-with-suitable-capabilities--continued-

Retail ethics and green retailing

http://www.retailresearch.org/retailethics.php

Reducing waste in retail store operations

http://business-ethics.com/2013/11/01/11338-reducing-waste-in-retail-operations/

Retail concerns for India

https://www.inkling.com/read/marketing-dhruv-grewal-michael-levy-3rd/chapter-7/ethical-

and-societal-dilemma-7-2

No delight for RIL's Non-Veg buyers

http://timesofindia.indiatimes.com/business/india-business/No-delight-for-RILs-non-veg-

buyers/articleshow/27443212.cms

How ethical are high-street clothes?

http://www.theguardian.com/environment/2013/oct/06/ethical-high-street-clothes-supply-

chain-bangladesh

29