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18.7 Ethical Issues in Retailing and Wholesaling

LEARNING OUTCOMES

By the end of this section, you will be able to:

  • 1 Discuss ethical issues in retailing.
  • 2 Discuss ethical issues in wholesaling.

Ethical Issues in Retailing

As with any business entity, ethical issues arise in both retailing and wholesaling. It can be easy to find oneself in an ethical dilemma while trying to meet consumer demands and stay competitive. There are several prominent ethical issues that arise specifically with retailing and wholesaling.

Because retailers are the final link between manufacturer and consumer, ethical issues often arise in the practices used toward consumers. Common issues in retail include deceptive or misleading marketing, poor treatment of consumers, and misleading sales tactics.

Unethical Practices Used by Retailers

Although there has been a considerable rise in the number of consumers and advocacy groups calling out unethical business practices, many retailers still attempt to use tactics to sway consumers into purchasing products. Truly Organic, a retailer based in Miami Beach, Florida, came under attack by the Federal Trade Commission (FTC) in 2019 for misleading consumers into believing their products were 100 percent organic, which wasn’t entirely true.45 The case stated that Truly Organic was guilty of false or misleading advertising, an unethical marketing practice by which consumers are given false or misleading information about a product or service.

Misleading or manipulative sales tactics is another common unethical practice used by retailers. Misleading sales tactics involve misleading the consumer with untrue information regarding a product or service. Subscription services used to be notorious for misleading sales tactics as they offered a service or product for a free trial but did not include in the promotion that the consumer would be charged every month after a free trial. There are many regulations that require such companies to disclose this information.

Ethical Issues in Wholesaling

Just as retailers may face the temptation to be unethical toward consumers, wholesalers often find themselves in an ethical dilemma with their retail customers. Two common ethical issues that arise in wholesaling surround fairness and pricing.

Fairness and Billing

Fairness can certainly be a subjective term. What you and your sibling may each deem as fair is based on your individual perspectives and opinions. In wholesaling, and commerce in general, the government has enacted regulations to maintain fairness in business practices. You have probably heard the term “monopoly.” In the United States, monopolies are considered unfair business practices and thus are largely against FTC regulations. If one or a few businesses control all of an industry, the laws of supply and demand cease to exist because one company controls both. In the wholesaling industry, the same rules apply. If a wholesaler requires a retailer to sign very specific contracts that they will use no other wholesaler, the retailer is at the mercy of the wholesaler when it comes to everything surrounding their business’s livelihood.

Just as with fairness, wholesalers also need to pay close attention to their billing practices. Wholesalers and retailers agree on the billing method to be used in their contract. However, it is unethical for wholesalers to bill retailers for product never shipped or received, damaged product without recourse, or product not ordered.

COMPANIES WITH A CONSCIENCE

Trader Joe’s

In 1967 in Pasadena, California, the first Trader Joe’s was opened. Today, the retail grocery chain has 505 stores in over 42 states as well as an online presence. Trader Joe’s has always been committed to improving sustainability in its channel. Unlike many competitors in the grocery industry, Trader Joe’s donates 100 percent of its unsold products. It does not allow certain controversial products in the manufacturing of its private-label goods and continues to make organic products more accessible. Additionally, the company has removed more than 6 million pounds of plastic from packaging and continues to have high rates of employee satisfaction.46 The ethical decisions of Trader Joe’s involve relationship building throughout the supply chain to ensure that each channel member upholds the high ethical standards that help enhance the customer experience.

There are other supermarkets known for ethical practices. These include Natural Grocers, Sprouts, Costco, and Whole Foods.47

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