Retail Ethics: An Exploratory Examination of Consumer Perceptions

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Retail Ethics: An Exploratory Examination of Consumer Perceptions James L. Thomas, Jr., University of Mississippi Faye S. McIntyre, Rockhurst College Faye W. Gilbert, University of Mississippi Although the literature addresses ethical behavior and perceptions of retail managers and salespeople, little work has been done to assess consumer perceptions of retail ethics. This study uses an 18-item scale of "customer-related situations" developed by Levy and Dubinsky (1983) to assess the perceived frequency of ethical problems in retail stores. The results of a cluster analysis clearly indicate two distinct groups of consumers, which we name trusting and skeptical consumers, and that these two groups differ significantly on several demographic characteristics. Trusting consumers are more likely to be older, married females, and skeptical consumers appear to be younger, single males. While consumers' level of education is significantly related to their cluster status, the findings regarding education are mixed. Introduction "Americans trust marketers about as much as the United Nations trusts Saddam Hussein." (Schw artz, 1992, p. 14). Today's consumers appear to expect unethical behavior by marketers. Consumer skepticism of marketing practices is exacerbated by such problems as scandals, bribes, deceptive advertising, unsafe products, exploitation of children, illegal payoffs and dumping of environmental contaminants (Ferrell, Gresham, and Fraedrich, 1989; Rozensher and Fergenson, 1994; Schwartz. 1992). Contrasting evidence suggests that the ethics of retail store managers have increased (from 1976 to 1986), while the ethics of retail students have declined (Gifford and Norris, 1987, Norris and Gifford, 1988). Whether practices are improving or declining, retailers are at the local forefront of the battle for the consumer's trust. This paper presents the findings of a survey designed to assess consumers' perceptions of retail ethics. First, a brief overview of the literature is provided. Next, the methodology and findings of the study are detailed, followed by a discussion of managerial and research implications. Background Retail salespeople are at the boundary of the firm and thus, operate in "an

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environment conducive for development of ethical problems (e.g., should the salesperson refuse to exchange the customer's merchandise?)" (Levy and Dubinsky, 1983, p. 47). However, the ethics of retail practices is an understudied phenomenon (Robideaux, Robin, and Reidenbach, 1989), and the identification of major problem areas has progressed slowly (Chonko and Hunt, 1985). Several authors have used scenarios to examine ethical perceptions of retail store managers (Dornoff and Tankersley, 1975 Gifford and Norris, 1987; Norris and Gifford, 1988), while others examine retail salespeople's ethical perceptions (Dubinsky and Levy, 1985, Levy and Dubinsky, 1983). However, relatively little research addresses ethics from the consumer's perspective (Muncy and Vitell, 1992). Of the existing consumer literature, most has addressed consumers' perceptions of consumer ethics (e.g., Antile, 1994; Cole, 1989; Cox, Cox. and Moschis, 1990; Muncy and Vitell, 1992; Wilkes, 1978). Ferrell and Gresham's (1985) framework of ethical decision making posits that individual factors, such as education and cultural background, will moderate one's decisions. Empirical studies examining the relationship of demographic characteristics and ethics provide mixed findings. Sikula and Costa (1994) found no differences in the ethical values of men and women based on responses from college students. However, Chonko and Hunt (1995) reported that female managers perceived more ethical problems than male managers. Contradictory evidence regarding gender in a recent study by Muncy and Vitell (1992, p. 308) led the authors to posit "the question about whether ethical perceptions differ depending on whether or not a person could perceive himself or herself engaging in the activity," i.e., regardless of gender, one may perceive as unethical those activities he/she is unlikely to engage in. Mixed findings also are evident in examining the "more ethical with age" assumption. Robideaux, Robin, and Reidenbach (1989) found that age was significantly related to retail managers' ethical perceptions, where the older the manager the "more unethical" the situation was perceived to be. Likewise, Muncy and Vitell (1992) found that older respondents exhibited a higher level of ethical concern than their younger counterparts. Though potential methodological problems are noted (Mudrack, 1994), Vitell, Lumpkin, and Rawwas (1991) found just the opposite and characterized the elderly as highly Machiavellian. "The strongest agreement with anti-marketer sentiment is found among college graduates, people with household incomes of $50,000 or more, and working parents," (Schwartz, 1992, p. 14). However, Muncy and Vitell (1992) reported that individuals with lower levels of income and education exhibited greater concerns

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with ethical situations. This study extends knowledge in three ways. First, it examines retail ethics from the consumer's perspective, filling a void in the extant literature, In addition, consumers' responses are examined to identify differences among consumers regarding these perceptions. Finally, demographic characteristics are explored to assess their ability to differentiate consumer perceptions. Table 1: Cluster Analysis Results Situation or Practice Trusting Skeptical Sales clerk gives incorrect change to a customer on purpose 2.383 2.760 Retailer takes a return from customers when the item should not 2.411 2.946 be returned Retailer refuses to accept returned item from a customer when 2.495 3.031 the item should be accepted Telephone customer wants help, but the sales clerk- decides not 2.533 3.419 to assist him/her Customer damages product while in the store, then wants a 2.598 3.163 markdown Retailer hoards free samples that were meant for customers 2.738 3.558 Retailer makes excuses about products when products are either 2.794 3.543 not yet in the store or when products have already sold out Retailer makes a promise that s/he cannot keep regarding when 2.841 3.434 a product will be ready, Retailer charges full price for a sale item without the customer's 2.879 3.217 knowledge Sales clerk does not assist customers s/he believes are less likely 3.000 3.806 to buy Retailer makes excuses when merchandise is not ready for a 3.047 3.713 customer to pick up Retailer does not offer information to a customer about an upcoming sale that will include the merchandise the customer is 3.178 3.791 planning to buy Retailer sells a more expensive product when a less expensive 3.243 3.915 product would be better for the customer Sales clerk pressures a customer into making a purchase 3.243 4.124 Retailer doesn't tell the complete truth to customer about 3.299 3.806 product characteristics Sales clerk buys merchandise before it is available to customers 3.308 3.783 Sales clerk ignores a prospective customer for one s/he believes

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will be a better prospect Retailer gives preferential treatment to certain customers * 5-point scale where 1 =Never and 5=Always; * All mean differences significant at p < or = .001. Methodology

3.318 3.421

4.023 4.086

The sample frame for this study consisted of the 31,000 residents of a Southern county. A systematic random sample of the telephone directory was conducted using a three call-back procedure. To ensure inclusion of households not listed in the directory, a random digit was added to the last number of non-respondents. All surveys were completed by trained student interviewers at a central telephone bank, monitored by two supervisors. Of 859 calls attempted, 25 were business lines and 381 households were unreachable, leaving 453 household contacted, 184 refused to participate, and 269 completed the survey. Thus, the effective response rate was 59.4%. Levy and Dubinsky's (1983) 18-item scale of customer-related situations with ethical implications was selected for the study. Respondents were asked to identify how frequently they believed each situation occurs in retail stores. A second set of questions was then asked to ascertain respondents' demographic characteristics. Results In this exploratory study, we attempt to identify groups of consumers based on their perceptions of the frequency of occurrence of the 18 customer-related ethical situations. Respondents were clustered using the nearest neighbor method with a squared Euclidean distance measure. As seen in Table 1, two distinct groups of consumers emerge from the clustering routine. For each of the situations, Cluster Two perceives a significantly higher frequency of occurrence than does Cluster One (p < or = .001). Consumers in Cluster One appear to believe retailers act unethically less frequently than do those in Cluster Two therefore, we identify Cluster One members as trusting consumers and Cluster Two as skeptical consumers. Demographic characteristics presented in Table 2 profile members of the two clusters. Trusting consumers are older than skeptical consumers. Though women are approximately equally distributed between the two clusters, they are significantly more likely to be trusting consumers, while skeptical consumers tend to be male.

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Marital status also appears significantly related to cluster membership. Single people are more often skeptical, while those who are married are trusting. Interestingly, no relationship is evident when examining consumers in the separated/widowed/divorced category: they are equally likely to be either skeptical or trusting. Though the overall relationship between cluster membership and income is not significant, two significant differences emerge when looking at individual income categories. Consumers with the lowest income (less than $10,000) are more skeptical. consumers with incomes of between $50,000 and $74,000 are more trusting. Cluster membership is significantly related to education. However, there is no clear gradation from one cluster to another as consumers acquire more education. In fact, the findings are quite perplexing: those with no high school degree are skeptical: high school graduates are trusting; those with some college are skeptical; graduates are trusting; those with some graduate study are skeptical. Perhaps some relationship exists between one's level of trust/skepticism and closure in the pursuit of an educational goal. Table 2: Demographic Differences Between Clusters Frequency t or x2 Characteristic C1 C2 (p-value) Mean Age 40.6 32.9 3.7(.000) Gender: 38 65 Male 5.5(.019) 68 62 Female Marital Status: 35 65 Single 9 13 Widowed/Divorced 9.5(.009) 61 48 Married Income: 14 24 Less than $10,000 12 17 $10,000-14,000 19 24 $15,000-$24,000 13 19 $25,000-$34,000 13 16 $35,000-$49,000 16 10 $50,000-$74,000 6 7 $75,000-$99,000 4.8(.689) 3 2 $100,000 or more Education:

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No High School Degree High School Graduate Some College College Graduate Some Graduate Study Graduate Degree

4 23 31 20 7 17

13 14 42 14 24 19

16.8(.005)

Discussion Retailers should note that skeptical consumers believe 16 of the 18 potentially unethical situations occur more often than merely occasionally (mean score > or = 3), trusting consumers believe half of the situations are not uncommon in retail stores. Even less suspicious customers appear to have little confidence in retailers' ethics. The identification of two distinct groups of consumers leads to the corollary, that findings of past studies describing all consumers' ethical perceptions may be tenuous. Perhaps the mixed findings with respect to demographic characteristics that predominate the ethics literature are due, at least in part, to the aggregation of data from heterogeneous groups. Conclusions about ethical perceptions of consumers as one homogeneous entity, may be over generalizations. The results provide guidance for aspects of retailer practices that could be improved for each segment. For example, Cluster 2 customers (skeptical) resent sales clerks who do not help, lack of information, high pressure sales, incomplete information, and preferential treatment. These customers should be treated accordingly. If further studies replicate these findings, retailers would gain specific direction for improving relations with Skeptics as well as other groups. Implications and Future Research The ethical practices of businesses have become an increasingly important issue; however, empirical examinations and critical discussions have not yet focused on the boundary line between the retail store and consumer from the customer's point of view. Similar to positioning studies of image. varying ethical perceptions of stores may well lead consumers to patronize one retailer over another. Thus, the views of consumers must be paramount if retailers are to establish policy, train employees, and lessen the inherent conflict between their personnel and their customers.

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The identification of two clusters of consumers raises the need for reexamination of much of the existing research on consumer ethics. Since consumers can be grouped based on their perceptions of retail ethics, might the same also be true of consumers' perceptions of consumer ethics" Likewise, findings of practitioners (e.g., retail managers and salespeople) should be scrutinized. One area that deserves scrutiny, is how consumers' level of trust or skepticism fits into existing models of marketing ethics. Hunt and Vitell (1986) postulate that personal experiences, which includes such dimensions as personality and life experiences, influence the ethical decision making process. Given a set of personal experiences does one's level of trust/skepticism moderate the likelihood of utilization of a teleological and/or deontological evaluation of a potentially ethical situation? As research continues, retailers should receive better guidance from knowledge of consumer perceptions of their practices. Positioning studies that differentiate segment views of competing stores could prove particularly enlightening. Normative guidance for strategy implementation, training programs, and customer outreach attempts should also be forthcoming. References Antile, John H., Socially Responsible Consumers: Profile and Implications for Public Policy. Journal of Macromarketing 4 (Fall 1984): 18-39. Chonko, Lawrence B. and Hunt, Shelby D., Ethics and Marketing Management: An Empirical Examination. Journal of Business Research 13 (August 1985): 339359. Cole, Catherine, Deterrence and Consumer Fraud. Journal of Retailing 65 (Spring 1989): 107-120. Cox, Dena, Cox, Anthony D., and Moschis, George P., When Consumer Behavior Goes Bad: An Investigation of Adolescent Shoplifting. Journal of Consumer Research 17 (September 1990): 149-159. Dornoff, Ronald J. and Tankersley, Clint B., Do Retailers Practice Social Responsibility? Journal of Retailing 51 (Winter 1975 1976): 33-42. Dubinsky, Alan J. and Levy, Michael, Ethics in Retailing: Perceptions of Retail Salespeople. Journal of the Academy of Marketing Science 13 (Winter 1985): 1-16.

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Ferrell, O. C. and Gresham, Lam G., A Contingency Frame work for Understanding Ethical Decision Making in Marketing, Journal of Marketing 49 (Summer 1985): 87-96. Ferrell. O.C., Gresham. Larry G.. and Fraedrich, John. A Synthesis of Ethical Decision Models for Marketing. Journal of Macromarketing 9 (Fall 1989): 55-64. Gifford, John B. and Norris, Donald G., Ethical Attitudes of Retail Store Managers: A Longitudinal Analysis. Journal of Retailing 63 (Fall 1987): 298-311. Hunt, Shelby D. and Vitell, Scott J., A General Theory of Marketing Ethics. Journal of Macromarketing 6 (Spring 1986): 5-16. Levy, Michael and Dubinsky, Alan J., identifying and Addressing Retail Salespeople's Ethical Problems: A Method and Application. Journal of Retailing 59 (Spring 1983): 46-66, Mudrack, Peter E., Are the Elderly Really Machiavellian? A Reinterpretation tan Unexpected Finding. Journal of Business Ethics 13 (September 1994): 757-758. Muncy, James A. and Vitell, Scott J., Consumer Ethics: An Investigation of the Ethical Beliefs of the Final Consumer. Journal of Business Research 24 (June 1992): 297-311. Norris, Donald G. and Gifford, John B., Retail Store Managers' and Students' Perceptions of Ethical Retail Practices: A Comparative and Longitudinal Analysis (1979-1986). Journal of Business Ethics 7 (July 1988): 515-524. Robideaux, Douglas R., Robin, Donald P., and Reidenbach, R. Eric. Developments in Marketing Science, vol. 12, Jon M. Hawes and John Thanopoulos, eds., Academy of Marketing Science. 1989, 235-238. Rozensher, Susan G. and Fergenson, P. Everett. Business Faculty Perspectives on Ethics: A National Survey. Business Horizons 37 (JuIy-August 1994): 61-67. Schwartz, Joe, Educated Consumers arc Suspicious. American Demographics (March 1992): 14. Sikula, Andrew Sr. and Costa. Adelmiro D., Are Women More Ethical than Men? Journal of Business Ethics 13 (November 1994): 859-871. Vitell, Scott J., Lumpkin, James R., and Rawwas as. Mohammed Y.A.. Consumer

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Ethics: An Investigation of the Ethical Beliefs of Elderiv Consumers. Journal of Business Ethics 10 (May 1991): 365-375. Wilkes, Robert E., Fraudulent Consumer Behavior. Journal of Marketing 42 (October 1978): 67-75.

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