June 1, 2007, 12:00 AM

Ethics 101

(Page 2 of 3)

“That’s really walking a fine line,” he says. “Retailers need to be sure they are getting it from the manufacturer themselves, not from another retailer who looks like they got it from the manufacturer.”

Good as gold

Product images shot by online jeweler Goldspeed.com regularly show up on competing sites, which the company can prove with a digital watermark on the images it owns. When it finds its images on another retail site, it contacts that retailer. “We say, ‘We know you have the image. We don’t want to cause you any undue expense. Just remove it,’” CEO Neil Kugelman says. While that generally works, Kugelman says some instances have required Goldspeed’s attorneys to contact the other retailer to reinforce the message.

Kugelman’s position is that independent of laws that constrain such practices, the ethical compass to guide retailer behavior toward other merchants as well as toward its customers already is crystal clear. “We treat our customers the same way we would want to be treated when we shop elsewhere, and we treat other merchants the same way we would want other merchants to treat us,” he says. “We would never lift images-we know what we spend on photography here. We know what we spend on writing copy.”

Another area in which Goldspeed has felt the bite of unethical practices by online competition is in the area of pricing. A competing online jeweler will represent a piece of jewelry on its site as larger or heavier than it actually is, and price it based on the lower actual materials cost. The net effect is it appears to be offering the “same” merchandise as Goldspeed but at a drastically lower price.

That becomes an issue when a shopper asks for Goldspeed’s 110% price match on items sold on Goldpeed.com that a consumer finds elsewhere for less. Goldspeed honors the match if a lowerpriced item is truly identical to its own merchandise, but it can also easily determine when that is not the case. Unlike categories such as consumer electronics, there is a certain value to the raw material of stones and precious metals in the jewelry Goldspeed sells, based on weight and indexed commodity prices.

“If we are selling a gold chain for $250, for example, you can take the chain and melt it down, and there is a certain amount of raw material there. You can’t do that with an iPod,” Kugelman says.

Kugelman says other sites often display product images that don’t represent what they actually send to customers. The difference may be in products’ carat or gram weights. “We point out to the customer this is the weight of the item, and this is the price of gold today-do the math,” he says.

Guilt by association

One retailer’s use of another’s content is a clearcut violation of ethical behavior-not to mention copyright law. But what about someone using a retailer’s digital assets to sell on the retailer’s behalf? Affiliates do that every day. “There’s a whole different kind of selling going on today in the affiliate merchandising model, where a retailer sends the affiliate content they need to better merchandise online on the retailer’s behalf to get the revenue share,” Bateman says.

Today, affiliates use selected retailer content with the retailer’s active participation, within the bounds of ethical practice. But an even newer online merchandising model is emerging in the area of Web 2.0 that puts consumers more in control of content. At social shopping sites such as ThisNext.com and Stylehive.com, shoppers swap opinions and information about products, including images and content such as product descriptions and images from retailer sites.

The sites enable users to plug a web page address into the interface; they’ll then fetch digital assets such as photos or descriptions from that retailer site for posting and commentary, Bateman explains. “These are people buzzing on your behalf, so you want them to use your assets,” she says. “They are not always going to say good things about you, but because these sites are oriented toward the cool and the new and the best, chances are good it will be good for you and generate traffic. So you get into this gray area. If you wanted to nail these guys, you could, but they are doing you a favor.”

Consumergenerated content also raises ethical questions for retailers around customer reviews, their authenticity and whether negative reviews are posted along with positive.

“We are finding the ability to post consumer references online is becoming very valuable. If a retailer does not have sufficient references, or good references, a natural human inclination is to say you’ll write it yourself or have a friend write it,” contends Paul Rand, director of communications at the Word of Mouth Marketing Association and CEO of Zocalo Group, a marketing services company dedicated to word of mouth marketing. In 2005 the association published the industry’s first code of ethics relating specifically to wordofmouth marketing activity.

Retailers such as J.C. Whitney and Petco.com report achieving positive results by hosting online customer reviews including some that criticize products, with those negative reviews helping establish the credibility of the whole review program. But when talking about launching a customer review program initially with a retailer client, it’s not unusual for a retailer to fear negative reviews, or even ask if reviews can be edited or created internally. Best practice answers no to both questions, says Fry’s Lechtner.

Negative returns

“Once a retailer understands how reviews work, and that having some negative reviews is equally as helpful to their business as the positive ones, they are less anxious to start seeding positive reviews, about having phantom reviewers or doing other things to get a lot of positive comments,” he says. And beyond ethical considerations, there are consequences for such engineering of reviews, he adds: Consumers usually can see through it, and they’ll spread the word.

The online landscape changes quickly. Policing it is a big job. When the rules governing new opportunities online aren’t clear and enforcement isn’t around the corner, having a considered position on ethics in place, and spreading it throughout the organization, helps protect a retailer’s carefully guarded reputation.

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