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A Code of Ethics for Our Industry
For retailers, manufacturers – and the rest
by Mike Hartnett (February 19, 2007)
The toy industry is looking at developing a code of ethics that
would be signed by retailers, manufacturers, importers, toy
designers, and others. Interesting idea.
Why a code of ethics? Because the legal system is a long,
complicated, expensive mess, and often does not cover certain
business disagreements. The industry is filled with charges of
unethical practices by ... the other guy. The latest, most public
example is the Provo/Cricut example. Some retailers claim
Provo acted unethically; Provo denies the charge. This is not a new
phenomenon; arguments like this have plagued the industry since its
At least part of the problem is people have differing ideas of
what is, and isn't, ethical. If the industry as a whole could come
together and agree on a code of ethics, maybe there would be fewer
A code of ethics would not be legally binding, but perhaps a
business – retailer or vendor – would not want to do business
with a company that refused to sign it. Ok, so what should a code of
ethics include? Here are some thoughts, in no particular order.
1. If you sign a manufacturer's minimum advertising policy
document, stick to it.
2. Do not take a manufacturer's product and copy it overseas,
or anywhere else.
3. If you like a product from a small vendor but you doubt
his ability to fill your order in a timely manner, do not encourage
a trusted manufacturer to copy the product. Instead, bring the two
vendors together and have them develop a licensing deal.
4. If cash flow problems are causing you to delay payment to
a vendor, call the vendor, explain your situation, and work out a
payment plan. Do not send checks as full payment if you don't have
enough to cover them. A manufacturer would rather have a smaller,
partial payment than bank fees.
5. Do not copy project sheets, magazine how-to's, designs,
and other copyrighted material without receiving permission from the
owner of the material. Do not allow your overseas vendors to do it,
6. If you will be insisting on entitlements, make them clear
to a vendor before agreeing on the
price of a line.
7. Do not place orders at trade shows if you do not have the
funds, expecting the manufacturer to hold the order for months.
8. Do not accept gifts from current or potential vendors.
1. Fill orders in the order in which you received them.
2. When an independent asks if you are selling, or hoping to
sell, to the chains, don't deny it if it's true. But do not violate
any confidentiality agreement you might have with a chain.
3. Establish a pricing structure and stick to it.
4. Offer the same "entitlements," such as ad
allowances and rebates, to all customers if they meet certain
conditions. Most independents probably could not meet the volume
requirements, but they deserve the opportunity if they so choose to
5. If you are delayed filling a particular order, warn the
retailer as soon as possible. If the shipment, or part of the
shipment, will be substantially late, call the retailer to see if
the order is still wanted.
6. If you're unveiling a prototype at a trade show, make it
clear to interested buyers that it is not yet in production. If you
later decide not to go into production, call retailers who had
placed orders and tell them.
7. If you are considering changing vendors because of price,
give your current vendor the opportunity to respond. If you had
insisted that your original vendor build a large inventory in order
to handle re-orders quickly, and later you do want to change
manufacturers, give the original vendor time to draw down the
8. Do not "shop" other manufacturers' booths at
trade shows or encourage your sales force to find your next product
or designs from other exhibitors. Do not enter other manufacturers'
booths to try to lure designers or other employees away from their
9. Don't use consumer shows to dump excess inventory at
drastically reduced prices. That simply hurts the area retailers.
10. If you have a sales rep force, support them. If a rep has
found a new customer for you, don't split hairs about whether an
order was physically written in a store. (A rep can't be writing
re-orders for a store in Phoenix if he/she is writing new business
in Santa Fe.)
11. If cash flow problems will interfere with prompt payments
to sales reps, inform them as soon as possible.
12. If you exhibit at a trade show, follow the show rules.
For example, do not take buyers off the floor during show hours to
show them new products in a hotel suite.
Manufactures and Retailers.
1. Do not artificially raise the suggested retail price of a
product so that the retailer can offer phony discounts to consumers.
(Note: Agree with the elements of the code? Disagree? Have
any suggestions about what should be changed, deleted, or added?
Email your thoughts, off the record, to CLN at email@example.com.
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