What’s the meaning of retail? What impact does the law have on the retail sector?.
Retail refers to retail sale, that is, the sale of products and/ or services in small quantities directly to consumers in commercial establishments. It is associated with marketing because marketing activities are carried out to encourage consumers to make purchases and, therefore, contribute to guaranteeing consumer satisfaction, serving as a link between distributors and consumers.
In turn, the International Council of Shopping Centers (ICSC) defines shopping center as a group of retail and other commercial establishments that is planned, developed, owned, and managed as a single property, typically with on-site parking provided, depending on the center’s size and orientation.
It should be pointed out that some specific factors contribute to the success of retailers and shopping centers in general, such as location, easy access, on-site parking availability, external and internal design of stores, etc., and legal advice is of utmost importance to guarantee business success.
Following are some examples of how different law areas contribute to the development of the retail sector:
i) Real Estate Law: Property purchase and sale agreements are signed either to carry out a retail business and/ or expand a shopping center; however, prior to the signing of these agreements, service agreements must be entered into with designers, construction and/or remodeling agents, as appropriate. Other contracts must be signed with the manager in charge of supervision, and supply agreements must also be signed to guarantee the availability of materials, etc.
ii) Administrative Law and/or Permitting: It involves taking the necessary steps to obtain construction, reconditioning, remodeling, operating, advertising and other permits. If undeveloped land has been bought for the project, then the necessary steps must be taken in order to obtain an urban development certificate.
iii) Corporate Law: A series of steps must be taken, from the incorporation of the company, to the purchase and merger of retail companies, the signing of lease and usufruct agreements, trademark franchise or license agreements, advertising agreements, agreements for the organization of fashion shows, for the assignment of model images, etc.
iv) Civil Procedure Law: If the lessee fails to pay the rent, it can be vacated; however, it’s more convenient to sign a termination clause by mutual agreement or reach an out-of-court settlement agreement for the payment of outstanding obligations.
v) Labor Law: Different employment contracts are available to engage administrative employees, including outsourcing and labor brokering agreements.
vi) Trademark Law: Every product must be identified by a trademark. In Peru, trademarks, which can be either figurative or mixed, are registered at INDECOPI and the term of registration is 10 years. They are registered in keeping with the Nice Classification.
vii) Copyright Law: In Peru, clothing, footwear and/or jewelry can be registered as artistic creations with INDECOPI to prevent unauthorized reproduction by third parties. Shopping centers must enter into agreements with collective management companies because shopping centers play background and other music when they organize events.
viii) Finance Law: In order for a retail business and/or remodeling to grow or obtain funds for the construction, expansion and/or remodeling of stores and/or shopping centers, funding such as bank loans from one or several banks (syndicated loans) must be secured. Shopping centers must comply with money laundering and terrorist financing laws, and eventually appoint a Compliance Officer.
ix) Unfair Competition and Advertising: To encourage shoppers to buy, it is necessary to launch advertising campaigns. In Peru, for instance, the requirements set forth in Legislative Decree No. 1044, Law against Unfair Competition, and Law No. 29571, Consumer Protection and Defense Code, must be fulfilled.
x) Tax Law: Tax planning in the retail business is of utmost importance, including Income Tax and Value Added Tax levied on all transactions, property or municipal tax levied on the transfer of real estate, when buying property.
xi) Environmental Law: Some retailers promote sustainable fashion, that is, they sell gorments made with organic materials, like cotton or wool. As a result, they need to have their products certified and they also need to reduce electric power and water consumption and carbon emissions, for which purpose an environmental impact assessment is required.
xii) Concession and Private Initiative Law: In view that there isn’t enough land available for the construction of shopping centers and/or commercial establishments in general, many retail operators have been recently looking for well-located joverment-owned land, not only in Lima but also in the provinces, which therefore helps promote private investment nationwide.
The above shows the retail sector is regulated by a patchwork of regulations or in many cases, there are not even regulations in place, for which reason unified, specific and appropriate regulations are needed to address to all matters inherent in the retail business and facilitate investment in this sector, as in other sectors of the economy, like fishing, energy, mining, etc. It should be pointed that unified regulations are not meant to constrain the retail sector. On the contrary, the idea is to contribute to its development of the retail sector, as the law is, as we have seen above, of utmost importance to its growth.