Section 27 Returnability of product

February 7th, 2013 Leave a comment Go to comments
WINNERS = Products which can be put right back on the shelf in the same package after having been opened and inspected by a previous purchaser or prospective buyer.

No matter what type of product you are selling, you are bound to have some customers or end users return some to you, or worse yet, to the place from where they purchased it.  Customers return products for all sorts of different reasons.  I have listed a few of them here:

  • The product was defective from the factory.
  • The product was missing something.
  • The product was the wrong color.
  • The package was mis-marked.
  • The product failed to perform as advertised.
  • The product didn’t fit its intended location.
  • The product was the wrong size for the end-user.
  • The product broke immediately or soon thereafter.
  • The customer got “Buyers Remorse”.
  • The customer didn’t like it.
  • The customer’s spouse didn’t like it.
  • The customer received it as a gift and already had one.

The worst possible situation is to have a heavy product, which has a small profit margin, in an expensive display package.  When someone returns such a product, it is likely that the cost of shipping this product back and forth will eat up all profits on a per unit basis.  Not only that, but you can be faced with replacing the package also.

On some products, the packaging is a major part of the cost of goods sold.  In this case, your worst enemy can be the “Looky-Lou” otherwise known as the “Picky Package Mangler”.  Take it from me, I am one!  I will always open a box or package to check out a product before I buy it.  If upon opening I find that the product is free of blemishes and appears to be of good quality, I will purchase that particular product.  However, if I like the product overall but feel that the one I have opened is blemished, I will open every box until I find a good one, even if it means leaving behind several “dead bodies” of display boxes which are unusable.

I am not alone.  I have had many of my own and my client’s products returned because of being ravaged by “Looky-Lous”.  I have also had products returned because of several of the other reasons I listed above.

The bottom line is, if you ship products out you will definitely have a certain percentage of “boomerangs” which will come back to you.  At many companies, the average number is 1/2 of 1%, sometimes a little higher.

The trick is to make your packaging:


If your packaging is revealing, where a prospective buyer can see it, touch it, and feel it, chances are better that they won’t try to take it out of the package.  If your package is not revealing but is easy to open and re-close with out ruining the box, chances are the product can be left on the shelf after someone like me has looked at it.  If your package is durable, chances are it will withstand several “Looky-Lou’s” like me, and the chances are better that it will be sold before it is “inspected to death”.

If your product is an expensive one, it may be inherently valuable enough that you will not be able to simply let stores “write-off” defective units, or give the stores “credit-backs”.  You will have to have the stores return the defective merchandise to you or your authorized repair centers for refurbishing, and or repackaging, and then return them to the stores.  Remember that this is costly to do since you must eat the freight both ways on top of the repair costs. It is a no-win situation because you can’t afford to lose the entire cost of the product by letting the store throw it away, so you must settle for the lesser of two evils and “eat” the cost of packaging and freight.

If you are planning on using outside contract manufacturers or “fulfillment houses” to assemble, package, and ship your products, you had better have a firm written contract with them which clearly states that they will be responsible for all costs of merchandise which they ship to your customers in a defective form.  These costs can be unbelievably high if the manufacturer ships a large quantity of defective goods to one of your customers on the opposite coast.  If the products are heavy or bulky, the shipping costs can be astronomical.  I had this happen to me once, and I did have a contract, which saved my company.  Here are the details of that horror story.   My contract manufacturer had not instructed his night shift in how to properly assemble one of my products, and the night shift assembled over 40 thousand units incorrectly, which caused over half of them to crack.  They shipped the product to one of my best customers on the east coast.  The customer’s incoming inspection department caught the defective shipment and promptly sent the whole shipment back to my contract manufacturer, FREIGHT COLLECT.  Because I had negotiated an “airtight” contract, my contract manufacturer had to:.

  • Pay all the costs to have the product shipped back to Los Angeles.
  • Unpack every individual display box from the 24 box masterpack cartons.
  • Unpack the individual units from their individual display boxes.
  • Inspect every unit to locate the defective units.
  • Disassemble all of the defective units.
  • Pay me for all of the parts they broke.
  • Replace the parts and reassemble the units properly.
  • Repack all of the individual units into their individual display boxes.
  • Replace and pay for the individual display boxes damaged in shipping and unpacking the units.
  • Repack all of the individual display boxes into the 24 unit master pack boxes.
  • Replace and pay for all the masterpack boxes which were damaged in shipment.
  • Pay all the costs to ship the product back to my customer on the east coast.

Since the 24 unit master pack shipping container weighed over 50 lbs each, they cost over $22.00 each to ship, each way.   That means to get them shipped back for repairs and then back to the customer cost the manufacturer $44.00 per case.  At 40,000 units, divided by 24 pieces per case, that amounted to 1,667 cartons, times $44.00 equaled a whopping $73,348.00.  That’s right, SEVENTY THREE THOUSAND THREE HUNDRED AND FORTY EIGHT DOLLARS JUST IN SHIPPING COSTS.  That does not include the parts which had to be replaced, the boxes which had to be replaced, or the labor to unpack, repair and repack the units, which was substantial.  If I had not had a written agreement with the contract manufacturer, I would have had to “eat” all of those expenses myself.  Don’t settle for anything less.  If the contractor will not agree to such a contract, chances are they have little faith in their ability to meet your quality control specifications, and you may be forced to eat their mistakes one day.

I was fortunate in that my customer agreed to take the shipment back, even though it was now past due.  I have seen cases where the store buyer has simply said “they were not up to our quality standards, so take them back and DON”T SHIP US ANY MORE”.  Now you really lose big-time.  Not only do you lose the revenue, and eat all of the shipping and repair costs, but you also have a tarnished reputation with the store buyer, and you must sit on the inventory until you are able to resell it.



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