A small independent retailer wrote elsewhere recently [edited]:
I sold a pair of men’s drawstring hemp pants made by [redacted] from my web site. I explained that in the event he wanted to return the order, the pants couldn’t be exposed to fragrances or laundered before returning. Well, the first thing he did was wash them. Twice. He says they shrank too much. I and my family have worn many things from [redacted] clothing line so I have a feeling that they were too small to begin with. Now he claims that stores always allow returns of clothing that have been washed. I have never heard of a store allowing that. Has anyone ever heard of, or do any of you take returns of items that have been laundered, barring those cases when something came apart because it was defective?
As further details were provided, it appears the customer actually did buy a size too small but the incident is an important example due to the comments from the other independent small retailers who responded. All but one said that “no stores” permit the return of laundered products for shrinkage. This is false. These store owners are small, they aren’t aware of the practices of larger established retailers so this opinion is a reflection of their policies. They do not know that inordinate shrinkage is a product defect of sufficient merit to justify returning the product because they assume laundered returns amount to their loss rather than charging it back to you. Just because you’ve sold to stores who haven’t attempted to return products for inordinate shrinkage doesn’t mean they can’t or won’t start. This is what I told them:
As retailers, you have a reputation to uphold. If you don’t have the mechanisms by which you accept returns for defective products, consumers won’t do business with you for long. If you can’t get refunds from your manufacturers, you won’t stay in business either so you have to exert your rights. The consumer doesn’t see the manufacturer so easily, they see you. You are the representative of smaller, unknown brands, you are lending them influence. Therefore, you need to be certain they don’t damage your reputation.
The problem with manufacturing and retailing apparel and sewn products is that there are very few books or classes for entrepreneurs on tacit standards and practices. Most people prefer to wing it by hook and crook as they go along. You learn by doing it so as you learn, your policies evolve. Maybe you are limited by the relationships you’ve established with your existing suppliers but I strongly recommend that as you pick up new product lines, you legally contract to standards you may not have known you could enforce before. If they won’t agree, don’t buy from them. You have more power than you realize. Manufacturers are limited because established stores who know their rights aren’t going to buy from them either. If the manufacturer doesn’t evolve to be more professional (meaning better, not bigger), they’re not going to be around very long anyway. The point is, you have rights. You need to make policies to establish your right to return defective products to manufacturers.
More of you manufacturers now realize that retailers act as gatekeepers to keep defective products out of the marketplace. In some cases it’s a matter of liability. Retailers are in the position of enforcement (like it or not and they don’t) because manufacturers can be clueless. There are few barriers to entry; manufacturing isn’t like law or medicine. There’s no exam to determine competencies to bar entry into the market. Retailers needed to evolve to become gate keepers to control their liability and costs. Contrary to popular opinion, it’s not competitors larger than you who have “conspired” to keep you out of the market but your customers, the stores who pay you.
Just as manufacturers have the right to return fabric that shrinks more than was quoted -prior to production, you must test the fabrics (see pg 158 in the Entrepreneur’s Guide) consumers are entitled to the same courtesy; that’s why they choose to frequent given stores and why you want to sell to those stores. This is why many retailers (Penney’s, Sears, Nordstom’s etc) permit returns of products from consumers that have shrunk too much. Still other stores like LLBean and Zappos, permit returns for no reason at all. As such, few consumers hesitate to buy from them. The reason those stores can extend such liberal returns policies to consumers is because their fulfillment policies are very strict. With high vendor standards, they have less product that needs to be returned to the manufacturer.
It is an established practice that fabric must be tested for shrinkage before production. It is very common that shrinkages vary to the extent that different patterns (to allow for shrinkage) must be made for various fabrics even if it’s from the same vendor with the same fabric style number. It is more expensive to make separate patterns for shrink percentages but this is part and parcel of the cost of doing business.
Companies like Nordstrom’s and Penney’s set the shrinkage level to 3% so owing to their leadership and pull in retail, this has become a tacit standard even among retailers who don’t specifically include a shrinkage percentage in their fulfillment agreements. Barring the 3%, it is generally accepted by all comers that 5% is defective. In other words, if your products shrink 3-5% or more, you should expect to get chargebacks, returns and your reputation will be tarnished. Returns have many consequences you likely haven’t thought about. For example, it is standard that your sales reps are docked for commissions owed on the amount of returned product. However, if you attempt to reduce commissions for returns owing to defective product like shrinkage, you’ll need to find some more reps and depending on the amounts owed, could face legal problems. In the interests of fairness, the reason sales reps are docked for returns is because you hire them for their connections, their relationships with other reps (who gossip about stores) and experience. While you can’t hold them 100% responsible, in placing orders from retailers, they are implying a store is credit worthy. If there were no accountability, they’d sell to whomever to collect their percentage.
In summary, I recommend that retailers establish and enforce product quality standards. This is usually done via fulfillment policies because a buyer can’t legally stipulate the conditions of sale although they can negotiate it. I don’t doubt that a small or newish manufacturer will resent this or say “nobody else” is doing it but perspective is everything. If a DE is selling to small retailers who don’t know much, it may not come up at the outset but it will become more prevalent as they grow and start selling to more established stores who will enforce this and other rules of fulfillment.
By the way, do you remember Beth, the DE I wrote about before? She went broke after she got her first big account. Yep, the store returned $10,000 worth of products that shrank too much. The store got too many returns on one item that they pulled her entire line and shipped it back. I tried to tell her. I begged her. I even offered a 50% discount to make a new pattern for the shrinkage of the one affected style. She declined and halfway implied I was trying to create revenue for myself because none of her other doors (all small of course) had ever returned anything. In situations like this, one doesn’t feel vindicated, there is no “I told you so”. Maybe Beth deserved what she got but the collateral damage was lethal. The eight stitchers living on the Indian reservation with 80% unemployment doing her sewing, didn’t deserve it.