Returns policies for defective goods

Let’s be honest. Most people wing their sales policies. They use feedback, usually from buyers to determine which policies to adopt. Or, they use their experiences as a consumer in the marketplace to determine their policies. It’s a problem to graft consumer expectations into wholesale. Designers who use email to pitch buyers with a big song and dance (brand story blah blah blah) are similarly guilty. It’s easy to understand why people do this if being a consumer is their only transactional experience.

Other than the obvious (selective reporting by retailers) buyer feedback can be a problem because its quality can be all over the map. The reality is, when most of you start out, you begin by selling to a range of smaller independent retailers. However, who is to say these buyers know much themselves? How long have they been selling? How much do they know? In the end it can be a situation of the blind leading the blind. Here’s one example I found recently.

We had a customer who ordered $1500 worth of products. About 90 days later, the customer called wanting to return the entire order because their customers returned items due to damages. Our return policy states that all returns must be made within 30 days of order but we completely understood so we agreed to apply a credit to their account for future purchases.

I think this wholesale sales policy should be reconsidered.

As a vendor, you control conditions of sale to which your customers can agree or disagree which is how they determine whether they will do business with you. As it relates to wholesale returns generally, you shouldn’t take anything back (ever) unless it is due to defects. Anything else amounts to a consignment agreement. So, on wholesale non-defective goods, no returns period.

However, the return of defective goods should not be subject to such a limited time frame of 30 days. This is not reasonable for a retailer. It will take time for them to sell the goods and once in the hands of end users, time to determine performance after which the goods may be returned to the retailer who then returns the items back to you. I advise manufacturers to guarantee their products for at least a year. If the return is within 90-120 days, a cash refund (if requested) is not out of line. Larger brick and mortars will take it out of your hide with chargebacks for longer periods than that leaving you with little say in the matter.

About their wanting to return the whole order (it is not known if non-defective goods were included in the returns request), this amounts to a lack of confidence. Wanting to return the balance of the order is typical because they don’t want to become known as purveyors of dubious merchandise. If x percentage of product is returned by consumers, retailers will want to return all of your products they have in inventory. So this actionable response to a crisis of confidence has long standing precedence in the practices of retail relationships.

As they are way over the return time frame, we agreed to provide a courtesy credit to the account for new merchandise and a refund for all defective products (without restocking fee too!).

You should never charge or deduct the cost of a restocking fee on defective goods so the fact that you did not was not a demonstration of good will. Restocking implies you’ll resell defective goods. Perhaps it’s better described as a fee to process the return but again, if the goods were not defective, they would not have been on the hook for it -in short, not their fault. In this case, I suppose it wouldn’t be inordinate to charge restocking on the return of goods not determined to be defective but declining to do so is what could be construed as good will.

Now they threaten to take us to small claim court, do they have any ground for that? Should we really refund the entire amount?

Technically, you control the conditions of sale to which they agreed when they ordered from you. Does it mean an impartial party will agree it is fair? Who can say?

Also, they have began to post negative comments about us in various places. Any suggestions on how to resolve this?

More to the point, it appears the customer has burnt their bridges and does not want to do business with you any longer. They are holding you hostage in the realm of public opinion. Is this a customer you want to keep? Considering their tactics, is this someone you want to represent your products? [As an aside, they use comic sans on their site in horrid blue font. Is this the image in which you want your products represented? People who are unprofessional are unprofessional in many ways.] Only you know whether it is worth the grief of forcing this customer to do business with you. Personally, I’d take the goods back, refund their money and then return the product to my vendor if it was clear they didn’t meet spec. I’d write off the balance and call it a lesson learned. If your vendor won’t take it back, that says all you need to know.

Caveat: I am undecided as to whether one should print a returns policy for defective goods on their sales forms because this could imply defects are common enough to warrant the necessity of a policy. Perhaps it is more appropriate to state that workmanship and construction are 100% guaranteed for X amount of time.

Related:
Establishing wholesale terms and sales policies -there’s lots of links here, an all-in-one post.

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8 comments

  1. Vesta says:

    Over the years, we evolved into a 100% guarantee on workmanship FOREVER. Sounds crazy, but in practice it makes the most sense. (Caveat: you have to be confident about the product you send out the door.) Because look, if you get an email from someone who has been using your product for 5 years, and now the side seam is coming apart and they’re just heartbroken about it because they love it so much and it’s just the right thing and they can’t imagine finding another they like so much and, and . . . send them a new one! And send them a note with tons of good wishes and many thanks for giving you the opportunity to continue to be a part of their life. This is such an opportunity for your brand to solidify that relationship. So we guarantee forever. There’s one brand (of hats? can’t remember) whose tag line is “Put it in your will.” I wish I had thought of that. It doesn’t get better than that.

    As for the store in question: you can’t hold customers hostage. Pay them and be done with it. In a situation like this, you pretty much have to ask them, “How can I make you whole?”, and then follow through. You’ll pick up another store in the area, they’ll do well with your stuff, and the first store will lose customers who are looking for your line. It all plays out in the end.

  2. kristin says:

    Was there any type of quality control before it was even delivered to the buyer/retailer? It does in fact sound like the blind leading the blind because a good buyer or retailer would inspect the goods when they arrive before they sell it to customers. Not when customers return the goods. That store doesn’t sound reputable and would never do business with this store again. Comic Sans type. . yuck. that is a sign right there. .

    thanks for the posting..

  3. Kathleen says:

    Vesta, I’m with you 100%. In spite of all the horror stories you hear, consumers who connect with your product and love it, are reasonable. Most won’t return something after X numbers of good use but call it money well spent. The few who, like you said, are heartbroken because they won’t be able to replace it, will adore you if you can repair or replace it for them. They won’t cease to sing your praises. Manufacturers really have a lot less to lose than they imagine with a lifetime guarantee and it can really help to get a fledgling line going.

    Kristin: In this case it would have been unreasonable to have expected the retailer to go beyond mere inspection of goods received from this vendor to test them outright. It was only when consumers washed the product that flaws appeared. It was incumbent upon the manufacturer to test wash the products they received from their contractor overseas (a vertically integrated push manufacturing deal) before sending orders to their retail buyers.

    Imo, the blame rests solely with the manufacturer. This was their product, their name went on it. It is unfortunate they had a bad result from their contractor but this is part and parcel of the risks involved in these arrangements. Sure things cost less that way but there is a trade off of risk one is exposed to if they haven’t invested in developing relationships with people they can trust. Trust but verify. Point is, they should have conducted batch testing via sampling methods (previously discussed on F-I).

  4. kristin says:

    That is unfortunate. A lesson to really know your manufacturer and who you are dealing with. I’m meeting with 3 manufacturers in the coming weeks so thank you posting this.

  5. Miracle says:

    a good buyer or retailer would inspect the goods when they arrive before they sell it to customers.

    Says who?

    If you show a sample at market or a trade show, that is up to par, then the assumption is that your entire order will reflect that quality. Passing the buck to a retailer’s burden is unreasonable. There isn’t enough time to QC every piece that comes through the door, the QC is done when making the choice to carry the line.

    Especially when it comes to wash testing, no one can afford to lose a piece out of each shipment to test the durability. This is why, many times, you may receive a request for a quality sample.

    It gets especially hairy in the case of retailers without brick and mortar presences, or packaged goods. No one can rip open every package to check quality. Usually QC is done on a percentage of goods and since an order can be relatively small, there is no way to QC a percentage of the goods.

    The buck cannot keep getting passed. Nor can manufacturers shift blame to contractors or retailers to cover themselves.

    Look at what’s going on with the auto industry and Toyota. Think they can go to dealers and say “look, you should have test driven every vehicle before selling it, that’s what a good dealer does.” No people buy into a name they trust, a quality standard they come to rely on, and ultimately that’s who is accountable for the product.

  6. Kathleen says:

    I know there’s continuing dilution in the use of terminology by newcomers to the trade and laymen but I feel it’s important to reduce the confusion. After the introduction, this is on the very first page of my book; it is that essential, the first thing anyone should know.

    “Manufacturer” is a legal designation that encompasses duties, responsibilities and culpability. Iow, the responsibility of the potential of recalls, injuries, law suits, fines etc. The manufacturer is who ever’s label/RN number is on the garment.

    A contractor provides production services. A contractor may produce/manufacture and they may even be a manufacturer of their own stuff they sew their own labels into but if you hire them, they are your contractor. The manufacturer (you) are responsible for any failures on the part of your contractor.

  7. hat lover says:

    —There’s one brand (of hats? can’t remember) whose tag line is “Put it in your will.” I wish I had thought of that. It doesn’t get better than that.—

    Vesta, that hat company is Tilly. They produce fantastic canvas duck hats that indeed last many a year. That slogan is stitiched right into the crown.

  8. Austin says:

    What to do with the returns?
    OK so I had too much fun with the eastman cleaning the shop last week of irregular, proof of concept, unusable, unsalable and just plain mistakes.
    Ohhh and those problematic trimmed to undersized patterns… gone.

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