Advice for Retailers

Retailers and Product Recalls

Is your retail business ready for the next wave of product recalls? The pace of product recalls is accelerating so you need to know how to handle a product recall.

As a retailer, it's important that you address product recalls correctly.

Knowing how to handle a product recall has become more important in recent years as the number of product recalls has grown considerably.

Here are a few statistics that show the upward trend in product recalls.

• The number of product recalls in the United States per year has grown nearly 85% since 1990.
• 467 products were recalled in 2006.
• This year (it's only September, mind you), we've had 409 recalls so we are on track to bust the 2006 record year for product recalls.
• Just in the past three months, we've had 17 lead-related product recalls, according to the U.S. Consumer Product Safety Commission.
• This year, we've seen lead-paint toy recalls, tainted pet food recalls, defective tire recalls, botulism-infected chili recalls, laptop battery recalls and a variety of other product recalls. It's a long and growing list!
• Faulty products cause an estimated 27,000 deaths annually.

Retailers are responsible for faulty products, so they must actively participate in product recall procedures. According to the Consumer Product Safety Act of 1972, manufacturers, distributors, wholesalers, private labelers and retailers are all liable for faulty products.

Many suggest that global outsourcing is driving the increase in product recalls. A drive to lower costs by producing products abroad often leads to corners being cut on safety issues.

In some cases, the manufacturer that is outsourcing is not aware that corners are being cut. Indeed, this year Foreign Tire Sales was surprised with having to recall 450,000 tires at an estimated cost of $90 million.

For retailers who sell recalled products, the message is very straight-forward: you need to be very aware of product recalls and proactively address them.

Here are a few product recall tips to keep in mind:

• Stay On Top of Product Recall News - In theory, manufacturers and distributors will notify retailers when there is a recall. However, the recall notification process can take some time, so it's best to also monitor recalls on your own. You can learn about recent government recalls by going to http://www.recalls.gov. You can also get e-mail notifications on product recalls at http://www.cpsc.gov/cpsclist.aspx.
• Protect Your Customers - Recalls are all about protecting consumers, so your obligation in a recall is to do as much as you can to protect your customers. If you have records of customers who have purchased a recalled product, contact those customers. Don't wait for them to contact you, or else the call might be coming from their lawyer.
• Provide Information - If you have a website, post relevant recall information on the site. You should also have posters and leaflets in your store that provide consumer information on a recall of products that you are currently selling or have sold in the past. Even if a recalled product has never been in your store inventory, let customers know that fact too.
• Read the Fine Print - Are you indemnified by your manufacturers for any liabilities related to product recalls? If you don't know the answer to that question, it's time to get your procurement contracts out and read the fine print. If a manufacturer is not willing to bear all the costs of a product recall, you probably don't want to have their products in your store.
• Double Check What Your Insurance Covers - Ask your insurance agent or insurance broker how they would handle a scenario in which you were sued by somebody who bought a product from you that was recalled. Ask them whether you can make a claim for lost business if a significant portion of your revenues evaporates because of a product recall. Liability insurance is highly variable, so you need to know what is covered and what is explicitly not covered. There are also product recall insurance policies now - ask your insurance agent for more information.
• Take Action Quickly - Take action immediately when you learn of a product recall. Now is not the time to procrastinate. Lives are at risk.

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