Your Experience
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Products returned under warranty eat up your expected profit.

Depending on your sales channels, you must consider the quantity of products that may be returned; then figure the cost to get the products back on the market.


Returned products

Most retail stores allow the customers 2 – 4 weeks to return their purchased products with little or no restrictions. Unfortunately, you might be the one paying for this policy.

The quantity of returned products depends on the product type and more important, the quality. When it comes to returns, there may be a difference between off-line stores and on-line stores. Off-line stores, mostly rewrap the products and return them to the store shelves with a note that they have been opened. Some on-line stores may do the same, but the difference is that the off-line customers can see the product is in an opened box and therefore knows the condition of the product; whereas the on-line customers expects to get ONLY new products. This creates a dilemma for the on-line stores for the reason that some of them will only sell open boxes through their auctions OR they will send them back to you. At the same time, FEWER customers return products they have bought on-line, compared to purchases off-line, which is to be expected to equal out in the coming years.

There are many reasons why customers return the products, quality is one of the problems, and another is information, or the lack thereof. If the customers do not understand your product, you increase the number of returned products. You can reduce the amount of those returns by educating the sales people, creating good manuals and having a good customer service hot line.

You should ask the retailers you are dealing with, what you should expect to be returned under the “Warranty period”, although they might not keep track of this information.

How to minimize the cost of returned products

There are companies that specialize in repackaging your returned products, which is an option if you want to get the products back in retail. Another alternative is that you can sell these products as refurbished, but then they are expected to cost a lot less.

Retail is dependent on extended warranties/insurance

Often with consumer electronics and computer products, retail will get a big part of their profit from extended product warranties and/or insurances. In most cases, retail is not interested in a manufacturer giving an increased warranty.

Retail normally has their own agreements with specific insurance companies for the extended warranties.

Jens Welling


The author of this article Jens Welling has worked with retail purchase, retail sales and retail marketing over the last 15+ years. Jens Welling has written a number of articles as a good source for any new and established company who want success with retail sales. Below are short descriptions and links to other articles.

Why You Have To Do Your Homework
Selling through retail is one of the toughest sales channels there is. Reactions come instantly. There is no mercy for mistakes in retail sales. One word covers what you need: Preparation. ...Read more

Choosing Sales And Distribution Channels
Make the right choices from the very beginning. Group the sales channels and start with the companies that fit your size and that do not compete head-on with each other. Use the distribution channels actively to get contacts inside the sales channels....Read more

Category Management
Learn to understand and use Category Management to your advantage and earn money....Read more

Unique Selling Points (USP)
Take the time to find out exactly WHOM your consumers are. You need to find your Unique Selling Points (USP). Once you get to know them, you'll know what to say to them!...Read more

Price Strategy
Right from the beginning, you have to be aware that On-line stores will “dump” your prices if you are not in control. Base your price strategy on your long-term goals: Where you want to sell the most products....Read more

What The Buyer Wants To Know
The buyer does NOT want a lot of information. He/she is living in a very high-paced environment and only wants your information in brief bullet points. Follow some simple rules and you will give the buyer what he needs....Read more

Exit Strategy
You must prepare your business for the anticipation risk of large quantities of products to be returned. You need an exit strategy. The returned products can be used to create new sales channels and partnerships, turning this somewhat hopeless situation into a profitable one....Read more

Price Setting
Consumers have psychologically priced a product with a certain amount that they are willing to pay (price point). If you exceed their psychological value, you risk failing in retail....Read more

Negotiation Tactics
It is obvious to focus on price as a sales factor. However, help yourself by prepare for negotiation tactics by highlighting the other Unique Selling Points (USP) - and at a minimum explain the price per performance compared to competitors....Read more

Rejection From Buyer
The buyer can reject you for several reasons. You must talk to the buyer to find out exactly WHY you got rejected.....Read more

Marketing Strategy
Selling to a retail chain often means you have to advertise in their catalogues, newspaper ads, etc.
This alone does not create a brand; you must also supplement the retail advertising with your own marketing strategy....Read more

Education Management
Your energy must focus on the stores (retail training). Face-to-face education is the most effective but also the most time-consuming and expensive....Read more

What retail warranties are you ready for? Depending on your sales channels, you must consider the quantity of products that may be returned...Read more

Building A Brand
You must raise the consumers' awareness and perceived value of your product through brand development.
Once you do this, consumers can and will identify your product as a brand....Read more

A high tech vendor will eventually have late delivery of products regardless of penalties. So what should a vendor do when the logistics fail?...Read more

Keeping Your Store Sales Alive
Keeping your retail store sales alive is a never-ending process....Read more

Product Development
One of the advantages to having a relationship with the sales channels is that you can discuss future product development....Read more