Analysis: product recalls – the wider impact
Following one of the largest recalls in the industry’s history, Mobile looks at how retailers, distributors, accessories manufacturers, device manufacturers and dealers have responded
With heightened in-built security applications and business-friendly features such as the S-pen, many dealers expected the Samsung Note7 to be a key product. Prior to release, A1 Comms’ MD Steve Fraser told Mobile: ‘We expect it to be one of our top sellers for the rest of 2016 and beyond.’ This was echoed by Samsung’s director of B2B Phil Lander, who told Mobile: ‘Our channel partners are very, very keen for us to launch this product.’
With the Note5 absent in the UK, for many B2B dealers the Note7 was an opportunity to align the launch with the end of the Note5’s lifecycle, incentivising businesses with a reason to upgrade. With the demise of Microso
ft and Blackberry’s devices, a shortage of business-focused devices could see companies happy to extend the lifecycle of their existing handsets. Not only does this reduce income from handsets sold, it also deprives dealers of the client conversations that are key in upselling additional services.
Mobile spoke to One Connectivity’s MD Paul Stevenson regarding how recalls can affect a unified comms dealer. He explained, ‘Product recalls do affect customer relationships due to customers losing confidence in the manufacturer. There is also a financial implication in replacing the product, even if this is just in the short term as most manufacturers do eventually cover the costs.
On how the most recent product recall impacted One Connectivity, Stevenson said, ‘Luckily we advised customers early on about the possibilities of a recall to limit any future problems, customers followed our advice and choose a different handset.’
He also had this advice for what proactive steps a business mobile provider can take, ‘I feel B2B mobile providers must offer a wide variety of handsets and be up to speed with any current handset issues. They must be able to offer a replacement handset that has the same features and be able to offer it quickly. The most important aspect is the customer is not without a device.’
When asked about the effects of product recalls, retail staff surveyed by Mobile had mixed views, with one EE staff member stating: ‘It doesn’t have to be negative, it’s based on the rapport you have with the customer, but It does affect the brand – we’re responsible in the eyes of the consumer for ensuring the quality of what we sell.’ Conversely, another from Carphone Warehouse told us: ‘I think consumers know to attribute fault with whoever makes the product, not at the point of sale. When a customer comes in because of a product recall it’s an opportunity to build trust by fixing a problem for them.’
This is the group that bears the brunt of the cost and reputational damage – Samsung’s Note7 recall reduced the company’s mobile profits, dropping 96% in Q3 2016 compared with the same period last year. However, mobile industry product recall expert and MD of RQA group Vince Shiers explained to Mobile that if a manufacturer is quick to act on sound market intelligence and product safety, the fallout should be limited to the short term, ‘Following recall action, a manufacturer that has acted responsibly is likely to have mitigated the negative impact on its reputation and should recover strongly; although this may take time. Reputational recovery may be accelerated by offering promotions and sales offers to retailers and other partners.’
Logistically, a recall in the mobile industry has several unique challenges and advantages compared with other industries. With many of the recalls being related to battery safety issues, device recalls can become expensive and time intensive, from sending out kits to allow untrained staff to store and package potentially hazardous materials, to negotiating with transport providers for the licences and access needed. The European Commission also requires both the manufacturer and the distributors involved in a recall to submit detailed risk assessments, and they can be criminally prosecuted under health and safety law for breaches. However, Shiers also explains that the traceability due to the mobile industry’s more detailed customer history can speed up the process ‘Product recalls in the mobile phone sector benefit from increased levels of traceability. Often the retailer and service provider are able to identify the contact details of a significant proportion of end customers; at least for handsets, but often also for accessories sold with handsets.’
Whether directly or indirectly related to their products, recalls nearly always negatively affect an accessory manufacturer’s finances. RQA’s MD says: ‘sales in accessories that are directly linked to a recalled phone will be impacted by a drop in sales of that phone, even though the accessory itself is unaffected.’
Incipio’s Griffin EMEA MD Neil Edwards, however, demonstrated that accessories manufacturers can take steps to reduce the impact, telling Mobile, ‘We didn’t range too much Note7 in the UK but in the US they did. You could either leave the pegs there with the cases that aren’t selling or you can be proactive like Incipio is and speak to those customers and say ‘we’ll take them back, but let’s keep the pegs,’ then deliver alternative products fitting with their audience.’