Melting Flashlights, Burning Hands — Target’s Spooky China Recall

Every month, it seems there's another large-scale China consumer products recall. Earlier in the fall, it was Wal-Mart. Now it's my favorite big-box non-warehouse format, Target. The LA Times blog recently reported that "Target has recalled 610,000 Halloween flashlights sold exclusively at its stores after learning that the lights could heat up, melt and burn hands". While this is a fate that I'm sure we'd like to wish on the witches and goblins that haunted our Halloween nightmares as children, it should also be a nightmare for any procurement organization sourcing similar electronic items from China. After all, given that the "recall was prompted by eight reports to Target of flashlights overheating and melting, including one person burning a hand," it's pretty evident to me that we're anything but in the clear when it comes to putting low-cost product safety issues on the back-burner, whether they come from China or any other region.

This case highlights how in the global sourcing game that even in the low-margin retail business, small orders -- I'm estimating around $500-$600K on a total basis at most -- can come back to significantly impact both the bottom and top-line. But the problem is that Target, which like other retailers in the Halloween season was buying a seasonal one-off item, probably failed to monitor quality and work with / develop its suppliers for these seasonal items in the same way that it would with longer-term suppliers. Yet the single recall will end up costing target far more than the unit costs of the items -- or even landed costs for that matter. And it will hurt Target directly in the bull's-eye they fear the most: their brand. After all, it's precisely these types of product shenanigans you expect from off-label, dollar store type of merchandise.

Clearly, you'd think that the extra 50 cents you pay at Target vs. a dollar type of store should offer some type of safety protection from their on-the-ground supplier development resources? Think again. Retailers like Target might have their supply chain in order from a global quality and risk standpoint when it comes to larger merchandising spend areas, but when it comes to trinkets and trash -- a term often used to describe this sort of thing in corporate procurement -- it's clear they've got a long way to go. But as they continue on this journey, perhaps they should step back and ask themselves the question: Is it even worth the risk to stock these sorts of items given the significant costs of recalls, potential litigation and brand damage from even one ghastly Halloween mishap like this? After all, consumers want treats. No one wants to get tricked by a Chinese supplier cutting corners and retailers turning their backs and rolling the dice.

Jason Busch

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