Defective or Disconnected? When Retailers Blame You for the Broken Item You Never Saw

Imagine this: You’re a supplier of countertop kitchen appliances sold in Walmart stores nationwide. One of your hottest items—a digital air fryer with dual cooking zones—has been a top performer in the housewares aisle. Reviews are solid. Sell-through is strong. And then... a deduction notice hits your inbox. Excessive defectives.

According to the retailer, return rates on the air fryer have exceeded 3%. As a result, your next invoice is docked $24,000. You didn’t see it coming. And you certainly didn’t cause it.

So, What Gives?

Here’s what often happens: Items get damaged in transit but are blamed on the manufacturer.

Or worse, customers return opened-but-perfectly-functional items, and retail associates mark them as defective without verifying. Yet you—the supplier—are held financially responsible.

Retailers often use “defective” as a catch-all category for anything returned. It’s easier to deduct than to investigate. But that disconnect between actual product quality and what’s claimed in the system creates an expensive margin gap for suppliers.

And when you don’t challenge it, those deductions become the new norm.

Real-World (Fictionalized) Scenario:

A home electronics brand sells a 50” smart TV to Walmart. During Q4, return rates spike in Texas and Florida. The reason? The outer packaging wasn’t humidity-resistant, and cardboard corners collapsed in transit, leading to minor cosmetic damage. Retailers logged them as defectives, even though the screens worked perfectly.

By the time the supplier traced the issue, they’d lost $110,000 to deductions.

What You Can Do:

• Request return reason codes. Push for more transparency in deduction documentation.

• Segment returns by region and time period. Heat, humidity, and shipping routes may be contributing factors.

• Work with a partner like HRG to recover and protect your revenue.

Bottom Line:

If your return data isn’t telling the whole story, you’re not just losing product. You’re losing trust in your numbers—and profit with it. Let's talk.