Excessive Defectives: When Returns Become Retailer Revenue
- The HRG Team
- 1 day ago
- 2 min read
Imagine this: a shopper buys a blender, uses it twice, then decides it doesn’t match their kitchen aesthetic. Back it goes. But instead of chalking it up as a return, the retailer marks it as “defective.”
For the supplier, that single word changes everything. Instead of a simple restocking process, it triggers a deduction. Multiply that by hundreds of returns across multiple distribution centers, and suddenly “excessive defectives” become a steady revenue stream—for the retailer, not you.
The Real Cost of “Excessive Defectives”
Industry studies show that returns cost suppliers up to 8–10% of gross sales. A big chunk of that isn’t true product defects but mislabeled returns. Apparel that doesn’t fit, food that’s past its sell-by date, electronics returned because the customer upgraded—none of those are actual defects. Yet, they’re logged that way, and suppliers eat the cost.
Fictional—but Familiar—Example
Picture a mid-sized toy brand with its top-selling action figure in 2,500 stores. After the holidays, 3% of sales are returned. But 70% of those returns are coded as “defective.” Retail deduction systems light up: claims for excessive defectives pile on, and suddenly the brand loses $350,000 in one quarter.
The toys weren’t defective. Kids just moved on to the next trend.
Why It Matters
Excessive defectives erode margins, damage supplier relationships, and make forecasting unreliable. Retailers get their money back quickly. Suppliers? Left scrambling.
The Fix
This isn’t about fighting every single claim—it’s about spotting patterns and disputing the ones that don’t align. A dedicated deduction recovery team, armed with data and context, can tell the difference between “true defect” and “customer changed their mind.”
Don’t let “defective” be the default answer. Start treating those claims as recoverable margin.
HRG has helped suppliers recover millions from excessive defectives. Let’s make sure those dollars land back in your P&L—not in a retailer’s pocket.
