Reduce Risks:
Costs
In addition to the loss of sales of non-compliant products, the manufacturers, importers, distributors or retailers affected often also incur considerable costs.
Taking back and destroying the products
For many products, it is not enough to simply withdraw the offending products from the market, but also to destroy them. Depending on the product type, price and quantity, this can result in considerable costs.
The costs for the destruction and disposal of a non-food consumer product can vary greatly, depending on various factors such as the type of product, the materials used, the regional disposal regulations and the method of destruction.
Cost examples of destroying various products
Experts estimate that the destruction of a smartphone costs around €10-20 per product for the disposal of hazardous materials (e.g. batteries), the recycling of metals and plastics and the destruction of data. For a T-shirt, companies incur costs of around €0.5 to €1, for a wooden chair around €30-60, depending on size and condition.
So if a company has to destroy 10,000 products, the costs can quickly amount to between €10,000 and €500,000 in addition to the lost purchase value. In addition, of course, there is the lost purchase value if the company has not agreed any liability claims against the suppliers for lack of product compliance.
Costs for product recalls
A significantly higher cost block is incurred if the market surveillance authorities initiate a product recall for the offending product. According to the Safety Gate, this was the case for 1,012 products in 2023.
According to a study by Allianz, product recalls of electrical goods or toys can result in costs of between €650,000 and €1,000,000, as companies have to try to reach as many people as possible, inform them of the dangers of the product and replace or repair the dangerous products.
Product recalls can have life-threatening effects if the products to be recalled are used as components in other products (e.g. machines) and lead to entire production lines coming to a standstill or if the components can hardly be removed from the other products. In this case, the companies concerned may be faced with claims for damages in the double or triple-digit millions.
Fines
Fines and claims for damages from customers can be a further cost factor. Fines of up to €100,000 can be imposed for violations of the Product Safety Act (ProdSG). Violations of the REACH regulation in Germany can be punished with fines of up to €50,000.
Fines of €100,000 can also be imposed under the Electrical and Electronic Equipment Act (ElektroG) for violations of the registration obligation, the take-back obligation or the labeling obligation. Failure to register, participate in the system or take back packaging can cost up to €200,000 per violation.
Claims for damages from customers
In addition to the loss of sales for non-compliant products, customers may also claim damages. If larger customers have planned a sales campaign with a supplier and the supplier cannot deliver the goods or cannot deliver them at the agreed time, these customers often reserve the right to claim damages for lost profits or necessary corrective measures.
Depending on the product and sales price, this can quickly result in six or even seven-figure costs.
Solution approaches from trinasco
The costs described above can be avoided if companies find out about the various requirements at an early stage, carry out audits and inspections at their suppliers and adequately take product compliance requirements into account in their supplier contracts. We are happy to support you with our training courses, workshops and quality assurance packages.
