Company quality standards blindsided by e-commerce behaviour

When defective products are returned by a dissatisfied consumer, there are three immediate effects:

  1. The retailer makes an expensive chargeback to the supplier.
  2. The brand’s reputation takes a hit.
  3. The returned good must now be reworked and re-supplied, or else disposed of.

This combination adds up to a significant cost for a company, especially where hundreds or even thousands of defective products are returned.

People working on a factory production line


AQL (Acceptable Quality Limit) determines the threshold for defects in product manufacturing, with the margin of acceptability varying between low priced goods and premium brands.

On average, lower priced brands set an AQL of around 2.5% for major defects and 4.0% for minor ones. The ISO Consumer Risk Index says that up to 10% of those orders will contain 17.5% of units with defects. Quality brands, with a tighter AQL of 1.0% to 1.5%, can still expect to have a fairly high 9.5% of defective units.


Although this has been the acceptable ‘norm’ for decades, e-commerce adds a new dimension to the numbers above.

When a customer receives a defective item at their home, they are presented with the hassle of having to make a return. Consumer research has shown that most of the time when this occurs, the customer doesn’t bother to order a replacement. However, if they do, and they receive a faulty good a second time, it’s usually a permanent goodbye to that brand.

Additionally, research has confirmed that for every complaint received, another 25 customers will not bother to complain, which can mask significant long-term negative sentiment about a brand.


The solution to reducing the cost of returns and preserving a brand’s reputation is to revisit those AQLs. Using Tightened Level III sampling levels (instead of the industry standard Normal Level II) will increase pre-shipment inspections by 50%.

In addition, a Factory Capability Audit will determine true proficiency and highlight any areas for improvement. This often helps to persuade factory owners to up their game and no longer turn a blind eye to passing along defects in the production chain.

BWES Compliance and Consulting can help companies of all kinds to reduce product defects and their resulting costs, with dedicated expert resources located in Australia, Hong Kong and China.

This communication (including any attachment) has been prepared by BWES and is based on the available information at the time of publication and is believed to be true and accurate. The information contained in this communication should be used as a guide only and may cease to apply if applicable regulation or the product’s design or application is altered. BWES does not take responsibility for any Injury, Loss for damage suffered by any party’s interpretation or decisions made by any party on the information provided in this communication.