As recalls continue, Mattel says consumer anxiety abated
By Consumers Union on Saturday, October 20th, 2007
The company based its hopes on tracking polls.
“Over all it looks like from a consumer standpoint, I think anxiety over the recalls is largely behind us,” Mr. Eckert said in a conference call with analysts. Mattel since Aug. 1 has undertaken three large-scale recalls, affecting some 20 million toys and stemming from lead-paint risks and potentially harmful magnetic parts. Mr. Eckert said that recent consumer tracking studies indicated that declining perceptions of the toy manufacturer “clearly have bottomed out” even if they had not “returned to pre-recall levels.”
While tracking polls may indicate that consumer anxiety is abating, product return rates may indicate that consumers are actually paying more attention to recalls than normal and doing something about it–perhaps a more accurate measure of anxiety than the latest tracking poll.
Mattel’s third-quarter results reflect an increase in its reserves for recall-related expenses as product-return rates are tracking higher than originally expected.
Most recalls see a very, very low response rate from buyers. Either people never hear about the recall, or they have trouble figuring out which products must be returned or tossed. This year, Mattel reports that more consumers are indeed returning products.
While Mattel’s profits may be slightly depressed by its largescale recalls and customer caution, it reports gross profits of a remarkable 40 percent against 2.2 billion in sales. That translates into hundreds of millions of dollars in profit this year alone. Some of that profit could be invested in a long term committment to more stringent safety systems and more independent testing by external labs. A serious investment in safety by the entire industry, coupled with enforcement by oversight agencies, will start to give buyers real comfort.