Recovering from a BIG mistake: the first time I bought $50,000 of defective refrigerators
Mistakes… I’ve had a few (a ton, a lot, a million). One that always stands out is the time in 2006 I thought for sure I was going to get fired. I bought $50,000 in wine refrigerators for Christmas… with the wrong temperature display.
Way back in 2006
I’d been sourcing OEM appliances for about a year and a half, and I had taken over the lead on the product development and sourcing team for LivingDirect. We hadn’t had any problems yet- in fact, we’d made a ton of money. When you buy something for $200 and sell it for $500- and you move volume- life is pretty good.
We were expanding our product line to wine refrigerators and we found a factory that made some really slick looking models. The wine coolers used thermoelectric cooling, which had a few advantages- really low energy use, very quiet, and there was no expensive, heavy, and bulky compressor.
But the biggest plus was the high-end look with blue LED digital temperature displays. Now, this was back in 2006. These days, you can roll into Costco and grab a good, slick digital control wine refrigerator for cheap. But back then, these were very unique pieces- and we’d be able to make big margin on them.
My big mistake
I arranged for a few samples and we tested them. They passed the quality and appearance tests with flying colors. The temperature displays were in celsius, but that was because the samples came from a production that was originally destined for Europe… right?
I placed the order for 2 containers for sale in the 2006 Christmas season, and the orders went through the normal procedures. Payment, production, inspection, check! During the inspection, the inspector checked the functioning of the LED displays, but did not take a picture, or note the temperature range on the display.
I approved the inspection results and the goods sailed. They arrived in Austin and we happily took a unit out and displayed it in our showroom, unplugged. About a week later, I got a call from one of our customer service peeps.
CSR- “Hey Peter, this customer says their wine cooler only goes up to 24 degrees.”
Me- “Silly customer. That’s well below freezing. It is physically impossible for the thermoelectric cooling unit to get that low.”
CSR- “I dunno. She’s pretty insistent.”
Me- “We’ve got a unit in the showroom. Go plug it in and check the display.”
5 minutes pass
CSR- “Hey Peter, this one doesn’t go above 24 either.”
Me- “Oh shit”
My heart sank when I heard the follow up from the CSR. I immediately jumped up from my seat and checked the unit in the showroom. Sure enough, the temperature display went from 10 to 24.
Which is freezing, if you mean Fahrenheit. Or, is delightful wine storage temperature if you mean Celsius.
The problem is, Americans don’t know, care, or think about Celsius.
I shut the door to my office and looked through all the POs and correspondence with the factory. Sure enough, I had specified the temperature range for the wine refrigerator, but I had not specified that the display show degrees F. At that moment, I knew this was all my fault and I thought that I would be fired for sure. I kept thinking about the cost of the containers- $50,000. At that time, $50k was more than I made in a year!
It took me about an hour to chill the hell out and go into problem solving mode. I had the warehouse grab a few more units to spot check the display and confirm the problem affected both containers- it did. I marched into the CEO’s office and told him about the problem, and told him that I was working on a solution, and took full responsibility for the error.
The CEO was quiet… which also freaked me out. But, the damage was done. There was nothing to do but move forward.
I convened the marketing team, plus the CEO and president of the company into the conference room and we brainstormed. Two hours later, we came out with a plan.
We printed a Celsius conversion table- the creative director made it look tight- like we made it on purpose. Then we changed the marketing and promotion of the wine refrigerator online (our main channel). We called the wine refrigerator, “Euro-style,” and marketed it with the tag line, “Why store your French wine in a Fahrenheit wine cooler?”
And we sold Every. Last. One.
After the marketing change, not a single customer complained. Also, I did not get fired. Instead, I was respected for thinking quickly and solving a big problem (of my own making.)
I reordered the wine refrigerator when we were running low- but this time I specified a display in F! We switched the marketing back to normal once we sold the last one with a Celsius display.
What I learned
You’ve got to specify everything on your POs. Some companies specify down to naming individual components used to build their products. I’ve never gotten this granular- but if you aren’t specific, the factory will interpret the PO as they see it.
Your inspectors must be given explicit instructions about what to check. Our inspectors were testing the LED displays, and taking pictures of the units, but they had not been instructed to take pictures of the display while it was on. I changed that!
Keep your head when problems occur. Remember- you have to operate in reality. It would have been great if I could go back in time and order the correct displays in the first place- but that’s impossible. Instead, I needed to think about how to get out of the current situation.
Did I miss anything?
Let me know in the comments. Whether you are a newbie with unanswered questions, or an old hand, I love all input and feedback.
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