Product Recall

AAA

DEFINITION of 'Product Recall'

The process of retrieving defective goods from consumers and providing those consumers with compensation. Recalls often occur as a result of safety concerns over a manufacturing defect in a product that may harm its user.

INVESTOPEDIA EXPLAINS 'Product Recall'

While the process behind a recall can vary depending on local laws, there are some general steps that occur. For example, if a pet food manufacturer releases a batch of product that may poison animals, the company will publicly announce the dangers of the food and request that its customers return the product to the firm, or simply discard it. Customers will usually be given a full refund or replacement. A public relations campaign is often created to handle the publicity surrounding the event.

Recalls may negatively affect a company's stock. Concerns grow over the company's capabilities when a dangerous product is released, and customers may turn away from purchasing its goods, leading to a decrease in sales.

RELATED TERMS
  1. Asteroid Event

    An event that is sudden and unexpected and cause a drastic change ...
  2. Acceptable Quality Level - AQL

    A statistical measurement of the maximum number of defective ...
  3. Product Recall Insurance

    Insurance that covers expenses associated with recalling a product ...
  4. Impairment

    1. A reduction in a company's stated capital. 2. The total capital ...
  5. Write-Off

    A reduction in the value of an asset or earnings by the amount ...
  6. Charge-Off

    A term describing an expense on a company's income statement. ...
RELATED FAQS
  1. How significantly does government regulation impact the chemicals sector?

    Federal government regulations have a significant impact on chemicals sector functioning in terms of industry procedure as ... Read Full Answer >>
  2. How will consumer packaged goods companies' stocks react to changes in oil prices?

    The stock prices of consumer packaged goods companies should react favorably to any significant decline in oil prices. Lower ... Read Full Answer >>
  3. Are there significant seasonal patterns in the electronics sector?

    There is strong seasonality in the electronics sector, with sales of nearly all kinds of electronics – computers, digital ... Read Full Answer >>
  4. Who are Family Dollar's (FDO) main competitors?

    North Carolina-based Family Dollar (FDO) is one of the biggest discount retailers in North America. Competitors include companies ... Read Full Answer >>
  5. Who are Target's (TGT) main competitors?

    Target (TGT) is a discount retailer, which means that it generates revenue by offering competitively priced consumer goods. ... Read Full Answer >>
  6. What is the difference between marginal benefit and marginal revenue?

    Marginal benefit measures the consumer's benefit of consuming an additional unit of a good or service, while marginal revenue ... Read Full Answer >>
Related Articles
  1. Retirement

    Consumer Confidence: A Killer Statistic

    The consumer confidence is key to any market economy, so investors need to learn the measures and how to analyze them.
  2. Markets

    Consumer Spending As A Market Indicator

    What people buy and where they shop can provide valuable information about the economy.
  3. Fundamental Analysis

    Impairment Charges: The Good, The Bad And The Ugly

    Impairment charge is a term for writing off worthless goodwill, but you need to know what its potential impact is on EPS.
  4. Options & Futures

    Analyzing Auto Stocks

    Find out what to consider before taking a ride with stocks from this industry.
  5. Savings

    20 Ways To Pay Less At Costco

    There are plenty of little-known Costco shopping hacks that can save you big bucks at the register, and help you avoid the notorious spending hangover.
  6. Stock Analysis

    Costco, Target or Walmart: Which is the Best Bet?

    These three retailers have all been long-term winners. It that likely to continue? If so, which is the best bet?
  7. Economics

    What's Involved in Customer Service?

    Customer service is the part of a business tasked with enhancing customer satisfaction.
  8. Economics

    What is Involved in Inventory Management?

    Inventory management refers to the theories, functions and management skills involved in controlling an inventory.
  9. Stock Analysis

    Is There Any Upside Left in Costco?

    Costco's stock has performed exceptionally well over the past five years, but does it need a breather?
  10. Economics

    What Does Accretive Mean?

    In the business world, accretive most often to refers to additional growth from outside sources.

You May Also Like

Hot Definitions
  1. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  2. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  3. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  4. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  5. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  6. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
Trading Center