Tech Drivers
Tech Drivers

Why Samsung's recall seems so confusing


Samsung is trying to make it easy to return its recalled phones — but consumers could be forgiven if they don't see it that way.

With multiple rounds of recall, confusing emails from the company and few ways to get face-to-face with a Samsung employee, Note 7 customers have to rely on often haphazard responses from the Korean electronic giant's competitors, carriers and retailers.

Before an official expanded recall was announced last Thursday, CNBC saw the customers turned away from the company's fancy showroom in New York City, told to get a box and shipping label and call Samsung or go online. While many were able to navigate the process, numerous customers at carrier retail locations reported inconsistent upgrade fees, taxes or restocking fees on online forums or social media.

Tweet: @verizon I just walked into vzw store trying to return my Note7 and the rep wanted to charge me a restocking fee. Really? #Verizon #Samsung

Mail carriers also announced their own special guidelines for returning the phone, while Amazon issued special packaging to customers.

An employee, left, assists a customer as he looks at smartphone cases inside a Samsung Partnership retail store in Hong Kong.
Justin Chin | Bloomberg | Getty Images

The process seemed to further aggravate some Samsung customers, many of whom were returning their Note 7 for the second time in a matter of weeks. At Best Buy, a customer told Money Magazine that the "ill-equipped" employees there caused him to lose trust in Samsung.

After carriers had already begun pulling the phone from shelves, Samsung announced an expanded official recall last Thursday, offering $100 bill credits to customers that exchanged for another Samsung phone, and a $25 bill credit for customers that asked for a refund. It also offered thermally insulated boxes so customers could safely return their phones, recalled amid reports of batteries overheating and catching fire.

But the announcement followed a dramatic and confusing few weeks for customers, who had already begun dealing with third parties.

"I'm not saying that third parties are not going to do their best, but if you walk into an AT&T store, you have Samsung devices, Apple devices and other devices, the full lineup," said Andres Mendoza-Pena, a partner in the retail practice of at A.T. Kearney, a global strategy and management consulting firm. "For a mobile operator, assuring that a customer is satisfied with the mobile service is the first objective. Their secondary objective is their satisfaction for the device."

Despite the complaints, all four major U.S. carriers — Verizon, AT&T, T-Mobile and Sprint — told CNBC that customers would be able to exchange their phones without fees. Sprint and T-Mobile quickly responded to online complaints, saying consumers would also be able to keep their upgrade eligibility and be refunded the difference for lower-end phones.

Though Samsung's approach is no different than most phone manufacturers, Samsung phones are more expensive and naturally draw comparisons to the "premium" treatment that Apple's customers get. The mobile manufacturer's recent recall highlights the advantages Apple reaps by investing in branded retail locations.

Whatever works best, that's what they're doing.
David Marcotte
Senior vice president of retail insights at Kantar Retail.

"If I were Samsung, I would want to be on bended knee, in whatever form that took," said Kit Yarrow, consumer psychologist and author of "Decoding the New Consumer Mind." "In some ways, they do have more limited opportunity to do that by virtue of the fact of nonbranded retailers to assist in that process."

The more sophisticated a product is, the more relevant it will be for a manufacturer to manage the relationship with the end consumer, Mendoza-Pena said.

Indeed, 75 percent of consumers shopping for electronics prefer to test the product in person during the shopping process, Mendoza-Pena said. For instance, Xiaomi, once thought to be China's Apple-killer, was upstaged by vendors like Oppo and Vivo offering physical locations.

When Apple first proposed the stores, it was to control an end-to-end experience for customers, writes Steve Jobs' biographer Walter Isaacson. The idea faced criticism, but today, the stores have the highest sale per square foot out of more than 200 retailers, according to eMarketer data.

The success or failure of Samsung's recall, meanwhile, is likely to be comingled with the experiences consumers have in retail locations, Yarrow said.

"If they're having a really positive experience — being offered compensation, feeling seen, heard and taken care of — it could be positive for everybody," Yarrow said. "Even Samsung can recover a little bit of stature by truly taking care of people. But if it is a bad experience, everybody involved takes a hit."

There are plenty of good reasons for Samsung to forgo stores, said David Marcotte, senior vice president of retail insights at Kantar Retail.

"Samsung has experimented with doing stores — their product portfolio doesn't lend itself to a store layout the same way that Apple does," Marcotte said. "Apple has an extremely limited number of products they sell. Samsung has a huge portfolio of home goods and other consumer electronics."

Marcotte said it's an apples-to-oranges comparison between the two companies, because Apple has a strong emotional connection associated with its brand that hasn't been well-replicated by store brands like Microsoft. Plus, said Mendoza-Pena, the basic argument goes that companies should focus on their core competencies, and for a manufacturer like Samsung, that's not retail.

"If you think about the opportunity to leverage and establish a network of stores with a third party, that allows you to have massive reach, without the same level of cost," Mendoza-Pena said.

By vigorously investing in quality packaging, refunds and cooperation with retailers, Samsung is letting retailers run the well-oiled machine they know best, Marcotte added.

"As bad as the situation is, I cant fault [Samsung] for anything they're doing at the moment," Marcotte said. "Whatever works best, that's what they're doing."

— Reporting by CNBC's Courtney Reagan