The recall of Samsung’s Galaxy Note 7 smartphones is interesting, not just for the sheer scope of recalling nearly three million phones, but also for the supply chain problems of trying to quickly replace batteries and phones. Perhaps more importantly, it isn’t easy for consumers to return the phones—which may burst into flames—so the impact on both the company’s bottom line and consumer loyalty remain to be seen.

 

Samsung began a massive recall of 2.5 million Note 7 phones in early September, just weeks after they launched, due to lithium-ion batteries exploding while charging. The company said at the time it would immediately stop sourcing its batteries from the problematic supplier, and divert orders to another supplier instead. Now, however, Samsung has permanently halted production and sales of the Note 7, following complaints that its replacement devices were also catching on fire. An expanded U.S. recall was ordered Thursday for all Samsung Galaxy Note 7 smartphones, including replacements.

 

“Consumers should immediately stop using and power down all Galaxy Note 7 devices, including Note 7 devices received as replacements in the previous recall,” the Consumer Product Safety Commission said in a statement.

 

Samsung said in a separate statement from its U.S. headquarters yesterday that it would offer a $100 credit to customers who want to exchange the Note 7 for a different Samsung device.

 

“We appreciate the patience of our consumers, carrier and retail partners for carrying the burden during these challenging times,” said Tim Baxter, president and COO of Samsung Electronics America. “We are committed to doing everything we can to make this right.”

 

Samsung said it was working with the CPSC, carriers and retailers to get customers to return the affected phones. That, however, is exceedingly difficult.

 

CNNMoney reports that FedEx, UPS and the U.S. Postal Service have announced that the phones will not be allowed on their planes and there will be tight restrictions on when their trucks will be allowed to carry the phones. U.S. Department of Transportation guidelines prohibit air shipments for any lithium battery products recalled for safety reasons.

 

Shipping returned phones by ground transportation is also complicated. FedEx Ground “will accept new or used devices, but only from mobile phone retail locations...only in packaging that meets strict regulatory guidelines,” FedEx spokeswoman Rae Lyn Rushing said, CNNMoney reports. The company will not accept any phones from “individual customers or through retail outlets, including drop boxes.”

 

To make sure the returned phones are in secure packages, Samsung is sending thermally-insulated “return kits” to users who contacted the company about shipping back the faulty smartphone. The kit comes with a static shielding bag for the phone, which is then placed into a small box. That package then goes into a slightly bigger box, and ultimately a shipping box. The outermost box is lined with ceramic fiber paper designed to handle and contain extreme heat. The package also comes with safety gloves and assembly instructions.

 

“A device containing a lithium ion battery subject to a recall must be shipped in accordance with government regulations, and these special boxes are required by government regulations,” the company writes in a letter shipped with the kit, CNNMoney explains.

 

Regardless of whether the issue lies with a lithium ion battery or some other component, consumers face an arduous process of returning phones, which likely will further strain loyalty. Furthermore, halting production of the phones just weeks before Black Friday and the holiday shopping season is sure to have an impact on sales as well as stock prices.

 

What are your thoughts on managing a recall of this size? How do you think consumers will respond?