The Importance of Consumer Electronics Safety the TÜV SÜD Safety Gauge Study

The importance of consumer electronics safety The TÜV SÜD Safety Gauge study

White paper

Abstract

Consumers are increasingly concerned about the safety of electronics devices they purchase. This TÜV SÜD white paper presents the findings of TÜV SÜD’s Safety Gauge study on consumers’ attitudes and experiences regarding the safety of consumer electronic devices, and offers guidance for device manufacturers to better meet consumer product safety expectations.

TÜV SÜD Contents

INTRODUCTION 3

SAFETY GAUGE STUDY BACKGROUND 3

KEY FINDINGS ON VIEWS ON THE SAFETY OF CONSUMER ELECTRONICS 4

THE BUSINESS COST OF PRODUCT SAFETY 8

WHAT MANUFACTURERS CAN DO TO MEET CONSUMERS’ PRODUCT SAFETY EXPECTATIONS 10

About the TÜV SÜD expert

Kapil Bansal Global Head of Consumer Products & Retail, TÜV SÜD Kapil became Global Head of Consumer Products & Retail Services in September 2010 where his key responsibilities are management and growth of TÜV SÜD worldwide operations for the Consumer Products & Retail business and to provide strategic direction, manage P&L and build global resources to successfully run the business. “Consumer Products & Retail” provides product testing, inspection, certification and social compliance auditing services to international retailers, brands and their suppliers for product categories like Softlines (apparel and footwear), Hardlines (furniture, houseware, sporting goods etc), Electricals & Electronics and Toys & Children Products. Under his leadership, the business has seen rapid sustainable growth, increased global representation, and improved efficiency along with a vision and commitment to continue strengthening the business and resources worldwide.

With seventeen years of global experience in areas of general management, sales, sourcing and operations, Kapil began his career with TÜV SÜD in December 2007 as Head of Asia Pacific for Softlines business. He was soon entrusted with global responsibility of the Softlines business in June 2008.

Prior to TÜV SÜD, Kapil worked with Kufner Textil in Indonesia and India as Country Manager and Global Sourcing Manager. Kapil started his career in India with a leather footwear and manufacturing company where he was responsible for business development for the European and American markets.

Leading a multi-cultural and geographically dispersed team has given him an opportunity to gain in-depth business experience in Americas, Asia Pacific and Europe. His key areas of interest and strength are setting up new business units as well as the profitable expansion of existing ones.

2 The importance of consumer electronics safety | TÜV SÜD Introduction

From personal computers and smart manufacturer. But unsafe products have been evaluated for safety by an phones, to television sets and audio can also lead to consumer injuries independent third-party? equipment, and even to state-of-the- and even death, thereby exposing art smart home appliances, consumer manufacturers to potential legal The TÜV SÜD Safety Gauge is the electronics are an essential, perhaps consequences. And, the cost of world’s first independent study to even indispensable, element in product recalls can have a significant evaluate consumer and business everyday life. Continued technical impact on a company’s profitability. attitudes and experiences regarding innovation and increasingly tech- product safety practices in the savvy consumers are key factors in So what do consumers think about the consumer electronics sector. The the continued growth in the demand safety of consumer electronics? How results of this landmark study reveal for consumer electronics, and in the does the origin of consumer electronic the increasing importance of product strong future economic outlook for devices influence consumers’ beliefs safety to consumers around the manufacturers of consumer electronic about whether a particular device world, as well as their views about devices. is safe to use? What is the impact of manufacturers’ efforts to improve product safety recalls on consumer product safety. This white paper But market prospects for consumer buying habits? How do manufacturers summarises the results of the electronics manufacturers can of consumer electronics measure up TÜV SÜD Safety Gauge study, and easily be derailed or undone in the minds of consumers when it discusses the implications of the altogether when unsafe products comes to the safety of their products? study’s findings for manufacturers of reach the market. At the very least, And, most important, are consumers consumer electronic devices. reports of unsafe products typically willing to pay a higher price for result in negative publicity for the consumer electronic devices that

Safety gauge study background

The TÜV SÜD Safety Gauge study Evaluating the impact of actions by Product (GDP). Data was collected was conducted in Q2 2012 by an industry and government to through online surveys as well as independent market research firm to improve product safety levels. through consumer and business develop a better understanding of the Measuring safety and traceability panel discussions. More than 5000 state of product safety in selected issues in global supply chains. consumers and 500 management- global industries, including children’s Assessing the role of third- level employees in manufacturing, toys, food and consumer electronics. party certification in food product distribution and retail companies Specific objectives of the Safety acceptance by consumers. contributed data to the Safety Gauge Gauge study included: study, with nearly 4500 consumers Study research was conducted and 231 management-level employees Understanding the general among consumers and business responding to surveys regarding the importance of product safety to professionals in top-tier cities safety of consumer electronics. consumers and producers. in the U.S., the United Kingdom, Uncovering perceptions regarding China, India and Japan. These five the level of product safety in markets represent almost half specific industries. (48%) of worldwide Gross Domestic

TÜV SÜD | The importance of consumer electronics safety 3 Key findings on views on the safety of consumer electronics

As with other industries surveyed in the TÜV SÜD Safety Gauge study, concern among consumers regarding the safety of consumer electronic devices is increasing. When it comes to purchasing consumer products, more than 3 out of 4 (77%) of consumer study participants say that product safety is either very important or quite important to them, up from 2 out of 3 (66%) of consumers in 2007. Further, product safety is likely to increase in importance, as more than 4 out of 5 (82%) consumer study participants predict that product safety will be very important or quite important to them by 2017.

CONSUMER PERCEPTION OF THE IMPORTANCE OF SAFETY WHEN BUYING CONSUMER ELECTRONICS Percentage of consumer respondents stating product safety is important 82% 77% 66% Very important 26% Quite important 33% 33%

56% 44% 33%

2007 Now 2017

Source: TÜV SÜD Safety Gauge 2012

Detailed results from the Safety Gauge study on the safety of consumer electronics are addressed in the following sections. The state of consumer electronics safety

The increased importance of product in the product. An additional 18% of more experiences per year, and 11% safety to purchasers of consumer participants report having suffered reporting 3 or more experiences electronics may be at least partially an injury as a result of a product’s within a single year. attributable to consumers’ own design, while 16% say that a product experiences with unsafe products. Six overheated or caught fire. Reports of consumer experiences out of 10 consumer study participants with unsafe electronic devices appear report having an experience with an The average frequency of to align with data from manufacturers unsafe consumer electronic device experiencing an unsafe consumer of consumer electronics. According to within the past 5 years. 26% report electronic device among consumer TÜV SÜD Safety Gauge management experiencing a cut from a sharp study participants was slightly more study participants, manufacturers edge of a product, with an additional than once a year. At least 1 out of 3 recalled consumer electronic devices 21% reporting an allergic reaction to (34%) of participants report having an average of 2.6 times per year substance in the product that was at least one experience with an during the past 5 years. However, 40% not disclosed on the product label unsafe electronic device during the of management study participants or otherwise not known to be used past year, with 19% reporting 2 or report that their companies recalled

4 The importance of consumer electronics safety | TÜV SÜD unsafe electronic devices more than 9 more than 20 times during the indicate that their companies did times over the preceding 5 years, with previous 5 years. Only 26% of not recall any consumer electronic 21% having recalled unsafe products management study participants devices during the prior 5 years. Perceptions of the safety of consumer electronic devices

Consumer perceptions regarding An electronic device’s country of those purchased through other retail the safety of consumer electronics manufacture is another important channels. are based on a number of factors, factor in consumer perceptions of including the type of electronic product safety. Japan was ranked as In addition to the above factors, device, the country from which an the safest country for manufactured familiarity with specific brands of electronic device originates, and or exported consumer electronics by consumer electronics also influences the retail channel through which an 53% of consumer study participants. consumer perceptions regarding a electronic device reaches consumers. Countries with the lowest consumer product’s safety profile. Consumer rankings regard the safety of study participants consistently report Among the various types of consumer exported or manufactured consumer that they expect manufacturers of electronic product groups, home electronics were generally located in their trusted consumer electronics appliance topped the list of consumer Asia and Southeast Asia. brands to routinely conduct: electronics of greatest safety 1. Batch testing of products for safety concern for 52% of consumer study Consumer study participants (67%). participants. Electrical extension also expressed a preference for 2. Pre-shipment inspections (56%). cords ranked highest in safety purchasing electronic devices through 3. Product certification testing (53%). concerns for 49% of participants, online retailers, with nearly 4 out while mobile phones ranked highest of 5 (78%) of participants reporting Manufacturers of trusted consumer for 43% of participants. Computers, that they had purchased consumer electronics are also expected to laptops and other information electronics online. However, for 57% conduct supplier audits (51%), and technology products ranked of participants, concerns regarding to maintain certified management highest in safety concern for 37% of product safety were much greater systems to assure quality and safety participants, and televisions ranked or somewhat greater for consumer (48%). highest for 30%. electronics purchased online than for

TÜV SÜD | The importance of consumer electronics safety 5 Electronic device safety and purchasing criteria

The TÜV SÜD Safety Gauge study For most consumers, the presence certification mark of a recognised also measured the criteria of greatest of product safety labels is a strong testing laboratory, or those signifying importance to consumers in the indication of the safety of consumer compliance with product safety evaluation of the electronic devices electronics. Fully 88% of consumer requirements of the European Union they purchase. Price was the most study participants say that they would (the CE mark or “RoHS-Compliant”) important or second most important be much more or somewhat more or the U.S. Consumer Product criteria in purchasing specific likely to purchase electronic devices Safety Improvement Act (CPSIA). consumer electronics for more that clearly state on their packaging Even for consumer electronics than half (58%) of consumer study that the product has met or exceeded brands with which consumers are participants, followed by product applicable product safety standards. familiar, evidence of product safety performance (48%), functionality Only 8% of participants say that the certification has at least some (36%) and product safety (20%). presence of such information would influence in the preference of one Product safety ranked ahead of other make no difference in their purchasing product over another for 80% of important purchasing criteria, such decision. consumer study participants. as energy efficiency (13%), brand (7%) and country of origin (3%), Among consumer study participants, as well as whether an electronic at least 8 out of 10 consumers are device is considered environmentally aware of at least one type of product sustainable (5%). safety label or mark, such as a

CONSUMER AWARENESS OF CONSUMER ELECTRONICS SAFETY LABELS

Aware 9% Aware but cannot recall any specific label 10% Not aware

81%

Source: TÜV SÜD Safety Gauge 2012

Importantly, consumers are willing verified by a credible, independent be willing to pay a premium of 30% to pay a premium price for consumer third-party as exceeding applicable or more for verified safe consumer electronics whose safety has been government standards would electronics, while only 17% would be independently verified. Among command an average 15.2% price unwilling to pay any premium. consumer study participants, premium over similar but unverified electronic devices that have been products. 14% of participants would

6 The importance of consumer electronics safety | TÜV SÜD PREMIUM CONSUMERS ARE WILLING TO PAY FOR SAFE CONSUMER ELECTRONICS Mean = 15.2%

41%

20% 17% 14% 8%

30%+ 10-29% 1-9% None Don’t know

Premium over average selling price

Source: TÜV SÜD Safety Gauge 2012 The role of government in assuring product safety

Consumers generally expect the safety of consumer electronics. to ensure the safety of consumer governments and regulatory Only 12% of study participants electronics sold in the market. Fully authorities to take responsibility for identified manufacturers of consumer 20% of participants believe that the safety of consumer electronics. electronics as the entity primarily government does little or nothing to 44% percent of consumer study responsible for the safety of ensure product safety when it comes participants assert that government electronic devices. to consumer electronics. And only authorities should take the lead in 16% of consumer study participants ensuring the safety of consumer However, only slightly more than half believe that penalties imposed on electronics in their country, while (53%) of consumer study participants companies that fail to meet product 20% believe that consumer groups believe that governments are safety standards are strict enough. should be primarily responsible for definitely or mostly doing enough The importance of third-party certification

Finally, consumers study respondents and their purchasing decisions. 90% consumer study respondents say that are clear about the importance of of respondents report that third-party third-party certification makes them third-party testing and certification certification is either very important feel better about buying a specific of consumer electronics in their or quite important for any electronic product, or at least provides some assessment of safe electronic devices device sold in the market. And 83% of reassurance of safety.

TÜV SÜD | The importance of consumer electronics safety 7 The business cost of product safety

When it comes to the perspective PERCENTAGE OF PRODUCTION COSTS SPENT ON PRODUCT SAFETY of manufacturers of consumer MEASURES electronics, data from the TÜV SÜD Mean = 14.6% Safety Gauge study demonstrates that significant improvements have been made to product safety practices over the last five years in the consumer electronics industry. 37% 37% A remarkable 85% of management 26% study participants report that their companies meet or exceed all applicable government product safety 1-10% 11-20% 21-30% requirements today, compared with only 70% five years ago. And nearly Source: TÜV SÜD Safety Gauge 2012 half (45%) say that their companies significantly exceed minimum product (61%) and product certification by measures, with 26% of respondents safety requirements, compared with an independent third-party (57%). reporting product safety expenditures just 16% five years ago. Additional methods include sourcing of greater than 20% of their total materials from trusted suppliers production costs. What’s more, Manufacturers typically rely on (56%), training staff on product safety management study participants a handful of methods to drive issues (55%), and product testing by estimate that their companies would improvements in the safety of the an independent third-party (52%). need to increase spending on product consumer electronics they produce, safety measures by an average of including testing and certification However, improvements in the safety 21.7% of total production costs to by independent third-parties. Nearly of consumer electronics have not achieve compliance with the most 7 out of 10 (68%) of management been achieved without a significant stringent safety standards. study respondents report the use cost. Management study participants of in-house product testing to report that their companies spend an assure safety, followed by process average of 14.6% of total production- certification such as ISO 9001 related costs on product safety

8 The importance of consumer electronics safety | TÜV SÜD However, these costs must be the previous five-year period, with 13% of respondents estimating measured against the financial impact 21% experiencing 20 or more recalls recall expenditures equaling or of product recalls resulting from within that timeframe. Expenses exceeding 20% of revenue. Indeed, unsafe electronic devices. Among directly associated with product product recall expenses can have a management study participants, recalls cost manufacturers of significant impact on a manufacturer’s companies experienced an average consumer electronics an average profitability. of 13.2 product safety recalls within of 10.3% of annual revenue, with

ANNUAL INDUSTRY COSTS OF RECALLS AS A PROPORTION OF REVENUES Mean = 10.3%

33%

21% 19% 13% 10% 4% 20%+ 10-19% 5-9% 1-4% None Don’t know

Source: TÜV SÜD Safety Gauge 2012

Continued investments by consumer safety levels can help a producer to brand reputation in the market, electronics manufacturers in demonstrate leadership in the providing manufacturers with greater product safety measures can result industry, and potentially open the door leverage when it comes to pricing in fewer product recalls and reduce to new markets where higher levels of their products. the expenses associated with product safety are expected. Finally, them. Further, improved product increased product safety contributes

TÜV SÜD | The importance of consumer electronics safety 9 What manufacturers can do to meet consumers’ product safety expectations

The findings of the TÜV SÜD Safety consumer electronics are serious competitive manufacturers are likely Gauge study clearly show that about product safety. 69% percent to be those who promote the overall consumers are placing increased of management study respondents safety of their consumer electronic value on the safety of the consumer reported that product safety should products, meeting the demands electronics that they purchase, and have priority over company sales and and expectations of consumers, are becoming more knowledgeable profitability. Further, for management and thereby gaining an important about how to identify electronic study respondents, the leading advantage in the marketplace. devices that are more likely to be challenge to improving product safety safe. These findings are evidence is not the cost of third-party testing, TÜV SÜD is a leading international of a significant opportunity for inspection or certification but the service organisation providing one- manufacturers of consumer lack of government regulations. This stop global solutions for product electronics to leverage consumers’ finding suggests that manufacturers quality and safety testing and interest in safe products by making committed to the safety of their inspections, engineering support, safety a priority. The additional products would welcome increased management system certification, and investment required to increase oversight and regulation, and even training. With over 19,000 employees, consumer electronics’ safety can mandatory certification, as a way TÜV SÜD operates worldwide at not only effectively reduce the cost to increase the overall safety of more than 800 locations. As partners associated with product recalls, but consumer electronics available in the in our customers’ processes, can also increase consumer loyalty to marketplace. our specialist teams ensure that specific electronics brands, thereby technology, systems, and know-how supporting company efforts to No doubt, an increasingly competitive are optimised, thus strengthening our increase market share. marketplace for consumer electronics customers’ global competitiveness. will drive demand for electronic The TÜV SÜD Safety Gauge also devices that are both innovative shows that manufacturers of and safe to use. In the end, the most

10 The importance of consumer electronics safety | TÜV SÜD GLOSSARY OF ACRONYMS CPSIA – consumer product safety improvement act GDP – gross domestic product

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