Even Cutting-Edge IT Couldn't Save Burlington Coat Factory From $1.5 Million Penalty

For decades, Burlington Coat Factory has been one of the most cutting-edge retail IT shops anywhere by being first—or close to first—in its deployments of Unix, Oracle, the Web, E-mail, TCP/IP, symmetrical multiprocessing and Linux, among many others. But even that type of IT pedigree couldn't help the discount clothier do what hundreds of associates could do manually. Last week, that cost the chain a $1.5 million penalty for selling recalled children's clothing.

The penalty, from the U.S. Consumer Product Safety Commission (CPSC), was issued because the government said Burlington had deliberately and knowingly sold recalled children's clothing. "From 2003 to 2010, Burlington knowingly failed to report immediately to CPSC, as required by federal law, that it had sold many different children's sweatshirts and jackets with drawstrings at the neck. Children's upper outerwear with drawstrings, including sweatshirts, sweaters, and jackets, poses strangulation and entanglement hazards to children that can result in serious injury or death," said a CPSC statement.

"The settlement also resolves CPSC staff allegations that from 2008 to 2012, contrary to federal law, Burlington knowingly sold or had in its store inventories many of these garments after they had been recalled."

Burlington never denied having sold the banned garments. But it rejected the deliberately and knowingly parts, saying suppliers had delivered the items and only a manual search uncovered the problem.

"Burlington did not manufacture the Garments. It purchased them from vendors and other suppliers. Consistent with practice in the retail industry, Burlington contractually required the Garment vendors to supply products that complied with all federal, state, and local laws, regulations, and standards, and relied on its suppliers to provide compliant products, as the suppliers were in the best position to know and understand the many legal requirements that were or potentially were applicable to their products," Burlington said in its legal filing.

"Since the Commission first issued the Guidelines in 1996, Burlington's children's apparel purchasing policy has prohibited Burlington's apparel buyers from purchasing children's upper outerwear with drawstrings. Prior to 2009, Burlington's management had procedures in place that it reasonably believed prevented the purchase of children's upper outerwear products with drawstrings. Upon learning in 2009 that, despite such procedures, certain Garments had been discovered in Burlington's stores, Burlington undertook an extensive manual audit of all children's upper outerwear in all of its stores to determine whether it had unknowingly purchased other products subject to the Guidelines. This audit was a massive undertaking, as Burlington's personnel in all of its approximately 450 stores at that time had to visually inspect all items of children's upper outerwear, and the Guidelines and ASTM standard contain ambiguities that made it difficult to determine whether certain items failed to comply."

Technology wasn't, and likely couldn't have been, much help here. A typical response to a chain selling banned items is that the purchases should have been blocked at the POS level. If the customer literally can't buy the item because the POS refuses to ring it up, the retailer would be warned that there was a problem. At the very least it would indicate to the CPSC that the chain was trying to avoid selling the dangerous product.

But that wouldn't work with clothing remnants, overstock and other irregular products, especially those that don't carry standard UPC barcodes. Apparel doesn't just come in more sizes and styles than a can of soup -- it also doesn't come in a convenient, easy-to-label can.

Would item-level RFID have worked? That might make POS-blocking possiblEM at least someday, once RFID is sufficiently standardized that every product comes with the same RFID encoding for every retailer. (That will also make manufacturers a lot happier, since they won't have to tag each chain's products differently.)

But that would still have depended on matching the banned feature -- drawstrings on children's clothing -- with the product code. Remainders and remnants can float through the channel for a long time (that's why they're remainders and remnants). It's going to take extra work to make sure every retailer is notified of the codes for every product that has a problematic feature.

It's one thing when a knowledgeable new-merchandise buyer is watching for features that are illegal in the U.S. It's much more challenging when products come at random and in bulk -- which pretty much describes Burlington Coat's sourcing.

Although it's nice to know that technology can accelerate and make more accurate almost all aspects of retail, it's even nicer to know that there are some things only professionals on the floor can do.