+1 800 967-0030

What Are Retailer Chargebacks?

If you’re contemplating moving into the business to business space or already have and have been billed by your retailers for “chargebacks” you may be wondering what, exactly, you’ve gotten yourself into. After all, those chargebacks can be very expensive, so much so that it’s not worth the effort it took to get them to the retailer in the first place!

What is a Chargeback?

When you contract with a retailer who will handle the product distribution of your merchandise to their stores, they will give you an instruction manual. This diary-thick vendor compliance manual explains exactly how you’re to send items to the retailer, and they’re not playing around.

If the book says that each pallet should have exactly 36 items on it, you’d better put 36 items on each pallet, otherwise, you’ll start running into retailer chargebacks. From the perspective of the retailer, you’ve just created a ton of work for them by sending improperly fulfilled merchandise to their warehouse. Now their people have to tear down the pallets and rebuild them, minimum. It’s a lot of work for them to sell your stuff, so they pass the cost on to you directly.

Other Reasons for Retailer Chargebacks

Although some of the most common reasons for retailer chargebacks are improperly packed products, there are several other common reasons these appear:

  • Not sending the right electronic data interchange or advanced shipping notice data. Your retail partner wants to know when your shipment will be arriving, who’s bringing it and how many items are coming, among other things. When you send bad information, or worse, no information, it really puts a hitch in their giddy-up.
  • Using the wrong shipper. Like everything else, your retailer will have a shipper or two that they prefer to work with for various reasons. Even if it’s because the trucks fit more neatly into their loading bay, your disregarding this preference can mean a hefty fine.
  • Incorrectly packaged or labeled items. By “incorrectly,” of course, your retailer means “not to the standard put forth in our instructions.” Even so, it takes manpower for them to tear your pallets down and put them back together correctly. A misplaced label can spell an equal amount of chaos in a heavily automated warehouse that relies on those labels for sorting and tracking purposes.

You can avoid chargebacks by being absolutely militant about the instructions listed in the vendor compliance manuals, but this is easier said than done. Often, it takes a whole team just to service one picky retailer, let alone several.

Good fulfillment services, on the other hand, often already have copies of the vendor compliance rules that you’re struggling to adhere to. When you think that it’s time to make the leap to working with retailers, it’s a good idea to find an order distribution facility that you’re comfortable doing business with and let them handle one of the hardest parts of being a retail vendor.

March 27, 2019
Share This:

Related Posts

RECENT POSTS

3 Things to Consider When Choosing the Best 3PL Company

When you are getting ready to partner with a 3PL company, it is important to do your research and keep an eye out for certain characteristics. When you are getting ready to partner with a 3PL company, it is important to do your research and keep an eye out for certain...

Growing Your E-Commerce Business in 2021 (Part 3: Technology)

This article is part of a series that also explores the latest e-Commerce trends and what today’s consumers want.  If 2020 has taught us anything, it’s that sometimes things don't go as planned. Businesses of all sizes and types were forced to make quick pivots to...

Growing Your E-Commerce Business in 2021 (Part 2: Customer Service)

This article is part of a series that also explores the most important e-Commerce trends and the latest technology. The events of 2020 have caused the world to change a lot in a short amount of time. People now live, interact, and shop much differently, and their...

Growing Your E-Commerce Business in 2021 (Part 1: Trends)

It has now been over a year since the coronavirus lockdowns began in the U.S., and businesses of all types have been forced to adjust and evolve. The e-Commerce industry was one that boomed in 2020, with U.S. consumers spending over $861 billion online- an incredible...

3 Things to Consider When Choosing the Best 3PL Company

When you are getting ready to partner with a 3PL company, it is important to do your research and keep an eye out for certain characteristics. Whether you are selecting your first 3PL partner or switching providers, we recommend choosing a 3PL company with proven...