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What’s A Chargeback?

Working with retailers to get more products onto more shelves in more stores is the dream of many businesses, but there’s a lot more to partnering with merchants than simply shipping pallets of items to them in the hopes they’ll integrate easily.

When your shipments don’t meet the requirements of your partner retailers, it often results in added fees, also known as chargebacks.

What’s the Purpose of a Chargeback?

Chargebacks occur when your shipments don’t meet the exacting requirements of your retailers, who may each have very different needs.

For example, if you’re sending products to Walmart, they might want a label on your boxes to be on the upper left side, where Target would want to see it on the bottom right. It may seem like an endless gauntlet of regulations and requirements, but the purpose of these retailer rules is to increase the efficiency of their warehousing and distribution processes.

It follows that if you don’t comply, additional costs are incurred by the company receiving your goods.

Rather than having to continue to pay for your retailers to repackage, relabel or return your items, you can take steps to ensure that chargebacks are a rare occurrence, including:

  • Investing in technology. Tech can help improve processes from the moment your items arrive from the manufacturer. By including all the requirements for each retailer you work with in individual processes, it can simplify your shipping.The right kind of tech, including tools like EDI, can also ensure that the right information is sent to each receiving merchant in a timely manner.
  • Implementing more manual shipment checks. For smaller companies, manual checks can sometimes help fill the gaps between full automation and totally manual processes.With your equipment configured to build pallets for one receiver at a time, for example, a supervisor can check that each one is correctly labeled and packaged before it’s loaded on a truck.
  • Hiring a dedicated 3PL. Your company is doing a lot of business with retailers, but because you have so many different requirements to meet, it can be difficult to keep track. Investing in updated tech would be nice, but it’s not in the budget right now, especially when you consider how much you’re having to pay in chargebacks.You have the option to outsource your fulfillment to a 3rd party logistics company that has all the tools already in place to get your products out into the world and minimize your loss to chargebacks.

Chargebacks are generally expected to only make up two to three percent of sales from any one supplier, so if yours are exceeding that for any or all of your retailers, you definitely need to reexamine your fulfillment process. By investing in new tech, changing processes or outsourcing your wholesale merchandise, you’ll see your chargebacks drop dramatically and realize significant savings to your bottom line.

October 12, 2017
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