Learning Spotlight: Chargebacks

Picture this: you’ve started selling an exciting new product through Amazon’s first-party system that your consumers are sure to love. All appears to be proceeding smoothly, but then a hefty chargeback bill arrives for any number of order fulfillment infractions. What’s even worse is that it’s not clear what all of these issues are let alone how to go about solving them. These roadblocks have become all too common in the past several years and can throw unwelcome curveballs into your expected profitability. Here are some key points to consider when handling chargebacks from Amazon:

It’s on you: While Amazon outlines its requirements for all stages of the order fulfillment process, it is notoriously hands-off when helping vendors meet these exacting standards. You can even be charged for issues that are Amazon’s fault; it won’t matter. Amazon would rather repeatedly charge you for the error via an automated process than help fix its root cause. It’s up to you to find the pain points and relevant processes within your organization and address them directly.

Peel back the layers: You will need to diagnose the problem in Amazon Vendor Central. Under “reports” you can view a dashboard that summarizes all of the chargebacks you have received by type and ASIN in the past year. There are potential issues at every step of the process, and they can include chargebacks for purchase order processing, routing for pickup, product pick and preparation, carton packing, carton labeling, and shipment execution. You’ll want to expand the view by dollar amount and focus on fixing the source of those chargebacks that are incurring the biggest losses for your business.

Get everyone on board: Resolving chargeback issues is easier if everyone is on the same page internally. Work to educate relevant departments on the effect that minor errors or unresolved inconsistencies in the product development, packing, and fulfillment process can have on downstream revenue and profitability. Establish long-term relationships with other departments like supply chain to quickly resolve chargeback issues as they arise.

There’s more under the surface: Purchase order rejections can be some of the biggest chargeback offenders. Furthermore, these charges can be indicative of larger issues such as unfilled purchase orders that can lead to much greater sales losses. Match the timing of the chargeback data from Amazon with your own unfilled purchase orders to get a sense of the total loss incurred. Many brands will want to prioritize purchase order rejection issues above all others.

Balance accuracy with cost: It may not be wise to eliminate every chargeback issue from your order fulfillment process. Adding steps or bottlenecks to your internal processes can be expensive and can cause unintended complications. Don’t introduce more costs than you save by eliminating the chargeback. Your time and resources are limited; focus on the biggest problems first that require the simplest solutions. 

Minimizing chargebacks is often a time and energy-intensive process, but it doesn’t have to be. CommerceIQ ‘s Shipment Tracker solution automatically reconciles Amazon’s PO data with invoices to eliminate many potential chargebacks before they occur. Our root cause analysis can determine which shortages are valid and invalid, and disputes are filed on your behalf and tracked automatically. Contact us here to request a demo and start taking the headaches out of chargebacks today!