Focus on the margins:
Let’s prevent Amazon Chargebacks
Being a Vendor on Amazon is a coveted privilege for selected brands and it helps you to expand your sales volume considerably. However, fulfilling directly to Amazon is not that strait forward, since vendors are expected to meet a lot of requirements when shipping to Amazon. If you fail to meet these requirements Amazon can impose fees, which they call “chargebacks”.
Chargebacks can be silent killers and ensure that profits will quickly erode. If no attention is paid to chargebacks, they can easily take up to 3-8% of your turnover.
The good news is that you can prevent and/or dispute chargebacks, but Vendor chargebacks are a complex issue involving multiple systems and various logistical causes. It’s worth preemptively prevent or, if not possible, resolve the chargebacks for healthier, long-term profit margins.
Incubeta Maze-One helped many clients with chargeback issues. “In some cases, we have been able to reduce the chargeback costs from EUR 3.000 per month to EUR 100 per month. That's a huge reduction of which the impact is immediately visible on the balance sheet”, explains Martine Kevelham, CCO at Incubeta Maze-One. “We always aim to ramp new Vendors’ operations up in such a way as to prevent chargebacks in the first place.”
Chargebacks in practice
Amazon works with different types of chargebacks:
- Advance shipment notification (ASN) chargebacks
- Receive process chargebacks
- purchase orders (PO) chargebacks
- preparation chargebacks
- Transportation chargebacks
And the list is expanding: In October this year Amazon announced new safety requirements for high-risk food supplements in the EU. Incubeta Maze-One helped several Vendor clients with analysing and identifying the main root causes of chargebacks and helped resolve long-standing operational issues.
Martine Kevelham explains: “A client in the FMCG sector had to deal with chargebacks because of ‘carton information compliance’. This chargeback withholds that a label on the packaging was not containing all the relevant information which is required by Amazon. After a deep dive into the shipping process, we found out that a specific number on the label was missing. We advised the client to change the labels, based on examples which we provided and our expertise how to tackle this. Together with the operations team we managed to reduce the chargebacks in a matter of time”.
Amazon also has specific requirements regarding the bagging of the products. In another case, we had a ‘prep issue’, which meant that the chargeback was issued for beauty care products that were ‘bagged incorrectly’: a plastic wrap was missing on all products in this specific batch. From a hygienic point of view the plastic wrap is required to protect the products from becoming dirty or dusty.
“Should clients receive a chargeback from Amazon, they should flag it as soon as possible. Together we define the problem and make a customized plan of approach. In the end we aim for a sustainable solution to avoid chargebacks in the future. Because of this approach, we helped to reduce the chargebacks to zero for most of our clients”, reassures Martine Kevelham.
Would you like more information or advice with preventing and disputing your chargebacks?
Incubeta Maze-One has a lot of experience, and we can help identify the reason of the chargebacks and most importantly help you reducing costs due to chargebacks.