What are chargebacks?
Being a Vendor on Amazon is a coveted privilege for select brands. This status can help you to expand your sales volume considerably. However, fulfilling directly to Amazon is not that straight-forward; vendors are expected to meet a great deal of requirements when shipping to Amazon. If vendors fail to meet these requirements, Amazon can impose fees, which they call “chargebacks”.
Chargebacks can be silent profit killers. They can easily take up to 3-8% of your turnover.
The good news is that you can prevent and/or dispute chargebacks, but it can prove a complex issue involving multiple systems and various logistical problems. Prevention is better than a cure, but chargebacks are already paining you, there are ways to resolve them to ensure healthier and long-term profit.
Incubeta Maze-One has helped several clients with chargeback issues. In some cases, we've been able to reduce the chargeback costs from EUR 3.000 per month to EUR 100 per month -- a huge reduction, something immediately visible on the balance sheet. As much as possible, however, we make sure to set up new Vendors’ operations up in in a way that prevents chargebacks in the first place.
Different Types of Chargebacks
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. For example, in October of 2018, Amazon announced new safety requirements for high-risk food supplements in the EU. For several of our vendor clients, we helped mitigate the situation by identifying, analyzing, and resolving the main root causes of chargebacks.
Example 1: Chargebacks for Missing Carton Information
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 on how to tackle this. Together with the operations team we managed to reduce the chargebacks in a matter of time.”
Example 2: Chargeback for Incorrect Product Packaging/Bagging
Additionally, Amazon 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.
If not prevention, take immediate action
“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.