Get in Charge of Your Chargebacks

By William Atkinson

In a perfect world, merchandise deliv­eries would never arrive late, be mis­labeled, or contain the wrong product or quantity. But ours is not a perfect world.

So to protect their interests and keep incoming inventory snafus to a minimum, merchants levy chargebacks, or fines against their vendors for not complying with agreed-upon requirements.

The Credit Research Foundation, a Columbia, MD-based organization that con­ducts research in the area of commercial credit and collections management, recently completed a customer deduction survey to which 424 vendor companies responded. According to these companies, the top five compliance-related chargebacks are

1. freight and routing issues, such as incorrect carrier, incorrect ship-to loca­tion, and multiple same-day shipments.
2. early or late deliveries.
3. concealed shortages.
4. errors in advance shipment notification (ASN) or electronic data interchange (EDI).
5. ticketing and labeling issues.

Most of these chargebacks “are com­pletely controllable by the vendor,” observes Jessica Butler, principal of Ridgewood, NJ-based deduction man­agement consultancy Attain Consulting Group, who worked with the Credit Research Foundation on the survey. “If vendors simply study the retail manuals and enter the right information into their systems, they can significantly reduce chargebacks.”

But it’s not a one-way street. Ideally mer­chants and vendors would work together so that both sides understand the terms and reduce the need for chargebacks. Indeed, one problem that rests with the clients is that not all multichannel merchants have a formal chargeback program in place.