What is a Retailer Chargeback?

Dorie StahlerBlog, Chargebacks, Compliance

blog what is a chargeback400x400For any company that supplies to large retailers, “chargebacks” can be more than a troublesome and familiar problem. Retailers use chargebacks or “offset charges” (a kinder moniker for the same consequence) as a way to motivate suppliers to comply with their supply chain requirements. Simply put, one simple vendor error can add up to biiiiiiig financial penalties.  The retailer’s Vendor Guide lists the financial penalty for each rule broken. These chargeback fees can range from $100 for the smallest infraction to thousands of dollars for more serious errors. The charges can quickly accumulate and overwhelm your profit margins.

Let’s walk through an example:  the Advanced Ship Notice (“ASN”) or EDI 856. It is a complex and detailed EDI document that has plenty of room for mistakes. ASNs include shipment,  item and packing information about each retailer order. Each retailer has strict ASN requirements, and while none of the information is difficult to obtain, there is ample opportunity for error. You can imagine, if an order is large and includes multiple shipping locations, a single error can quickly multiply and rack up some serious chargebacks.

For many vendors, the chargeback black hole is the GS1-128 shipping label. Also dictated by the Vendor Guide, the GS1-128 has to be absolutely perfect when it arrives at the retailer destination. If the retailer determines that your label is unscannable or doesn’t match the ASN, brace yourself for chargebacks.

There are solutions and processes you can implement to make chargebacks a seldom—if not rare—event. Fixing the root cause of the problem to prevent similar errors is the first step in obtaining 100% retailer compliance.  Careful selection of your EDI service provider and GS1-128 label production are two checkboxes in your compliance strategy.

Additional benefits resulting from compliance? Increased supply chain and internal efficiencies, money and resource savings, and a strengthened relationship between you and your retailer. These cumulative returns can help you stand out as a preferred vendor because you’ve made business transactions and communication easier for the retailer.