You have probably heard of Amazon chargebacks – but do you know the full extent of them? Exactly how much they could cost your business? And which overlooked, niggling little factors could lead to a cascading torrent of fees.
These seemingly tiny fees are designed to be just that. Small slaps on the wrist for misdemeanours. However, if you are an Amazon Vendor who deals in large-scale orders, those minuscule chargebacks are multiplied by the thousands.
So while you balance your production processes and carefully calculate your profit margins, often there are not enough hours in the day to safeguard your business from these Amazon chargebacks.
But don’t worry – we won’t just tell you what Amazon chargebacks entail. We will also tell you how to avoid them!
An Introduction To Amazon Chargebacks
Potential Types of Amazon Chargebacks
- PO-Related Chargebacks
- ASN Chargebacks
- Preparation / Packaging Chargebacks
- Receive Process Chargebacks
- Direct Fulfillment Chargebacks
How To Avoid Amazon Chargebacks
If you are already familiar with Amazon chargebacks and wish to know how to avoid them, simply skip to the bottom to find out the secret. But for those who want learn exactly what they are, let’s have an introduction to them.
An Introduction To Amazon Chargebacks
Retaliatory measures are all around the Amazon business world. From late charges on payment systems, to sellers receiving decreased visibility on Amazon listings because of consistent breaches of contract.
Chargebacks are just another one of these measures.
They were created with the intent to ensure consistent and trustworthy service from Vendors. A little flat fee here, a little percentage off there. They are simply a deterrent to those who would potentially cut corners. Your business must adhere to a certain level of professionalism or be on the receiving end of these charges.
However as your Amazon vendor business grows, so too do these Amazon chargebacks – sometimes to terrifying levels. After all, an ant is tiny by itself, but no-one willingly jumps into a nest of thousands. That is why many business believe that Amazon deliberately set up these complex charges to increase their own revenue.
It is because of their nature that they are often overlooked. Ask any business about FBA Fees and they will be able to tell you all about them (as long as they have read our article on it at least) but ask a business owner about Amazon chargebacks and their answers will be more hazy.
Potential Types of Amazon Chargebacks
What business guide would be complete without a list of dry rules and regulations to adhere to? We will do our best to keep it short and sweet however.
In short, there are several types of chargebacks which you could incur. Each occurs anywhere from production to delivery and each infraction has a different level of severity.
PO-Related Chargebacks
PO-Related stands for Purchase Order Related and is then subdivided into 3 sections.
Not On Time
This first one is simple. If your products reach the destination outside of the time window set in your Purchase Order, then you will receive a penalty. Your Freight Ready Date (FRD) or your Carrier Requested Delivery Date (CRDD) was set outside what you previously stated in your purchase order.
These infractions cost 3% of the cost of each product that failed to arrive on time.
Down Confirmed
Business is all about matching your promises. When the ship window has begun, you have five calendar days to declare if you can produce the number of units promised on your purchase order.
If you reduce the confirmed number after these five calendar days, then you will be down confirmed. This infraction incurs a 3% cost of every product that you failed to make to match the purchase order.
Not Filled
The most serious of all PO-Related Amazon chargebacks. Not Filled costs the biggest chargeback fees. If you fail to send the confirmed products promised on the Purchase Order before the auto-cancel date then Amazon charges you a full 10% of the cost of every product you failed to deliver.
Advanced Shipment Notification (ASN) Chargebacks
An ASN is way Vendors and Amazon communicate in terms of shipment content and carrier tracking.
Obviously these notifications are vital to the entire process and if you make an error on your ASN or do not submit one on time, then they will charge you ASN Amazon chargebacks.
So if your products arrive:
- Before the fulfillment centre has received an ASN
- In different quantities than stated on the ASN
- Without Expiry Dates
- Or your Progressive Tracking Number (PRO) does not match your Bill of Landing (BOL)
Then you will be charged. These ones vary between 1% and 6% of the cost of each item. Each Amazon chargeback is also varied on your previous levels of compliance as well – meaning that if you have made these mistakes before, then you will incur ever more charges.
Preparation and Packaging
Preparation and packaging chargebacks stem from your production side of the business, rather than any logistical processes. But they incur Amazon chargebacks nonetheless. Improperly packaged and prepared products can appear in any form, so make sure that your products match these criteria.
- Bubble Wrap – Ensure that fragile objects are securely bubble wrapped.
- Taping – Tape any and all loose items.
- Boxing – Box up easily damaged or loose products.
- Bagging – Bag products that are in danger of dust or leakage.
- Opaque Covering – Cover up products with vulgar language or nudity with an opaque exterior.
- Suffocation Hazard– Bagged packages must come with a suffocation warning.
- Set Creation – Package together multipack items securely and label them as a set.
- Hanger Removal – Remove all hangers from clothes before shipment.
Non-compliant products are charged as a percentage of the cost per unit.
Receive Process Amazon Chargebacks
At the Amazon Warehouse, your products will be processed under a stringent set of guidelines to ensure everything is clear. This is another step of the journey where you may incur Amazon chargebacks. These can be related to:
- Missing PO labels
- Unscannable, incorrect or missing barcodes
- Unapproved packaging materials
- No carton content labels
- Overweight or oversized cartons
- Expired products
These particular Amazon Chargebacks are perhaps the costliest. In fact, you can be charged up to 25% of the cost of each carton. That is a devastating impact on your business, especially if you a large-scale Amazon Vendor.
Direct Fulfillment Chargebacks
Only Vendors who use a direct fulfillment method (when you ship orders directly to customers via your Vendor Central account without first shipping the products to an Amazon warehouse) are open to these particular Amazon chargebacks.
These are either cancellation charges or incorrect shipping method charges.
You will be charged a $10 chargeback for each cancellation of an existing order, and the same amount if you deny an incoming one (another reason to ensure that your entire inventory is up to date!) An extra $10 charge is made for each delivery that is fulfilled by a different method than that which is stated in the original order.
How To Avoid Amazon Chargebacks
In essence, there is a single way to avoid these chargebacks:
Stay Compliant
Ok that was a fairly disappointing reveal, but it is the truth. The trick is knowing how to stay compliant. In a world of business where you manage a large number of staff and juggle huge orders there is one way to keep your business from making mistakes.
Use the right tools
As a large Amazon Vendor you complete shipping and compliance which are large labour-intensive efforts that, more often than not, require double-checking. This is either time-consuming, repetitive work to complete properly and if improperly completed, will trigger Amazon chargebacks.
The right Amazon compliance tool will manage all of these problems.
How about a tool that ensures compliance with all ASN, LPR labels and invoicing?
One that also consolidates shipping and groups together shipments based on destination and time to suggest the most efficient groupings to save on costs?
What about a tool that helps combined clients grow their business up to 689%?
The right tool will also help you to dispute chargebacks. Amazon can and does make mistakes and also offers a 30 day window to dispute the chargebacks. With the right compliance tool you can not only be alerted to these chargebacks immediately, but dispute them successfully because one all-encompassing tool contains all of your records in one single place.
This tool is Vendor Central Connect.
What’s The Catch?
Absolutely nothing – all you need is an Amazon Vendor account!
Additional software is not required to use Vendor Central Connect. It simply works between your ERP and Amazon Vendor Central. After a very short integration
checklist, your Amazon Vendor business can enjoy exponential growth with zero hassle on your end.
The entire process is completed extremely quickly. In fact, most businesses complete our typical integration plan in just 6 weeks. The entire process covers data validation, testing and intensive training to ensure that you have the knowledge to make the most out of the tool.
So get in touch with our team today, and in just a month and a half your business can look forward to a brighter future free of Amazon Chargebacks. No more mix-ups or repetitive diligence. Just a smoother business workflow that cuts down the red tape and lets you run your business the best way you know how!
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