Vendor chargebacks are tiny Amazon fees, but left uncontrolled they can cost you thousands.
When Vendors sell directly to Amazon, they have to pay a number of extra fees if their labels aren’t compliant, if their ANS is incorrect or if any of a number of rules is breached. These can range from documentation errors, to preparation and packaging incongruities and many more. The cost of these, is of course, financial recrimination, but is it vital for Vendors to reduce their chargebacks and shortages?
Absolutely.
By themselves, vendor chargebacks and shortages are small. However, if you don’t reduce these Amazon fees then you’ll face a 3% chargeback on each unit here, perhaps a 7% shortage fee per unit elsewhere, and the numbers keep adding up.
How can Vendors avoid paying these Amazon Vendor chargebacks and reduce these Shortages?
What are Vendor Chargebacks?
Vendor chargebacks are fees that Amazon charges Vendors when their deliveries do not line up with Amazon’s stringent regulations.
These can include:
- PO (Purchase Order) Errors
- ASN (Advanced Shipping Notification) Errors
- Preparation and Packaging Inconsistencies
- Receive Process Errors
- Direct Fulfilment Chargebacks
For example, Amazon ordered 60 units from you to be shipped by a certain date.
- If the number of units is different, you’d face a PO chargeback.
- Maybe you shipped later than the time window specified in the PO which would incur an ASN chargeback.
- You may have boxed the items instead of bubble wrapping and boxing the items which would incur a Preparation and Packaging chargeback.
- You have unscannable, non-GS1-approved barcodes; that’s a receive process chargeback
- Or if you use Vendor Central to send directly to customers, but used an incorrect shipping method, that would be a direct fulfilment chargeback.
These chargebacks can be costly and incredibly numerous, so it’s important for Vendors to avoid them whenever possible.
How to Reduce Vendor Chargebacks
In two words; stay compliant.
However, that’s easier said than done, there are a whole host of potential errors that a Vendor can make. You have to run a business on top of your dealings with Amazon, so it’s unlikely that you have the time to everywhere, all of the time!
With that said there are some steps that you can take:
Resend your ASN for confirmation
An ASN must arrive before your product arrive at the Amazon Fulfilment Centre. If anything has changed about your order since the last ASN that you sent, then you will be charged for each discrepancy. Luckily, Amazon doesn’t mind if you resend ASNs, they will only count the latest one that you send – just make sure that it’s correct!
Review Amazon’s Packaging Rules
If you review the rules for packaging Amazon items, you shouldn’t have a problem classifying your own products within those categories. Ensure that your production line or supply chain is effectively matching those restrictions.
To increase your chances, you can also…
Highlight Potentially Difficult Products
Got a product that may need different packaging? Make sure that you consider how to reduce vendor chargebacks and highlight those products before you begin fulfilling those orders. You don’t necessarily have to be on the production line overseeing it, but you can make sure that your employees take extra care with the products.
Get Your Labels Upgraded
Amazon’s incredibly powerful supply chain runs so well due to one thing – automation.
Part of that requires you to have GS1 standard barcodes that are easily scannable and legitimate. So make sure you brush up on your barcodes and labels knowledge!
Record Everything; Challenge Everything
The issue with large scale automation is that it picks up exceptions, not errors. Most of the time, these exceptions are errors. However, sometimes Vendors can be wrongfully charged! If you can record and dispute every single charge that comes your way, the burden of proof lies on Amazon to show that your chargebacks were valid. You may discover that you can reduce all of your Vendor chargebacks this way!
What are Shortages?
Shortages occur when a Vendor does not have enough inventory to fulfill all of the orders that have been placed for their products.
This can happen for a variety of reasons, but it typically happens because a Vendor underestimated the demand for their products or because their products were unexpectedly popular and sold out more quickly than anticipated. While for Sellers, this situation only means a loss in sales and the missing of a valuable market opportunity, for Vendors it’s much worse.
This is because once you agree to a delivery for Amazon, you must deliver. If you are late in production, then that’s a fee. Or worse, if you fail to fulfil all of Amazon’s needs then those are more serious charges.
You’ll also reduce your Amazon compliance score drastically. The lower your compliance score, the more Amazon will charge you with each chargeback and shortage!
How to Stop Shortages
Know Your Inventory
If you can’t make it, be clear about it before the time window begins. Get Amazon to send a more realistic PO that your supply chain can handle. A high compliance score and reduced chargebacks are preferable to overpromising and underdelivering!
Forecasting
The vast majority of products have some sort of seasonality to them. Even cleaning products, which are used throughout the year, have upticks in sales (it’s called spring cleaning for a reason)!
If you can forecast demand of your products, you can forecast what Amazon may order from you. By studying the trends from previous years you can at least offer yourself a safety buffer of inventory to cope with any increased orders.
Be Current
This goes without saying for any business, Vendor or Seller.
From music videos, to TV series, customer demand can surge from a single appearance of a product. While you don’t need to go on a daily Netflix binge every day, it’s important to stay up to date with goings on in the world of pop culture.
Not everything can be calculated from a copy of The Financial Times!
The Easy Way to Reduce Vendor Chargebacks and Shortages
Automation tools now make it far easier to remain Amazon compliant.
With VC Managed Service, you can do just that. In fact, it’s so effective that our clients have seen a 70% regain of their revenue, and a 68% improvement in operational performance.
This tool can identify supply chain defects, stock-receipt issues, automatically update and send your ASNs and keep your operational requirement margin to <5%.
It can do all that while you make yourself a coffee.
VC Managed Service will also maintain a constant record of documentation and automatically dispute every chargeback and shortage made against your business. This is a tool that works 24/7 to reduce your chargebacks and shortages while you focus on your business. Get in touch with one of our specialists today and learn more about our rolling contracts for Amazon Vendors! Remember to check out our ecommerce guides and resources to stay ahead of the game and keep your profits on the rise!
