Did you know you could be losing up to 7% of your total annual revenue on Amazon in the form of chargebacks and shortages? Fears of a global recession have the retail industry facing some of the most challenging financial conditions in recent history. At a time when competition and inflation are rife businesses simply cannot afford to leave any money on the table.
It’s no secret that Amazon leads the way of working in the ecommerce world through its highly automated processes, more specifically when it comes to the digitalisation of the supply chain. With several other retailers pitted to follow suit in the near future, it’s crucial that brands take note and adapt their internal processes accordingly to help uncover long-term cost-saving opportunities.
Knowing how to drive efficiencies in your supply chain and finances is key to maintaining profitability on Amazon. In this blog, Brainlabs’ Head of Operational Excellence Zoe Cantley-Wright delves into why chargebacks and shortages on Amazon are a growing problem for retail brands and what brands can do to recover these payments.
What are chargebacks and shortages on Amazon?
If you’ve been trading with Amazon for some time, you will likely have built up a balance of financial deductions through chargebacks and shortages. Automated systems on Amazon’s end often cause unnecessary, and sometimes even overestimated, deductions on your account that are difficult to gain clarity on and can be a blocker to the long-term sustainability of your business.
Discrepancies accumulated across areas such as purchase orders, packaging and shipping are known as chargebacks or non-compliance charges. Meanwhile, shortages occur when Amazon believes the quantity of stock received on purchase orders is less than what was confirmed or that have been invoiced for, leading to withheld payments.
The problem
Amazon’s strict requirements in supply chain management means that failure to comply with these requirements can be costly to your profit margins. For brands, the problem lies in the difficulty in knowing how many invoices are unpaid, and what each defect type is when it comes to the dispute process.
The impact of chargebacks and shortages are potentially even more significant in industries with tight margins, causing lost revenue in the purest form. Not only this, but the time, effort and resources taken to reclaim this money all impact other work and projects your existing team should be focussed on.
What can you do to dispute these claims?
Thankfully, brands can recover most chargebacks and shortages claims through a dispute process. However, the process can often be tedious and involves you presenting precise data in specific ways to meet Amazon’s requirements. Leveraging a professional reclaim service to take care of these disputes enables your team to focus on their core responsibilities and free them from having to log disputes with Amazon.
Brainlabs’ team of supply chain experts have helped a number of global brands who’d built up significant chargeback values recover payments and have worked alongside internal teams to identify the main causes of incorrect charges through our bespoke reporting tools. From consultancy through to team training and outsourcing, our approach to operational excellence is flexible based on your current capabilities, expertise, and business objectives.
