Implemented operational excellence to achieve an above-industry-standard chargeback rate.
What we’re celebrating:
Thanks to our tireless work of analyzing and identifying chargeback issues, addressing those issues with clients, and implementing best practices, our agency acquired a 0.5% total chargeback rate in 1H 2023.
Our chargeback rate vs. the industry:
A 5% chargeback rate is considered “good” for Vendor Central brands on Amazon. However, GO found that benchmark too high and initially aimed for a 2% benchmark in 2021.
We ended up averaging below 2% in 2021, ultimately inching closer to 1% by the end of the year. The next push was to get below 1% and that was achieved in March 2022 when we reached 0.8%.
Our next goal was to dig into smaller chargeback issues to drive this metric closer to 0%. The major chargeback costs had already been addressed for most of our clients, so it was just a matter of solving some of the less impactful problems. Thanks to this more nuanced work, we accomplished a 0.5% total chargeback rate in the first half of ‘23.
How we accomplished this:
Our chargeback mitigation process involves 3 main initiatives:
Deep Dive & Root Cause Analysis – We perform a 6-to-12-month in-depth review of all chargebacks that a Vendor has received from Amazon. We then filter by financial impact to determine which chargeback costs we need to mitigate first. In our experience, most Vendor Central accounts have between 2-4 chargeback types that account for over 80% of their total fees.
Address Top Chargeback Issues with Our Client – Once we’ve identified the biggest cost offenders, we present our findings to our client. We explain how we determine which chargebacks are the ones we need to tackle first, underscore the potential hurdles we may face, and come up with a game plan on how to reduce these costs moving forward.
Implement Lasting Solutions – We don’t take shortcuts or simply Band-Aid chargeback issues – we use strategies that have proven to be successful, long-term fixes. We provide Vendor Central training, guidance on process alterations at the Vendor and 3PL levels, EDI support, and cost/benefit analyses to our clients so that they can reduce their Amazon costs.
Our biggest chargeback wins:
Mitigated the Impact of Our Largest Chargeback Offenders – Thanks to the chargeback reduction initiatives our team has implemented, we’ve seen the following decreases among these main chargebacks:
No Carton/Package Content Label: Dropped from 20% to 1.6% of total
ASN Accuracy: Dropped from 18% to 2.8% of total
Ships in Own Container (SIOC): Dropped from 15% to 8.9% of total
PO On-Time Accuracy: Dropped from 22% to 16% of total
Alleviated PO On-Time Accuracy Issues - PO On-Time Accuracy accounted for 55% of an HPC brand’s chargebacks at the end of 2021 because they struggled to get appointments within their delivery windows when sending products to west coast fulfillment centers. We collaborated with our client’s warehouse team and their carrier to determine the minimum lead times needed to be compliant. We then worked directly with the Amazon ISM, showing them data that proved the brand was not given enough time to be punctual with their deliveries and convincing them to grant extended delivery windows. Thanks to these initiatives, PO On-Time Accuracy now accounts for 2.9% of the brand’s total chargebacks.
Improved No Carton/Package Content Label & ASN Accuracy – A client wasn’t including correct LP label values on their ASNs, resulting in No Carton/Package Content Label and ASN Accuracy chargebacks. We discovered this was all tied to the EDI 856 (ASN) transmission, so in May 2022, we began running a thorough analysis of the transmission errors and led a mapping update with our client’s EDI team. Once the mapping process was in place, we were able to lower this chargeback rate from 2% in May 2022 to a monthly average of 0.4% from June 2022 – November 2022.
Reduced a Client’s Biggest Chargeback Cost – Prep & Carton Content Accuracy (CCA) were the most expensive and prevalent chargebacks for one of our clients. These fees were incurred because our client had non-compliant inner wrappings within their case-packed items, causing individual UPC barcodes to be scanned which prompted errors. With our client’s help, we reduced these costs in 2 ways:
We worked closely with our client’s manufacturing department to remove inner wrappings from the case-packed items and create separate, Amazon-specific product lines for the top 20 CCA offending ASINs.
We created an Amazon Vendor Flex (VF) node inside our client’s warehouse, allowing Amazon to submit POs that are delivered directly to the VF node for customer orders. Because VF does not use traditional PID receiving, there are no CCA charges, prompting us to enter as many products into this program as possible.
When comparing Q2 2022 vs. Q2 2023, we reduced our client’s CCA charges by $134,000, and our eventual goal is to cut annual CCA charges by $500,000.
Are you dealing with chargeback issues?
If not managed properly, chargebacks can have an extremely negative impact on a brand’s overall profitability. Connect with our team of operation aficionados – they are ready to become an extension of your brand to help you reduce unnecessary costs. Click the contact button below.