How to use chargebacks to improve Amazon logistics

Chargebacks are a consequence of non-compliance with Amazon’s strict guidelines, and they can quickly eat into your yearly profits. The key to eliminating them is to improve your Amazon logistics. Here’s how.

What are Amazon chargebacks?

You can effectively save thousands by responding appropriately to your Amazon chargebacks. Chargebacks are designed to incentivize sellers to develop better processes to increase customer satisfaction. Instead of regarding it as a problem, if you regularly check your chargebacks, you’ll get crucial insights into problems with your operational performance.

Despite the rationale behind chargebacks, the mighty retail behemoth does sometimes charge you by mistake. This happens all too often, but you can dispute them (you can use this guide to disputing claims here).

What do chargebacks say about Amazon logistics?

With over 6 million active sellers and counting, Amazon oversees a huge logistical operation, so it has to closely regulate all vendors.

Amazon chargebacks are issued when you fail to comply with its rules, as this disrupts the flow of operations. Amazon has several types of chargebacks, such as Buyer Chargebacks, ASN Accuracy Chargebacks and Preparation Chargebacks, to name a few. You can also be penalized for faults such as late delivery, data misalignment or faulty packaging.

Amazon also charges shortage fees when it believes the quantity of products received in the warehouse is less than the quantity ordered. This may simply be because your shipment has an incorrect label, which creates inaccuracies in Amazon’s warehouse system.

Dealing with these issues costs Amazon time and money, so it passes the costs on to sellers to encourage compliance with guidelines and thereby streamline operations.

How can I improve logistics and avoid chargebacks?

To find out exactly what you’ve been charged and why, log in to Vendor Central and check out your Operational Performance Report. Each chargeback will be for a specific non-compliance, so resolving those issues at source will improve your overall operations.

Amazon consultancy Optimizon recommends checking your chargebacks on a weekly basis. Multiple fees can soon add up, so taking a proactive approach can save your business hefty amounts. Big brands can use an Amazon Vendor Chargeback Service to reduce the hassle of recouping these costs.

Simple changes you can make now to cut chargebacks

The quickest way to reduce any Shipment Chargebacks and Shortage Fees is to ensure that barcodes on units are visible, accurate and easy to scan. Make sure all your orders follow Amazon’s labeling requirements.

To avoid Unconfirmed Purchase Order Chargebacks – fees applied for products that were not included in the original Purchase Order – double-check the contents of each carton leaving your warehouse. This also reduces your chances of receiving Overage Chargebacks or Shortage Fees.

It is also critical you keep all your product data up to date. Amazon automates many of its processes and expects you to account for any differences. Make sure all the information provided in your Purchase Orders matches your shipments. Despatching your goods on time also reduces fees for non-compliance.

One way to streamline the entire order process and thereby reduce opportunities for all the above errors is by using the Pan-EU Inbound Consolidation Service (PICS). You should certainly consider this option if you sell your products in multiple countries. This little-known service simplifies the ordering process for vendors and typically leads to substantial savings. However, it must be noted that the vendor must be eligible to enter into this agreement.

What is the Pan-EU Inbound Consolidation Service (PICS)?

The Pan-EU Inbound Consolidation Service (PICS) allows you to ship orders to a limited number of fulfillment centers. Amazon then spreads your inventory through the EU fulfillment network to place products closer to customers. For you it means fewer purchase orders of higher value, so you have lower preparation, transportation and labor costs. It also reduces opportunities for human errors, late deliveries and other inaccuracies that lead to Amazon chargebacks.

Customers also have better access to your products and receive orders on time. This minimizes Late-Delivery Chargebacks and negative reviews for your business, which can significantly harm sales.

The good news is Amazon chargebacks are not an inevitable part of doing business on Amazon. They can be excellent indicators of where you can make positive changes across your business to improve profitability and customer satisfaction. And even when you have been charged, it is possible to reclaim lost revenue.

Optimizon has dedicated and experienced Amazon consultants specializing in helping brands to take control of their chargebacks to increase profits.

Find out more about the Amazon Vendor Chargeback Service here, or get in touch with Optimizon here.