Chargeback Pushback

 In 101

Stanislav Kondratiev on Unsplash

For those who are uninformed, a chargeback is a fee or penalty imposed by a retailer for poorly performing barcodes on shipments received from vendors. Walmart is most often blamed—or credited—with inventing the chargeback, and that sounds plausible, since the Walmart business model built on logistics.

Although we do not know it for a fact, disgruntled Walmart suppliers have stated that the income stream from chargebacks is so considerable, Walmart no longer uses them to motivate vendors to improve their barcodes (if they ever did). Maybe so, but when barcodes don’t work right, logistics don’t work right and there is a cost to correcting the problem.

There is also a cost to preventing the problem, but whereas a chargeback will be an ongoing liability if the cause is not brought under control, the cost of prevention is more like an asset and it even has a return on investment. It is the chargeback pushback and it is called verification.

Nigel Tadyanehondo on Unsplash

Consider the following actual case histories:

  • New Jersey clothing distributor saved $50,000 in prevented chargebacks with (2) verifiers that cost about 15% (at MSRP)
  • Medical device manufacturer was threatened with fines for non-compliance to FDA’s Unique Device Identification rule for non-working barcodes on hydration bags
  • Chinese garment manufacturer paid $20,000 in chargebacks on one 40 foot ocean freight container of shipments to stores
  • Big Box retailer saved $5000 the first week they had verifier on a sales demonstration—they had not even purchased yet

In all cases, the verifiers paid for themselves immediately and then contributed significantly to the bottom line in preventing future chargebacks.

These are not extreme or unusual scenarios. These are companies, large and small, who have learned by paying attention and not accepting the idea that mistakes are an inevitable and unavoidable cost of doing business.

Photo by Fikri Rasyid on Unsplash

It may be true that chargebacks have become a common line item on the income side of the balance sheet of retailers. But vendors are not powerless: they can deploy the chargeback pushback and strengthen their own balance sheets and their trading partner relationships. It is a win for everyone.


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