4 expert strategies to reduce retail chargebacks this peak season – Insights from Dan Weiss

Retail chargebacks can be a significant drain on profits, especially for brands partnering with third-party logistics (3PL) providers. Chargebacks often arise due to minor infractions, but they can add up quickly, costing brands thousands in penalties and fees. 

Recently, we spoke with Dan, a logistics expert with over 25 years in the industry, who shared powerful insights on how brands can leverage a data-driven approach to minimize chargebacks.

Here’s a look at some strategies that can help brands stay compliant, cut down on costs, and streamline their logistics processes this peak season.

1. Integrate compliance into your 3PL’s warehouse management system (WMS)

One of the most effective ways to avoid chargebacks is to embed retailer compliance requirements directly into your 3PL’s warehouse management system (WMS). Here’s why:

• Reduced errors: Major retailers impose strict compliance guidelines, with penalties often ranging from 1% to 5% of the gross invoice for non-compliance.
• Automated checks: Integrating these guidelines within the WMS ensures that every step—from picking to packing to shipping—aligns with the retailer’s requirements.
• Documentation: Real-time photographic proof and data tracking for each shipment provide crucial evidence if chargeback disputes arise, strengthening your case for any contested penalties.

Impact: When your WMS system is aligned with retailer standards, it helps maintain consistency, reduce errors, and save money in the long run.

2. Track chargeback data to identify patterns

Chargebacks can come from a range of issues, including minor mistakes like incorrect labeling or using a non-approved carrier. These infractions often carry penalties from $50 to $100 per shipment, but by tracking chargeback data, brands can start to see patterns that reveal the root causes. Here’s how this helps:

• Spotting avoidable issues: Analyzing chargeback data can differentiate avoidable costs from those that are beyond control.
• Improved communication with carriers: Some issues, like product damage from carrier handling or stacked pallets, may lie outside warehouse operations. Identifying these patterns allows you to proactively discuss potential improvements with your carriers.
• Better decision-making: Tracking data over time provides insights into whether internal adjustments are needed or if it’s time for discussions with logistics partners on how to prevent recurrent issues.

Impact: Data tracking equips brands with the clarity needed to tackle chargeback issues strategically rather than reactively.

3. Clarify chargeback responsibilities with partners

One common oversight in chargeback management is failing to understand which costs are covered by which parties. Not all chargebacks impact the 3PL directly—some may be absorbed by merchants or suppliers based on specific contract terms. Here’s why defining responsibilities matters:

• Cost sharing: By understanding which costs fall to the 3PL and which remain with the brand, you can navigate chargeback penalties more effectively and avoid surprise fees.
• Improved partner relationships: When roles are clearly outlined, misunderstandings are minimized, helping maintain strong relationships with logistics partners.
• Proactive planning: Clarifying chargeback responsibilities can allow you to set more realistic expectations with your 3PL, ensuring smoother operations and fewer disputes.

Impact: Clear communication and well-defined roles are foundational to minimizing unexpected charges and sustaining valuable partnerships.

4. Plan ahead for retailer scheduling constraints

Late delivery chargebacks are a common issue, often stemming from retailer scheduling constraints. Retailers typically have strict delivery windows, and missing one can mean waiting days for the next available slot. This can be costly, especially during the busy peak season. Here’s how to mitigate this risk:

• Track scheduling patterns: Understanding each retailer’s appointment window tendencies allows your team to plan accordingly and avoid last-minute surprises.
• Proactive planning: By forecasting potential delays and securing appointment slots early, you reduce the likelihood of timing-related chargebacks.
• Flexibility in scheduling: For some brands, building a buffer into scheduling can prevent last-minute rushes, reducing stress and ensuring timeliness.

Impact: Effective scheduling reduces not only chargebacks but also the logistical headaches that come with rescheduling delivery windows.

Conclusion - Take a data-first approach to chargeback management

At its core, reducing retail chargebacks is about using data to optimize every aspect of the fulfillment process.

A data-driven strategy empowers brands to proactively reduce chargebacks and optimize operations this peak season, turning potential losses into opportunities for improved efficiency and cost savings.

Here’s a quick recap of strategies to reduce retail chargebacks:

• Embed compliance guidelines into the WMS for consistent adherence to retailer requirements.
• Track chargeback data to spot trends and address root causes.
• Clarify roles and responsibilities with your 3PL and logistics partners.
• Plan for retailer delivery constraints to avoid delays and last-minute charges.

This season, make chargeback management an integral part of your logistics strategy, and watch your profits grow as penalties shrink.