Retailer Chargebacks and How to Avoid Them

By Joshua Weatherwax

5 min read

July 28, 2022

As an emerging CPG company, the last thing you want to deal with are retailer chargebacks. They eat into your profit margins and are a symptom of larger issues.

But, what are retailer chargebacks, why do they exist, and how can you plan to avoid them?

Read on to learn the ins and outs of retailer chargebacks and get some tips on the ways you can avoid running into them.

What is a Retailer Chargeback?

Retailer chargebacks, sometimes called vendor chargebacks, are fees incurred when a retailer deems a shipment to be substandard. Essentially, a retailer chargeback is a fine levied by a retailer against the supplier for failure to adhere to predetermined terms. Each retailer has their own set of terms, so understanding what they require is key to avoiding chargebacks.

Why do Retailer Chargebacks Happen?

Many retailers have a set of metrics that they use to evaluate incoming shipments. Failure to meet these metrics mean you may be charged upward of 20% of an invoice when products don’t meet their standards. Often, these standards include quality control, shipment size, improper CPG packaging, late delivery, or even incorrect paperwork.

How to Avoid Retailer Chargebacks

Retailer chargebacks are an unfortunate, but necessary part of any retailer’s supply chain. But, retail chargebacks can really hurt a CPG brand’s bottom line. It’s important to do everything you can to avoid them.

Here are a few ways to avoid retailer chargebacks:

Read Your Contract

It might seem like a no-brainer, but you really need to read through your contract with a retailer carefully. They will likely lay out their expectations for your product shipments and the chargebacks you can expect for failing to meet them. You should also make sure to keep a list of each retailer you work with and their specific rules regarding chargebacks. You don’t want to be surprised to discover you were adhering to the wrong standards for your shipments.

Focus on Your Supply Chain

Supply chain management has never been more important. Your retailers may charge you for late shipments (which most do). This means you really need to make sure you have your supply chain operating at maximum efficiency. You’ll need to track product lead time, forecast for demand shifts, understand the overall global supply chain, and more. Running a successful CPG business means you need to have a holistic view of the supply chain. Understanding these areas will keep you ready to react at all times.

Build Strong Relationships

Believe it or not, retailers tend not to penalize companies for shipment issues when they have closer relationships. Your relationship with your category manager can open doors or cause you problems. Make sure to stay in contact as often as possible and build a rapport. You should really view them as your gateway into the retailer. These leaders can help you with more than just getting your products on shelves. Just remember, this should be a mutually beneficial relationship, not just to avoid fees.

Invest in Retail Data

Retail data analytics gives brands deeper insight into sales trends, consumer demand, market growth, and more. This information can give you a more comprehensive view of the future and let you act to avoid problems before they arise. Use a platform like Byzzer to accrue POS, panel, and trend data that shows your existing and projected demand. This will ensure you can fulfill retailer orders exactly as requested and avoid getting charged for slow or small shipments.

Avoid Retail Chargebacks with Byzzer

No matter which retailer you’re working with, staying on top of retail sales data will make you more prepared to meet their needs and ensure you have a winning product assortment that you aren’t paying chargebacks for. Whether that’s tracking inventory levels, forecasting demand, or picking out the best retailers to partner with.

Luckily, with Byzzer, powered by NielsenIQ, you can have all the data you need at your fingertips. Byzzer provides breakdowns of product and category attributes in easy-to-digest reports. Best of all, we’ll show you how to leverage this information for your action plan.

Sign up for a free account with Byzzer today!

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