We don't wait for the engine to fry. We get an oil change every 3,000 miles or so.
We don't wait for hackers to take over our computer. We install antivirus software.
We don't wait for our teeth to rot. We brush twice a day and visit the dentist twice a year.
Being proactive saves money. It saves us from aggravation. It allows us to focus on what we really need and want to do each day. Unfortunately, we spend too much time reacting to things. Chargebacks are a perfect example.
You know the chain of events. The shipment went out, the retailer received it and, lo and behold, there's a compliance violation. It could be an issue with the ASN, the pre-pack configuration, the retail price on the ticket – something on that order doesn't match the purchase order or adhere to the retailer's requirements.
The retailer issues a chargeback – the monetary solution to get the supplier's attention. Once that chargeback is deducted, the hourglass is flipped. Most retailers set a short time period for suppliers to research the cause of a claim and either address the cause or dispute the claim if the cause is determined to be invalid.
Because most suppliers do business with multiple retailers, chargebacks are inevitable, and they can mount quickly. Because the supplier is constantly researching and addressing chargebacks, it's almost impossible to not be in reactive mode. Almost.
But does it really have to be that way? Is it possible to get out in front of chargebacks, or is that just wishful thinking?
With a little work, you can be proactive and prevent chargebacks. The first and most obvious way to avoid chargebacks is to ship everything compliantly. Being perfect isn't exactly realistic, but greater attention to compliance requirements and collaboration with retailers to hash out any issues is the first step.
The easiest way to do this is by using the RVCF Compliance Clearinghouse. This is a free service for RVCF supplier and 3PL service provider members. Many of these members have even told us that the Compliance Clearinghouse was the main reason why they joined RVCF. RVCF constantly monitors the compliance rules and requirements of numerous retailers so suppliers and 3PL's can focus their resources on higher-value tasks. We then alert them of any changes in a daily e-mail. This allows you to be proactive in addressing these changes. Realistically, one notification of one requirement change from one retailer through the Compliance Clearinghouse could prevent a chargeback that far exceeds the cost of RVCF membership.
However, if you're unable to comply with retailer requirements due to systems issues or facility setup, it's your responsibility to be proactive and contact the retailer. Before you place that call, you should have a clear explanation of why you can't comply, as well as a solution to propose, even if it's a temporary workaround that buys you time while you work on a permanent fix.
Think of how much time and money you'll save by being proactive rather than waiting to receive the chargebacks and constantly playing catchup.
But you'll still get chargebacks. Nobody is perfect. Then what?
Many retailers offer pre-deduction notifications to alert suppliers to compliance violations so suppliers can research claims before deductions are taken. A pre-deduction notification will typically include a code or brief description of the violation and, ideally, more detailed information so the supplier can quickly research the issue.
At this point, the supplier can either acknowledge that the deduction is valid or dispute the claim and produce evidence that proves the deduction is invalid. Most importantly, the pre-deduction notification allows the supplier to correct an issue before any other orders are shipped, meaning the prevention of numerous other chargebacks that may have resulted had the issue not been resolved until after actual deductions took place.
Respondents to our 2016 Merchandise Supplier Compliance Management Survey offered a lengthy list of retailers that provide pre-deduction notifications – a sure indication that retailers are eager for their supplier partners to be proactive about resolving non-compliance issues quickly.
Sadly, many suppliers don't have a formal process for researching these notifications, or they simply don't have the resources. To take advantage of pre-deduction notifications, suppliers need to devote at least one or two hours per week to researching them. It's important to for suppliers to spend time on both sides of the deduction – before and after – to make a dent in combating the chargebacks they receive.
Prioritization is the key. Tackle retailer requirements as soon as they're issued. Use the RVCF Compliance to ensure you're receiving updates as they happen and managing them efficiently. Take advantage of pre-deduction notifications so one violation doesn't lead to many. Implement a formal process for researching and disputing chargebacks. Collaborate with retailers to solve problems.
The odds of completely eliminating chargebacks are slim. But being proactive, minimizing violations, and maintaining a close relationship with your retailer customers is far less costly and less stressful than constantly working from behind and digging out from a mountain of chargebacks.
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