A Quick Guide to Preventing and Disputing Chargebacks
While cultivating exceptional CX via retail.
The account landed in January. The first PO ships in March. The chargeback notice arrives in May. What do you do next?
Nordstrom's compliance guide is 57 pages. Bloomingdale's is longer.
A missed ASN window can trigger a chargeback worth 2–5% of the invoice, per shipment.
Many chargebacks go undisputed because brands aren’t prepared to challenge them.
The mitigation is a pre-ship checklist and a named owner.
Best Buds at your service, helping founder-led brands call BS on surprise chargebacks.
Here we go.
What a Chargeback Actually Is
A chargeback is a deduction a retailer takes directly from your invoice payment, often, if not always, without offering an explanation as to why. The retailer identifies a compliance failure on their end, applies the corresponding deduction defined in their vendor agreement, and remits the difference to you. You find out when you go to balance the books.
Common chargebacks range from unfortunately consequential (a late shipment resulting in a disrupted floor set) to bureaucratic (a barcode placed 1/4 inch outside the specified zone on the hang tag).
Then there's the float. Retailers remit on net 30, net 60, sometimes net 90. When they deduct first and pay later, the cash you were counting on to cover your next production run is short by the amount of the chargeback. That's a cash flow problem that can really f things up.
If you don’t have someone who owns vendor compliance, you will suffer the consequences.
Chargeback Categories
Chargebacks break into four categories. Every major retailer has their own specific rules, but the failure modes are consistent.
Routing and carrier violations.Retailers specify which carriers to use, which service levels to use, and often which routing guide to follow to get goods to their DCs. Ship via a carrier not on the approved list, or miss a delivery window, and the chargeback is automatic. The delivery window problem is particularly expensive during peak seasons.
EDI and documentation errors. An Advance Ship Notice (ASN) filed late, a PO number that doesn't exactly match, or an invoice with a missing field are grounds for a chargeback. EDI/tech is one category of chargebacks that is entirely preventable with the right SOPs and ownership.
Packaging and ticketing non-compliance. The hang tag is the wrong size. The UPC doesn't scan. The poly bag lacks the required suffocation warning. These are fixable problems that are way upstream and require collaboration and communication with product teams and suppliers. Retailers don't absorb re-ticketing costs. You do.
Fill rate and substitution failures. Shipping 85% of a PO without prior authorization or substituting a colorway without approval triggers shortages, which are easy deductions. Inventory allocation decisions made on the DTC side of the business will create wholesale compliance failures if not properly monitored.
Disputing Chargebacks
Retailers have defined windows, usually 30 to 60 days, during which you can submit proof of compliance and get the chargeback reversed. Brands that have a system for preventing and disputing chargebacks recover a meaningful percentage.
The system is two-fold:
Prevent: Airtight SOPs and checklists when fulfilling sales orders. SOPs must include a comprehensive list of non-negotiables tailored to each retailer's compliance requirements. This list must include mandatory documentation of each compliance check.
Dispute: Escalation workflows to respond to and dispute chargebacks quickly.
The same person who owns the Prevention layer also owns the Dispute layer and oversees maintenance and updates for all related SOPs.
A Simple Framework To Reduce Chargebacks
Assign an owner. A single named individual owns compliance, fulfillment, and chargebacks. The same person is responsible for maintaining documentation and communications. All SOPs remain up to date and standardized so anyone can jump in without skipping a beat.
Build a retailer-specific pre-ship checklist. Each retailer will have their own compliance. Don’t assume Nordstroms operates like Target. Each retailer gets its own airtight pre-ship checklist to ensure compliance.
Get EDI right before your first live PO, not during. Test, validate, and don’t assume. Retailers want you to get EDI right, too, so reach out to them with questions and document their responses.
Track chargebacks by type, by retailer, by SKU. The three checkpoints above should eliminate the need for quantitative data on chargebacks. However, establishing a track record and identifying patterns will go a long way.
The Learning Curve On Chargebacks
Retailers have their own businesses to run, with unique systems, and require partnerships with brands to serve their customers best. Therefore, chargebacks exist to hold brands accountable in this respect. When we see it from that perspective, the standard is reasonable. Ship on time, label correctly, file the paperwork.
The brands that struggle aren't doing anything catastrophically wrong; they just haven't built the systems to bake in chargeback prevention and escalation yet. Retailers want you to succeed in their stores. So grab your compliance agreements, redline them, and build the operations around that to prevent chargebacks by default.
At your service…
Best Buds CX is a fractional COO partnering with bold brands built on core values. We implement customer-retaining operations across the business that empower teams to operate at their highest potential so you can reclaim your time, energy, and ambition. Learn more.
