Amazon Shortages & Chargebacks

Text only transcript

DID YOU KNOW?

93% of brands report deductions from Amazon, costing businesses thousands.
There are 100 different chargebacks or shortages (deductions).
The total cost of shortages and chargeback worldwide are c. £4.8bn.
Up to £5k lost for every £100k in revenue generated via Amazon.

Amazon operates a sophisticated, advanced PID (Parcel identifier system), automating goods-in processing with no tolerance errors. If Amazon inefficiently or incorrectly receive your product due to manual processing you may receive significant fines, chargebacks, and, invoice shortages when they haven’t been able to resolve goods-in issues manually.

Suppliers must ensure they set up logistics and order fulfilment to meet Amazon’s complex requirements. Internal procedures and communication to Amazon must be aligned – from product development and launch, to invoicing and EDI integration.

EXPLAINER – WHAT ARE CHARGEBACKS AND SHORTAGES?

Chargebacks:

Chargebacks are fines for non-compliance, and include PO on time accuracy, Amazon Shipment Notification (ASN) accuracy, Prep issue, barcoding issue, and labelling issues.
According to a report by CPC Strategy, the average chargeback rate for Amazon vendors is around 2-3%.

Shortages

Shortages, occur when the quantity received by Amazon differs from the PO. Typically, this is due to two root causes: shipping compliance and master data.

Logistics and account management teams often don’t have the time or knowhow to navigate Amazon’s stringent rules and guidelines. This guide can support teams to work through areas that may be non-compliant with Amazon’s requirements.

‘HOW TO’ OVERVIEW

1. Get to know your process

Have you fully understood Amazon’s requirements via Vendor Central training?
What does the inventory listing and catalogue setup look like?
Is there data missing?
Is the data aligned with your ERP system and physical stock?
Do you understand what all barcodes relate to on your products?
Are all labels in line with Amazon’s requirements?
How are you communicating to Amazon (i.e. EDI or Non-EDI)?
Is the data flowing correctly?
Are you preparing your parcels and pallets in line with requirements?
Do your parcels and pallets require extra preparation?
Are your 3PLs operating in line with requirements?
Are they triple checking the contents? Remember, Amazon is not like other customers.
Do the invoices match the PO, and all details on Amazon Vendor Central?
Are you invoicing correctly, (i.e. correct pricing & product info)?

2. Get to the root cause

Once you’ve understood and analysed your process, do you know how you can fix it?
What are the timelines to correct this?
Do you know the impact of each error?
Can any of the shortages be recovered? Example: if it was an issue with invoicing data or EDI transmission can this be reviewed to recover some of the lost revenue.

3. Dispute

Fortunately, you can dispute shortages and chargebacks if you have found no wrongdoing. Ensure you know the process, what data is required, and what evidence you can and cannot provide.

Why 30 days is important

Chargebacks – You can only do this twice and it must be within a 30-day period.
Shortages – You can only do this twice. Wait minimum of 30 days to dispute a shortage claim as Amazon often ‘find’ additional units initially marked as shorted.

4. Lock in your improvements

Create effective KPIs – Create effective KPIs to regularly monitor your performance. Amazon provide a comprehensive suite of KPIs, which you can adapt to align to your own needs.
Communicate your improvements – After the issues have been analysed and appropriate solutions developed, ensure the wider business is aware and commits to the proposed changes required.
Record – Record and ensure Standard Operating Procedures (SOPs) are updated and reviewed involving all affected departments (commercial, logistics, finance (deductions)).
Stay up to date – Amazon continuously improves its processes so ensure you continue to do so too. For example, they might change requirements for dispute evidence or labelling. Ensure you keep track.