The bigger and more powerful Amazon becomes, the more it tightens the thumbscrews on its suppliers. Many vendors are increasingly struggling with Amazon cutting their invoices because allegedly fewer goods have arrived at the shipping centers than invoiced or because more and more rules and their non-compliance are associated with penalties.
The costs for this can easily add up to high amounts per month and thus reach relevant orders of magnitude. If you don’t identify and eliminate the causes in time, these costs will keep accruing, thus increasing exponentially. This puts you in a cost trap that, at the end of the day, will lead to you no longer being able to cover the costs of running your Amazon business.
In this article, we will explain the different types of chargebacks and show you what the most common reasons are for these charges by Amazon. We’ll also let you in on our many years of experience in dealing with these Amazon claims and provide you with tips and tricks that you can use to significantly minimize these deductions and thus save a lot of money.
What are Amazon Charge Backs?
As an Amazon supplier, you must comply with certain procedures and guidelines. Violations of this are sometimes punished with penalties, the so-called charge backs. There are different types of charge backs at Amazon, most of them are related to the ordering or logistics process. Basically, four different areas can be distinguished:
- Problems with purchase orders (PO)
- Problems with notification (e.g. ASN)
- Problems with delivery/collection
- Problems with shipment preparation or packaging
What types of charge backs are there for vendors on Amazon and how can you avoid them?
Type of penalty | Explanation | Tips for prevention |
1st section: On-time delivery | ||
| Orders – over delivery (PO) | This fee is charged if you ship more items to Amazon than ordered in the PO. | Never deliver a larger number of the item than ordered (even if it should make logistical sense, or Amazon did not comply with the VPE when ordering). |
| Orders – Down Confirmed | This fee will be charged if you reduce the quantity outside the deadline ( e.g. delivery window). | If you need to reduce quantities subsequently, then by all means within the delivery window. Any change must be entered in VendorCentral. |
| Units not shipped | This fee is charged if you have confirmed items but they are not shipped. | If you cannot deliver items, cancel the item in question or the PO in VendorCentral. |
| Orders – On-time delivery | You will be charged compensation for failure to deliver on time if your confirmed products, including backorders, are not received within the order window. | Ship packages on the first or second day after order receipt, if possible. For pallets, notification must be made within the delivery window. Please make sure that the carrier receives all information and also reports any delays back to you. |
| Delivery – date and load | If your contracted carrier does not show up at the agreed delivery date or if the acceptance of the load is refused (e.g. insufficiently secured or wrong truck type), charge backs will be due. (currently 290 EUR for non-appearance). | Delivery guidelines per warehouse can be found in Amazon’s Resource Center. Notification must be booked at least 24 hours in advance. Booked appointments must be kept and changes must be deposited in VendorCentral. |
2nd section: Non-compliant or inaccurate ASNs | ||
| Notification – non-compliant ASN | Through the Advanced Shipment Notice (ASN), you provide Amazon with content and tracking info before the goods arrive at the Amazon logistics center. Incorrect ASNs and ASNs submitted too late will result in penalties. | The information in the ASN must match when notified. The ASN must be entered into Amazon’s system prior to delivery. In addition, the forwarder must enter the BOL/PRO number in the advance shipping notification. (BOL from ASN and BOL specified by forwarder in notification must match). Changes must be stored in VendorCentral. |
3rd section: Non-compliant information about the carton contents. | ||
| Delivery – carton labels | You have not provided information about the carton contents or the label could not be read. | Put Amazon compliant content labels on your boxes. |
4. section: preparation of products for shipment | ||
| Shipping preparation – repacking | The outer packaging of your items does not comply with Amazon guidelines (product could get dusty, or parts could get lost). | You will find an overview of the affected articles in your ARA under Product Catalog “Instructions for preparation required”. |
| Shipping preparation – barcode | Your item does not have a readable barcode that matches an Amazon ASIN. | Print the EAN code legibly on the respective carton. |
5. section: Shipping in original packaging (SIOC) | ||
| Shipping preparation – SIOC | Items exceeding a defined size must be delivered in shippable and certified packaging. | An overview of affected items can be found in VendorCentral under Operational Performance. |
More tips and tricks from our experience with a wide range of manufacturers:
Backorder: The delivery window will not be automatically extended just because you have confirmed the item in the backorder option. This option may be used as long as you do not fall below the 90% in the four week cycle.
No Show: If you have received No Show charges and are unable to track them, you can request notification data via case to file claims against the carrier if necessary. Request the following data by case: Creation Date, Carrier request delivery time and date, Actual Arrival Date, Schedule Date, Checkin Date, Unloaded Date, Closed Date.
Desired date for delivery: If the carrier specifies a desired date instead of Amazon’s date when notifying the customer, charge backs will also be incurred. Dates which Amazon changes itself will not be charged.
Number of pallets: If one pallet is registered, only one pallet should be shipped… Example: External logistician packs one pallet on 2 pallets due to height restriction and ships 2 pallets.
No single code on outer packaging: If it is necessary to paste over an EAN code on the packaging, care must be taken that this is ALWAYS done.
Shipment preparation: If you think the charge backs are unfounded, you can object by case with appropriate pictures. Items will be reviewed on Amazon’s part (Recommended order: 1. object directly to the compensation and only if that was unsuccessful – 2. object with images per case).
Preferred Carrier – Even if you are shipping with a preferred carrier, periodically ask for proof of shipment of their merchandise (also ask for restocking if necessary) so you can respond accordingly. It is difficult to make claims against the carrier later. Make sure that the freight forwarder receives all necessary information for the shipment and also gives feedback in case of possible delays, so that you can adjust e.g. the PO accordingly. (Preferred Carrier does not automatically mean that everything is running correctly here……)
You’re just thinking “help” right now?
Our team of experts looks back on many years of experience in dealing with Amazon. We help vendors from a wide range of industries and are there to support you both in an advisory and operational capacity. Contact us here.
