Common Chargeback Reasons

The Most Frequent Chargeback Reasons

While retailers publish long lists of possible chargeback violations, a handful of reasons account for the vast majority of fines. Understanding these common reasons and knowing how to prevent them will save you significant money over time.

Late Shipment

Every purchase order includes a Must Arrive By Date (MABD). This is not a suggestion. If your shipment arrives even one day late, the retailer may issue a chargeback. Late shipments disrupt the retailer's inventory planning and can result in empty shelves.

• What it means: Your shipment did not arrive at the retailer's distribution center by the MABD on the purchase order.
• Typical fine: $150 - $500 per PO, or 3-5% of the PO value.
• How to prevent: Work backward from the MABD to determine your last possible ship date, then build in a 1-2 day buffer. Ship early enough that carrier delays will not push you past the deadline.
• Can you dispute? Yes, if you have carrier tracking records proving on-time delivery. Weather-related delays are sometimes forgiven if you can show the shipment left on time.

Missing ASN

The Advance Ship Notice (856) must be transmitted before the shipment arrives at the retailer's distribution center. If the ASN is never sent, the retailer's receiving team must process the shipment manually, which is costly and error-prone.

• What it means: You did not send an ASN at all, or it was not received by the retailer's system.
• Typical fine: $100 - $250 per shipment.
• How to prevent: Send the ASN in RetailReady immediately after the shipment leaves your facility. Make it the last step of your shipping process.
• Can you dispute? Yes, if you have a RetailReady transmission timestamp showing the ASN was sent. Check for 997 acknowledgment as proof of delivery.

Incorrect ASN

Even if you send the ASN on time, errors in the data can trigger chargebacks. The retailer's receiving system compares the ASN data against what physically arrives, and mismatches create problems.

• What it means: The ASN was sent but contained wrong item numbers (UPCs/GTINs), incorrect quantities, missing tracking or BOL numbers, or wrong ship-to location codes.
• Typical fine: $50 - $200 per error.
• How to prevent: Verify UPCs, quantities, tracking numbers, and ship-to addresses before transmitting the ASN. Use RetailReady's validation to catch errors before sending.
• Can you dispute? Difficult unless you can prove the data was correct and the error was on the retailer's side.

Short Shipment

Shipping fewer units than ordered is one of the most common "in full" failures. Retailers plan shelf space and promotions around expected quantities, so a shortage has a ripple effect.

• What it means: The quantity received at the warehouse was less than the quantity on the purchase order or ASN.
• Typical fine: $100 - $300 per PO, or a percentage of the shorted amount.
• How to prevent: Count every item against the pick list before sealing cartons. If you cannot fill the full quantity, communicate the shortage via an 855 PO Acknowledgment before shipping.
• Can you dispute? Yes, if your BOL and ASN quantities match what you shipped and the shortage occurred during transit (carrier damage/loss).

Over Shipment

Shipping more than ordered might seem harmless, but retailers may not have space for extra product and their systems are not set up to process unexpected quantities.

• What it means: You shipped more units than the purchase order specified.
• Typical fine: $50 - $200 per PO. Some retailers refuse the entire shipment.
• How to prevent: Always ship exactly what was ordered. Double-check quantities by SKU, not just total units. If the retailer wants more, they will send a new PO.
• Can you dispute? Generally no. The PO specifies the quantity, and you are expected to match it exactly.

Wrong Product

Sending the wrong item entirely causes major disruption. The retailer cannot sell what they did not order, and the return process is expensive for everyone.

• What it means: The products in the shipment do not match the items on the purchase order. This includes wrong colors, sizes, styles, or entirely different products.
• Typical fine: $200 - $500 per occurrence, plus return shipping costs.
• How to prevent: Verify SKUs and UPCs against the PO before packing. Use barcode scanning in your warehouse to confirm correct items.
• Can you dispute? Only if you can prove the correct items were shipped and the error was in the retailer's receiving process.

Damaged Goods

Products that arrive damaged at the distribution center cannot be sold. The retailer charges back the cost of the damaged goods plus a handling fee.

• What it means: Products arrived in unsellable condition due to inadequate packaging, rough handling, or moisture damage.
• Typical fine: Cost of damaged goods plus $50 - $150 handling fee per incident.
• How to prevent: Use appropriate packaging materials. Double-box fragile items. Follow the retailer's packaging specifications exactly. Take photos of packed shipments before they leave your facility.
• Can you dispute? Yes, if you have photos proving the goods were in good condition when shipped. File a claim with the carrier for transit damage.

Labeling Issue

Labels are how the retailer's warehouse automation identifies and routes your shipment. Incorrect, missing, or unscannable labels shut down the receiving process.

• What it means: Carton labels, pallet labels, or GS1-128 (UCC-128) labels are missing, incorrect, unscannable, or do not match the ASN data.
• Typical fine: $100 - $300 per shipment.
• How to prevent: Print labels directly from RetailReady to ensure PO numbers, SSCCs, and UPCs are accurate. Apply labels flat on two adjacent sides of each carton. Test scan before shipping.
• Can you dispute? Difficult. Label issues are usually caught at the dock with clear evidence.

Pricing Discrepancy

When your invoice price does not match the agreed-upon price on the purchase order, the retailer will either short-pay or issue a chargeback for the difference.

• What it means: The unit price on your 810 Invoice does not match the unit price on the 850 Purchase Order.
• Typical fine: Typically the price difference is deducted, plus a $50 - $100 administrative fee.
• How to prevent: Always use the price from the PO, not your own price list. RetailReady auto-populates prices from the PO. If you believe the PO price is wrong, resolve it with the buyer before shipping.
• Can you dispute? Yes, if you have documentation showing the correct agreed-upon price (e.g., a signed price agreement or corrected PO).

Packaging Non-Compliance

Retailers have specific requirements for how products are packaged within cartons, including inner pack quantities, poly-bagging, and hang tags.

• What it means: Products were not packaged according to the retailer's vendor compliance guide. Examples include wrong inner pack quantities, missing poly bags, incorrect ticketing, or missing hangers.
• Typical fine: $100 - $300 per violation, sometimes per carton.
• How to prevent: Read and follow the retailer's packaging requirements in their vendor compliance guide before your first shipment. Set up your packaging process to match their specifications.
• Can you dispute? Rarely. The retailer's DC team documents packaging issues with photos during receiving.

Carton Count Discrepancy

The number of cartons received at the distribution center must match the carton count on your ASN. Even if the total unit quantity is correct, a carton count mismatch triggers a chargeback.

• What it means: You said you shipped 20 cartons but the warehouse counts 18 (or 22). The physical count does not match the ASN.
• Typical fine: $50 - $150 per shipment.
• How to prevent: Count cartons carefully before shipping. Update the ASN if the count changes after initial entry. Verify the BOL carton count matches the ASN.
• Can you dispute? Yes, if your BOL shows the correct carton count and the discrepancy occurred during transit.

Pallet Non-Compliance

Retailers have strict rules about pallet configuration, weight limits, and stacking patterns to ensure safe and efficient handling in their distribution centers.

• What it means: Pallets did not meet the retailer's specifications for size, weight, stacking, wrapping, or labeling. Common issues include overweight pallets, mixed-SKU pallets when single-SKU was required, or pallets exceeding height limits.
• Typical fine: $150 - $400 per pallet.
• How to prevent: Follow the retailer's pallet configuration guide exactly. Weigh pallets before shipping. Use proper stretch wrap and corner boards. Label each pallet with a GS1-128 pallet label.
• Can you dispute? Difficult unless the pallet damage occurred during transit, in which case file a carrier claim.

BOL Issue

The Bill of Lading is a legal shipping document and must be accurate. Errors on the BOL create confusion at the receiving dock and can delay or misroute your shipment.

• What it means: The BOL contains incorrect information such as wrong PO numbers, wrong weight, wrong carton count, missing carrier details, or incorrect ship-to address.
• Typical fine: $75 - $200 per shipment.
• How to prevent: Double-check the BOL against the ASN and PO before handing it to the carrier. Ensure PO numbers, weights, and carton counts all match.
• Can you dispute? Yes, if you have a copy of the correct BOL and can show the error was on the carrier's or retailer's side.

Unauthorized Shipment

Shipping without a valid purchase order or shipping outside the approved delivery window is treated as an unauthorized shipment and may be refused entirely.

• What it means: You shipped product without a corresponding PO, shipped against a cancelled PO, or delivered outside the retailer's approved delivery window.
• Typical fine: $200 - $500 per shipment, and the shipment may be returned at your expense.
• How to prevent: Only ship against active, confirmed purchase orders. Verify the PO status in RetailReady before shipping. If a PO is cancelled, do not ship.
• Can you dispute? Yes, if you have a valid PO and can prove it was not cancelled before you shipped.

Quality Issue

Quality chargebacks cover defects that make products unsellable or that generate customer returns.

• What it means: Products had quality defects such as incorrect sizing, color variations, construction flaws, missing components, or did not match the approved sample.
• Typical fine: Cost of defective goods plus $100 - $300 per incident. Repeated quality issues can lead to vendor scorecard penalties.
• How to prevent: Implement quality control inspections before packing. Compare production samples against approved samples. Conduct random audits of packed cartons.
• Can you dispute? Difficult unless you can demonstrate the defect occurred after delivery (e.g., warehouse handling damage).

Return Deduction

When a retailer returns unsold or defective merchandise, they deduct the cost from your payments. These deductions appear as chargebacks on your 812.

• What it means: The retailer is returning product to you and deducting the value from future payments. Reasons include overstock, seasonal closeout, or defective merchandise.
• Typical fine: Full cost of returned goods, plus a return processing fee of $25 - $75 per return authorization.
• How to prevent: Review your return allowance terms in your trading partner agreement. Maintain high sell-through rates by providing accurate forecasts. Respond to Return Authorizations promptly.
• Can you dispute? Only if the return violates the terms of your agreement (e.g., returns outside the allowed window or exceeding the agreed return percentage).

Advertising Allowance

Many retailers require suppliers to contribute to advertising and marketing costs. These are deducted from payments as chargebacks if not paid separately.

• What it means: The retailer is deducting an agreed-upon advertising co-op fee or promotional contribution from your payment.
• Typical fine: Varies widely, typically 1-5% of net sales to that retailer, deducted quarterly or annually.
• How to prevent: Understand your advertising allowance terms during the onboarding process. Budget for these deductions as a cost of doing business with the retailer.
• Can you dispute? Yes, if the deduction amount does not match your agreement or if you were not notified of the advertising program.

Promotional Allowance

Promotional allowances cover special pricing, discounts, or markdowns that the retailer takes during promotional events.

• What it means: The retailer is deducting money for a promotional event (sale, clearance, markdown) that was either pre-agreed or imposed per your trading terms.
• Typical fine: Varies based on the promotion. Can range from a few hundred dollars to thousands, depending on the scope.
• How to prevent: Track all promotional agreements carefully. Confirm the terms, dates, and markdown amounts in writing before the promotion starts.
• Can you dispute? Yes, if the deduction does not match the agreed promotional terms or if you never agreed to the promotion.

Volume Rebate

Volume rebates are post-sale discounts based on hitting certain sales thresholds. Retailers deduct these once the threshold is met.

• What it means: The retailer is taking a rebate deduction because your sales volume reached a threshold that triggers a retroactive discount.
• Typical fine: Typically 1-3% of sales above the threshold amount.
• How to prevent: These are usually agreed-upon in your trading terms. Ensure you understand the thresholds and budget for the rebate as a cost of the volume.
• Can you dispute? Yes, if the calculation is incorrect or the volume threshold was not actually met.

Freight Claim

Freight claims arise when the retailer incurs extra shipping costs because of supplier errors in routing, carrier selection, or shipping method.

• What it means: You did not follow the retailer's routing guide, used the wrong carrier, wrong shipping method, or shipped to the wrong distribution center.
• Typical fine: Freight cost difference plus $100 - $250 penalty per shipment.
• How to prevent: Follow the routing instructions on every purchase order exactly. Use the retailer's designated carrier and service level. Ship to the correct DC.
• Can you dispute? Yes, if the routing guide was unclear, recently changed without notice, or if the designated carrier was unavailable.

Compliance Violation

This is a catch-all category for violations that do not fit neatly into other categories. It covers any breach of the retailer's vendor compliance manual.

• What it means: You violated a specific requirement in the retailer's vendor compliance guide that is not covered by other chargeback codes. Examples include missing EDI documents, wrong EDI version, or failure to follow specific handling instructions.
• Typical fine: $100 - $500 depending on severity.
• How to prevent: Read the retailer's full vendor compliance guide before your first shipment. Review it annually for updates. Use RetailReady's validation to catch issues before they become chargebacks.
• Can you dispute? Depends on the specific violation. If you can show you complied with the published requirements, dispute with documentation.

Chargeback Reference Table

Key takeaway: Most chargebacks are preventable. They come from rushing through the shipping process or skipping steps. Building a consistent workflow in RetailReady, where you complete each step before moving to the next, is the best way to avoid these costly fines.