If you are experienced with Amazon Vendor Central, terms like deductions and chargebacks will not be new to you. They might even make you cringe.
Chargebacks and deductions represent a significant amount of time and energy of the vendor-retailer relationship. They are the means through which retailers enforce compliance with their guidelines and protect their customers' experience. However, for suppliers, Amazon Deductions can heavily impact your bottom line and operational efficiency if not managed effectively.
Within this article, we shall delve into the intricacies of Amazon Chargebacks and Deductions, shedding light on the diverse deduction types and the factors influencing their emergence. In addition, we present professional insights to proactively minimize their frequency and manage them with utmost efficiency.
What is a DEDUCTION?
Deductions refer to the money that Amazon deducts from your payment for violating Vendor Regulations. They can range from minor amounts for small infractions to a significant 50-60% of the product cost for major violations.
In recent times, there have been allegations that Amazon is issuing numerous deductions to increase its profit margins. As a vendor, it's essential to know how to handle these deductions effectively.
To do so, you need to be aware of the various types of deductions that Amazon imposes on vendors.
Types Of Deductions1) Compliance Chargebacks
These are the most common types of deductions issued by Amazon. They are issued when the vendor fails to comply with the Vendor Agreement. The most common chargebacks we handle for customers include:
- Overweight or Oversized Carton
- Label Accuracy: this is issued when the label is not as per the terms agreed upon.
- Advance Shipment Notice (ASN): this is issued when you fail to notify Amazon about a shipment reaching earlier than expected.
- Carton Content Accuracy: this is issued when the content of the carton, for example, the wrap used to cover the product, does not meet the terms agreed upon.
- Ship In Own Container: this will be issued when the vendor ships a product in a box when it is supposed to be shipped in its original packaging without any extra box.
- PO Time Accuracy: this is issued when the timeline of the shipment does not match the terms agreed upon. For example, it was decided that the shipment will be dispatched in 24 hours once the PO is received, so if you fail to do so, this chargeback will be issued.
As the name suggests, these deductions are issued when the quantity of products received is less than stated in the invoice. Reasons for shortages can include:
- Human Error: errors made by people working for carriers, warehouses, or shipping docks in counting or damage caused to items at various stages of transportation
- Miscounts: when the number of items in a shipment does not match the number of items listed on the shipping documentation. This can be due to incorrect labeling or error in counting.
- Pilfered or Missing Items: this occurs when items are stolen or lost
- This will be issued when there are any discrepancies in the pricing of the product. There are numerous ways for this to happen.
- Label and invoice price mismatch
- Differences between Amazon's purchase order price and the invoice price
Best Practices to Avoid Deductions.
Proactive Shipment Tracking: By tracking each step of the shipment you as a vendor can make sure if everything is happening in a timely manner and if at any point there are delays you can update it on Amazon Vendor Central to avoid any deduction.
Stay Up to Date With Vendor Agreement: Amazon frequently changes Vendor Regulations, these changes are usually minor, but by not complying with them you can get a large number of deductions. So you should make sure that you stay updated with these changes and make sure your staff adheres to them.
Streamline and Standardized Process: It’s a hassle to follow every step manually so there is software out there to streamline this for you. They are super efficient and cost-effective. Further in this article I will share more details about it.
How To Dispute Amazon Chargebacks/Deductions
Disputing Amazon chargebacks/deductions must be done within 11 days, or you risk losing out on profits. The conventional manual approach involves hiring multiple full-time employees to upload relevant documents to Amazon Vendor Central for each chargeback.
- Conventional manual methods
With already narrow margins, you don't have any choice but to process these numerous chargebacks. Don't forget, this is money that is already owed to you!
To dispute these deductions, employees will dispute every single deduction by uploading relevant documents to Amazon Vendor Central. This usually takes 15-30 minutes per deduction.
While this process works it is slow, tedious, and requires continuous focus. During seasonal sales spikes, deductions management can become overwhelming. Downstream effects include claims getting backlogged, warehouse and operations teams needing to get pulled from critical duties to help provide BOL and shipping data, and other internal inefficiencies. While teamwork is not a bad thing, there is certainly a better way to work together to ensure consistent disputing and payment is achieved.
- 30x Efficient way, using Robotic Process Automation (RPA)
Robotic Process Automation or RPA is specifically designed to work with retailer portals, EDI, and other document sources to create and submit disputes. Whether it is Amazon, Walmart, Lowes, CVS or any of the twenty other retailers we support, iNymbus will streamline the end-to-end deductions management process & chargeback automation for your staff.
Our RPA is customized directly to your company's SOPs ensuring we maximize efficiency around your current tools and procedures. We do all of the heavy lifting to configure the bots and deliver a full, live product in as fast as two weeks.
These are the results our clients have got after they onboarded with iNymbus:
- 30X efficiency boost in processing chargebacks
- Cost-per-claim reduced by a drastic 80-90%
- Reduction in duplication of work and unnecessary manual steps
- Continuous disputing and follow-up of all 100% claims
- In-app reporting showing the status of all claims across all connected retailers.
Processing chargebacks is a tedious process, but with the help of technology, you can not only fight this battle but also win it. Understanding your current process, what documents are needed, and how they are accessed is the first step to getting started with iNymbus.
Schedule a quick call to learn how iNymbus can help with your unique business needs and processes!