The Retailer Spring Edition 2022

THE RE TA I L ER

30

HOW THE GLOBAL SUPPLY CHAIN CRISIS WILL AFFECT CHARGEBACKS

Monica Eaton-Cardone Chief Operating Office Chargebacks911

S hipping problems around the world and rising fuel prices will mean slower deliv eries – and this could lead to a surge in chargeback claims.

How does this effect chargebacks? Any company that relies on shipping physical products to customers will be affected by the supply chain crisis, and not just those who ship products overseas – domestic shipping has been affected by increased demand and a decreased number of delivery drivers. This creates several problems. There is the obvious damage to merchants’ reputations, the revenue lost to refunds and a reduction in repeat purchases, but we can also expect a surge in chargeback claims. The chargeback system was created to be a last resort for consumers who couldn’t solve a dispute with merchants, but it is increasingly being used as a first-resort by customers who believe that it is a quicker and more certain way to get refunds than dealing with companies who don’t have a financial interest in giving them their money back. This in turn has led to an increase in illegitimate chargeback claims, in which, for example, a customer receives a delivery but initiates a chargeback anyway in order to get their money back. Having a surge of chargebacks at a time when there are serious supply chain issues could be devastating for many companies. Chargebacks cost companies significantly more than refunds – they also include fees levied by the acquiring bank and take time to process, particularly if you intend to dispute them. Should your company receive enough chargebacks your acquirer may decide that your company is risky, and will therefore increase their processing fees, meaning that every trans action will cost more. Your company is probably already doing everything it can to ensure that your products are reaching your customers, but with aworldwide crisis in supply chains it will be difficult for many companies to avoid disruption. The first and most obvious fix for the problemwould be to offer robust, easy to use package tracking for all of your deliveries. Even if you have to pay more for this service you are likely to find that it will save money in the long run – even if a delivery is running late a customer will still be able to see it and that should prevent a request for a refund or charge back. After that, by ensuring that your company’s return policies are easy to understand and customer-focussed you may be able to prevent a significant portion of chargeback claims. This imbalance caused the global ship ping industry to become ‘clogged up’, and we are still experiencing the repercus sions from this.” ‘‘ How can your company stop the chargebacks surge?

Businesses around theworld have been facing serious delays in shipping, and this is leading to increases in delayed or lost deliveries, which in turn leads to chargeback claims from customers. Both the COVID-19 pandemic and the current rise in fuel prices caused by thewar in Ukraine are causing the gears of international logistics to slow down, and while they’re far from grinding to a halt, everyone from individual consumers to businesses are seeing the effects. Supermarket shelves that are partially empty, sudden shortages of specific goods ( such as wheat ), and increase in prices of fuel, microchips and second-hand cars. So where has the supply chain crisis come from, how is it effecting chargebacks andwhat can be done to stop it from effecting your business? Having a surge of chargebacks at a time when there are serious supply chain issues could be devastating for many companies.” ‘‘ Origins of the supply chain crisis When the COVID-19 pandemic began, some of the first places to be hit hard were major manufacturing centres – China, but also Vietnam, South Korea and Taiwan. Factories at these locations had to shut down or slow down production and the shipping companies who take their finished goods across the world similarly slowed down their operations in anticipation of much less demand. Also affected were shipments to certain industries like food service, as logistics companies anticipated a general slow-down of the economy, but shipping companies overlooked something obvious: if consumers in the developed world aren’t spending money on social activities then they will spend that money somewhere else. This caused a huge spike in demand for certain goods, and this imbalance caused the global shipping industry to become ‘clogged up’, and we are still experiencing the repercussions from this. Although lockdown restrictions are ending in many places, the sudden record-breaking rise in fuel prices is likely to have effects on shipping for months to come. Everything from container ships to heavy goods vehicles to delivery vans run on diesel and petrol, the prices of which have skyrocketed since the beginning of the year. This is likely to have effects on shipping as carriers try to cut costs, perhaps by reducing the number of deliveries or cutting costs elsewhere, both of which could cause delays and lost deliveries.