For suppliers, success on platforms like Amazon and Walmart comes with its fair share of challenges. Among them, chargebacks and deductions can be costly and frustrating to manage. These financial penalties can eat away at your profits and create cash flow issues if not handled properly.
That’s why it’s crucial to understand the differences between Amazon and Walmart chargebacks, how they are imposed, and the best ways to dispute them. So, let’s break it down.
Understanding Chargebacks and Deductions
Chargebacks and deductions are financial penalties imposed by retailers when suppliers fail to meet specific requirements. While these terms are sometimes used interchangeably, they have distinct meanings:
Chargebacks: Fees imposed due to non-compliance with shipping, packaging, labeling, and other operational standards.
Deductions: Reductions in payment due to discrepancies in invoices, product shortages, or promotional allowances.
Amazon’s Chargebacks and Deductions
Amazon has a highly automated compliance system that tracks supplier performance. If suppliers fail to meet Amazon’s stringent requirements, chargebacks are issued through the Amazon Vendor Central portal. Common Amazon chargebacks include:
Purchase Order (PO) On-Time Accuracy Chargebacks: If shipments do not arrive within Amazon’s specified delivery window, a penalty is applied.
Advance Shipment Notification (ASN) Chargebacks: If ASN information is missing, incorrect, or late, a chargeback is assessed.
Labeling and Packaging Chargebacks: Errors in barcodes, incorrect label placement, or missing shipping labels lead to penalties.
Routing & Transportation Chargebacks: If Amazon's carrier instructions are not followed, suppliers face additional fees.
Amazon also enforces invoice deductions, which often result from:
Invoice discrepancies (e.g., pricing errors, missing items, or duplicate billing).
Shortages (when the received inventory is less than what was invoiced).
Unauthorized returns or damaged products.
Amazon suppliers must use the Dispute Management system within Vendor Central to challenge erroneous chargebacks or deductions. However, disputes can be difficult to win, requiring strong documentation, such as proof of delivery and accurate invoice records.
Walmart’s Chargebacks and Deductions
Unlike Amazon, Walmart assigns deduction codes for issues like shortages, compliance errors, and pricing mismatches. This approach provides more clarity but still demands close monitoring to prevent unnecessary losses. Sellers must track Walmart’s Accounts Payable system and dispute invalid deductions within strict timeframes to recover funds.
On-Time In-Full (OTIF) Penalties: If shipments do not arrive within Walmart’s delivery window or are incomplete, suppliers face financial penalties.
Labeling and Packaging Violations: Missing or incorrect barcodes, labels, or packaging errors result in chargebacks.
Transportation and Routing Violations: Failure to follow Walmart’s carrier instructions can lead to fines.
One key difference? Walmart’s OTIF penalties are among the strictest in the retail industry. Failing to meet the OTIF threshold can lead to substantial financial losses for suppliers.
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