A
chargeback is a return of funds to
another company. When a company
issues you a chargeback, they are
requesting payment from you.
Most commonly, a charge back occurs
from a retailer to a wholesaler.
For example, the wholesaler of brand
ABC sells women's
t-shirts to a retail
store name XYZ. After receiving the
shipment of t-shirts, the retailer
has found that the wholesaler did
not properly attach
price tickets in the
proper location. As a result the
retailer will chargeback
the wholesaler. In other words, the
retailer will request compensation
for the error made by the supplier.
As
a supplier, it is very important to
understand all of the buyers
requirements. Following along with
the example above, as a t-shirt
supplier it is important to
understand that some buyers request
price tickets to be placed thru the
garment labels on the inside
neck of the shirt. However, other
buyer prefer the price tickets at
the arm pit, or possibly the sleeve
opening. It is absolutely critical
to know your buyers requirements.
You can not simply assume the
placement. Even here at Apparel
Search, we may understand something
about industry standards. However,
"buyers" are not required to follow
industry standards. They set their
own standards... As a supplier, it
is important to understand the
specific standards set forth by your
particular client. Do NOT rely on
what you "think" is best. Make sure
you ask your buyer or face the
consequences.
Note: the proper price ticket
location, should have been
adequately explained by the retailer
in a memo, purchase order, supplier
manual, etc. If you are not
certain, it is important to ask your
buyer specifically.
If
the wholesaler finds that the
clothing
factory made the error,
the wholesaler may attempt to charge
back the factory for the error. If
a factory finds that their supplier
has made an error, they can possibly
charge back their supplier.
Chargebacks can occur to any company
along the supply chain that makes an
error.
Most major
retailers
have a very large chargeback
department. Some fashion
industry pundits say that the
chargeback department may be the
most profitable aspect of a
retailers business (no, I am not
going to tell you exactly who says
such a thing...). Because they are
no longer in business, I am fairly
comfortable stating that the former
May Company, was notorious for
tossing about large chargebacks.
That company was purchased by
Federated Department Stores.
Federated changed their corporate
name to Macy's. I wonder if
Macy's uses chargebacks as an art
form... You can draw your own
conclusions.
Retailers may
initiate a chargeback to their
suppliers for any one of a number of
reasons. Chargeback's are most
certainly not limited to price
ticket placement as illustrated in
our example above. That is simply
one of the MANY possible causes. A
few examples would be incorrect
label placement,
incorrect UPC, late delivery,
missing ASN, short shipments (I do
not mean short pants; short shipment
is shipping less units then the
purchase order required), incorrect
carton dimensions, etc. Typically,
the retailers supplier manual will
include details regarding possible
chargebacks and reason codes as
guidance.
If you believe
that the
clothing
stores
are the lucky
ones in this chain of events, you
are not entirely correct. Even
retailers are faced with charge
backs. They get
returns from
unhappy customers. If a product is
not correct, it gets sent back to
the store and the customer receives
compensation (refund). However, the
retailer may do well and be able to
side step this expense by charging
back the wholesaler for the
return if their was a quality
problem...
Do all
chargebacks get paid in full? That
is a good question. Possibly, I
will write about that in the future.
