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FBA Inventory Management Strategies to Run Your Business Smarter

Posted on March 17, 2021 by Amanda Levine

There’s no denying the benefits of Amazon’s FBA inventory management program. But as you enjoy its many conveniences, don’t forget there are still many other things to consider—it’s by no means a “set it and forget it” process. Supply chain bottlenecks can still happen, and the constant cycle of replenishing your inventory while avoiding stock-outs and extra FBA fees is certainly no easy feat.

Having dedicated FBA inventory management strategies can turn what once was a precarious juggling act into a simplified, streamlined process that increases profitability (and probably lowers your stress level, too). Let’s take a look at a few of these strategies and the common pain points they help solve.

1. Staying in Stock

It’s no secret that staying in stock is essential for all sellers, but it’s even more important for FBA sellers because of all the added Amazon processing. Things move a little slower, and by the time you’re back in stock, you’ve likely taken a hit on your sales, search ranking, and ratings. Competitors will snap up your business, and it will take some time to recover.

Avoiding these losses to your profits and reputation is crucial, but it takes careful planning to replenish your inventory at the right time—not too early and definitely not too late.

And just when you think you have a handle on things, demand will, as it always does, change. Analyzing previous sales data offers a good baseline on what to expect, but you also need to look at:

Changing industry trends
Q4 and holiday season shopping habits
Key Amazon shopping dates

Anticipating product demand is a crucial step in FBA inventory management and forecasting, which is when timing really comes into play. What are your supplier lead times? How long are you in FBA processing? If you’re importing, don’t forget to factor in possible customs delays or international holidays.

When a lot can go wrong, you need to dedicate your resources toward getting it right. Amazon inventory funding with Kickfurther can ease many of the initial financial constraints, and dedicated FBA inventory software (like eComEngine’s RestockPro) can help you make more informed inventory decisions to set you up for success.

2. Managing Excess Inventory

While you should do your best to understand and meet your customer demand, buyer behavior in general can be hard to predict as there are many variables outside of your control. Just look at how the COVID-19 pandemic has impacted purchasing in the last year or so and likewise impacted FBA inventory management.

Worldwide crises aside, inventory issues can (and will) happen. You may find yourself stuck with excess stock. Storing unsold goods is always costly, but even more so when you’re an FBA seller and have to pay long-term storage fees on top of your monthly storage expenses. These fees quickly add up and eat into your bottom line, so it’s prudent that you act quickly.

Here are a few things you can do:

Lower your prices or offer a discount
Create a bundle with a popular complementary product
Run ads and/or refresh your product listing to increase visibility
Sell on Amazon Outlet (you must meet certain criteria to be eligible)

Consulting your own inventory database or Amazon’s Manage Excess Inventory tool can help you potentially avoid and address this frustrating issue.

3. Maintaining a Healthy IPI

Amazon uses a number of different measurements to track how well your business is performing over time. The marketplace’s IPI (Inventory Performance Index) is one such metric that FBA sellers must keep a close eye on.

Your IPI score is based on the following:

Excess inventory percentage
FBA sell-through rate
Stranded inventory percentage
FBA in-stock rate

It can be confusing, but here’s how it works in a nutshell: Amazon sets an IPI threshold (it was lowered from 500 to 450 in December 2020) and you should always aim to be above it. Scores lower than that number could result in overage fees and storage volume limits being placed on your FBA inventory. Amazon reviews storage limits on a quarterly basis so be sure to stay up to date.

If Amazon notifies you that your IPI score is below the target inventory level, you have six weeks to improve it. If you fail to do so, restrictions will begin the next quarter.

The Inventory Performance dashboard in Seller Central gives you a summary of key inventory metrics and ways to improve your performance. eComEngine’s free Amazon IPI checklist can also help you increase and maintain your score.

4. Minimizing Pick and Pack Fees

Running an Amazon FBA business has its own unique challenges, with rising fulfillment fees typically near the top of the list. Amazon pick and pack fees can be especially costly, oftentimes making up an estimated 20% of your overall selling fees.

Many sellers are paying too much and don’t even realize that they can do something about it. Pick and pack fees are calculated for every FBA order that’s fulfilled from its centers based on an ASIN’s weight and dimensions. So, if you have heavy, cumbersome packaging, you’re unnecessarily opening up your pocketbook.

Try to keep the weight and dimensions of your products in the lowest tier possible—you don’t need all the extra attention-grabbing packaging like you would in a physical store. It also pays to be strategic. For example, if products can be deflated or disassembled, do it! As long as you set clear packaging expectations (and offer necessary assembly instructions) for customers in your product listing, this shouldn’t be a problem.

Be sure to internally track your FBA products’ weight and dimensions, too. Amazon may incorrectly measure your item and overcharge you, for which you’ll want to file a reimbursement claim. Keep organized records and double check Amazon at every turn—humans are still at the helm of the big eCommerce machine and mistakes happen. Don’t be the one paying for it!

5. Keeping Supplier Info Accessible

It sounds simple enough, but it’s more difficult to do in practice, especially if you have multiple suppliers. Having the right information in the right place streamlines inventory orders and reduces errors.

Be sure to include this important info:

Supplier name and your main point of contact
Mailing/ship-from address
MAP policy details
Lead time information
Payment terms
Purchase order instructions

Having a central place to store this information will be especially helpful as you grow your product catalog or add more employees who need access to this key information to carry out their tasks.

In Conclusion: Work Smarter, Not Harder

Selling via FBA is a balancing act of having enough on hand without ending up in excess. Staying lean is tricky, and manually tracking the many moving parts of your inventory can be an exhaustive task. A good inventory management program and dedicated FBA inventory management strategies make it much easier to keep tabs on your inventory and take action exactly when needed to reduce costs, increase profitability, and grow your business.

8 Hidden Ways to Cut E-Tail Overhead Expenses

Posted on March 16, 2021February 1, 2025 by Amanda Levine

Overhead is a killer for internet-based businesses. It’s true you’re not dealing with the rent, utilities, and staffing costs of running a brick-and-mortar storefront. But expenses still add up quickly

Having limited overhead leaves fewer opportunities to spend less than your competition for your business’s core operations. Fewer savings opportunities make it that much harder to find the money for promotions and customer service to drive customers to your door instead of somebody else’s.

But that doesn’t mean there are no opportunities to cut your business expenses. Here are eight of our favorites for e-commerce business owners.

8 Ways to Reduce E-Tail Overhead Expenses and Outperform the Competition

1. Pack More Efficiently

Most e-commerce shops buy one or two kinds of boxes and ship their supplies in them because that’s the easiest way. The result is that items end up in containers that are too big, increasing postage costs. It’s a small extra expense at first, but when you start shipping a thousand units a month, it can add up to significant money.

Take the time to buy the right box for every item you sell. That way, you ship your wares at the lowest cost possible. It’s one of those investments that pay off forever once you put in the initial effort.

While You’re At It

Look into how you’re packing and shipping your products. If your storage and fulfillment process is streamlined and straightforward, it saves you labor costs. If it’s disorganized and difficult, that’s unnecessary money going out of your pocket.

2. Buy in Bulk

Buying supplies and wholesale products in larger quantities means you pay less per unit, which reduces your overhead expenses.

Some suppliers list decreasing prices for larger quantities, but others will negotiate a deal they don’t advertise. They decide to sell what they can for full price but offer a reduced price on large orders when asked. Remember: Nobody will increase your prices if you ask for a discount, so pick up the phone and see what can happen.

Remember, you can negotiate for bulk pricing over time. For example, if your vendor’s threshold for the discount is 1,200 units, you might be able to get it by committing to 200 units per month instead of buying them all at once. Again, you have nothing to lose from asking.

While You’re At It

If you could qualify for a bulk discount, but you can’t get the money upfront, consider a business line of credit or using inventory funding to free up needed capital. These can help with bulk supply and wholesale orders, along with several other cash flow issues that plague small businesses. Run the math on fees and interest to make sure it doesn’t cost more money than it saves.

3. Pay Vendors Strategically

If you let your vendors choose their payment timeline or leave it to chance using their defaults, you end up with cash flow issues when payment for your sales comes in after you need to pay your bills. At best, this results in strained relationships with the vendors who make your business possible. At worst, you rack up late payment fees or credit card interest that cuts into your bottom line.

From the beginning, work with your vendors to set a payment due date that works with the flow of your predictable incoming sales. This means you have to study and understand your business’s cash flow trends, but you were already doing that, right?

While You’re At It

Many vendors deliver your orders and expect payment within 30, 60, or even 90 days after receipt. With focus and effort, this makes it possible to sell the entire order before payment comes due — and then pay the vendor for units you’ve already sold. Be careful ordering on margin like this, but if you can pull it off, it can do wonders for your bottom line.

4. Trim Your Offerings To Cut Overhead Expenses

Some online businesses offer only one item and do it so well that’s all they need to sell. If that’s you, go ahead and skip this section. If you offer multiple items, though, consider culling the worst-performing.

Each item you sell requires another supply order to manage, another size of packaging, another line item to track in your reporting, another set of advertisements to draw attention to it. Cutting your offerings, then spending that money on advertising your top performers can streamline your business and increase profits.

Remember that sales volume is not the best metric to decide which of your products to cut. Look instead for net profit and customer lifetime value. These numbers show you which items do the most good for your business overall.

While You’re At It

Although your worst-performing offerings need to go and can reduce overhead costs, they might represent an excellent opportunity for somebody else. Don’t just discontinue your program of selling those. See who might be willing to buy that part of your operation as a turnkey business. Funnel that money into bulk discounts and doubling down on your best-performing items.

5. Get All the Discounts

Most of your vendors, suppliers, and distributors offer one or two discounts upfront to entice your business and get you to spend more. But those won’t be the only discounts available to you to reduce overhead expenses. Deals you might qualify for include:

Bulk discounts (your manufacturer may offer volume-based discounts on larger orders, for example)
Bundling discounts from ordering multiple kinds of things altogether
Clearance discounts, where you can get a great deal on something you can use or sell
Co-advertising credits, a discount for mentioning your vendor or referring a new customer
End-of-quarter discounts, where you get a deal so they can make their quotas
Holiday discounts, either because it’s a holiday or themed for certain items

While You’re At It

Also approach the discount option from the other side of the equation: how you pay. Do you have a rewards or cash-back card you could use to pay your vendors? If so, be strategic and maximize your points.

If not, find out if the vendor has a cash or check payment discount. Since processing your card costs them handling fees, they might take that off the top if you mail them a check or pay via direct deposit.

6. Find Free Shipping

You’re not going to find anybody to ship things to your customer for free. We’re talking about getting supplies sent to you, your warehouse, or your fulfillment center either free or at a significantly reduced cost to reduce overhead expenses.

To make this happen, you need to identify the shipping sweet spot for your suppliers. Some will reduce shipping charges if you order enough product — another form of bulk discount. Others will reduce costs if you purchase enough items. Still others have a rough cash flow at the end of the month and will kick in free shipping if you place your order then.

This will take some investigation, but when you find this overhead cost-cutter, it gives you an edge over all your competitors who haven’t.

While You’re At It

Consider consolidating your vendors and ordering your supplies from as few companies as possible. The more you order from any one business, the better you’ll be able to negotiate for perks like free and reduced shipping.

7. Use Your Mailing List

You may have heard the oft-quoted statistic that it costs seven times as much to attract a new customer as it does to sell to an existing client. The specifics of this vary depending on the industry, but you do get higher profits when you’re no longer spending money to get somebody’s initial attention. Maximizing the power of your advertising dollar is one way businesses often forget can reduce their overhead expenses.

Your mailing list can be one of the most effective, least expensive ways to mine your existing audience for more sales. The dos and don’ts of this process are beyond the scope of this article, but the more you leverage this communication channel, the more you’ll save on your sales.

One technique that works well is calculating how much you save by marketing to your mailing list instead of marketing to the general public. Then offer your subscribers a discount equal to 50% to 75% of that savings. You still save money on orders, and they appreciate their exclusive deal.

While You’re At It

You can get similar results from activating your social media following through discounts, flash sales, and similar engagement techniques. Create a content calendar and follow through on it to make extra sales with this part of your audience.

8. Install an Abandoned Cart System

Chances are, you’ve had this experience before: You’re all set to purchase something online, but you get pulled away at the last minute. Maybe something came up at work, or maybe one of your kids called for your attention. Whatever the reason, did you return later and complete your order?

Most likely, you didn’t.

An abandoned cart system notes any time an order gets to this stage but doesn’t finish. Then, the system sends a reminder via email to the person who relinquished their order. These reminders work very well, especially if they include a discount or bonus gift for customers who return and complete their orders.

While You’re At It

Set up a drip system for your store. This is a list of contact emails for everybody who interacts with your business in any way. Don’t send this list emails once a week; they’ll unsubscribe. Just send a high-quality message once a quarter or twice a year to remind them you exist and are happy to do business with them whenever they’re ready.

Final Thought: Start With an Inventory

Don’t inventory your stock; inventory your opportunities to reduce overhead expenses. Go through each of the items above and look deeply into your spending for the categories in question. Can you find a way to trim expenses by $100 each per month? How would you leverage that $1,200 per year to improve your business’s reach, service, or performance?

There’s only one way to find out. I’ll leave you to it.

5 Steps to Create a Strong Brand Identity in 2021

Posted on March 15, 2021August 1, 2024 by Amanda Levine

How to Create a Strong and Scalable Brand Identity: a Beginner’s Guide

In 2021, there are many touch points that customers can interact with your brand through. With so many channels and so many competing businesses out there trying to make a name for themselves, it’s become all the more important to have a strong brand identity that scales across any channel.

There’s digital channels like your website, Facebook, Instagram, Pinterest, and other social media channels, and there’s also the offline experience, which includes your products and your packaging.

What is brand identity?

Your brand identity isn’t just your logo, your business or the products that you sell. It’s also the values you stand for, the experience you provide and the feelings this creates for your customer.

These intangible qualities of your business are ultimately what captures your customer’s mind, heart and attention.

Your brand identity also shapes the way people communicate your brand to others through word of mouth. Or as Amazon founder Jeff Bezos says, “Branding is what people say about you when you’re not in the room.”

With that in mind, here’s how to create a strong brand identity that scales.

Understand who you are selling to and the kind of experience you want to give them.

All great brands start with their customers, so knowing the qualities of the demographic your product or service is aimed at is incredibly important to shape the best possible experience for them.

Alongside their age, gender, income and occupation, some key questions to ask to identify them better could include:

What interests and challenges your customer?
What is the way they like to be communicated to, and on what channel do they most spend their time?
What is their expectation of the way a brand should act in terms of ethics and values?
What would your brand mean to them, and what experience would they be seeking from it?

Come up with a strong value proposition, mission statement and personality.

Once you’ve gleaned the above information from the demographic you want to target, you have what you need to form a brand guidelines and build out your brand’s visual and written aspects.

This document should be stored in a place that everyone in your team can access for brand consistency as you start to scale. It also informs how your brand behaves in every interaction it has with customers, while laying out the key essence of your brand’s identity.

This includes:

A strong value proposition. This is what identifies your brand as unique in your particular industry. In order to succeed and build a strong identity, you need to be able to articulate clearly what makes your business different from the competition. What can you offer people that your competitors can’t? Keep an eye on other companies like yours are doing with their branding and see what works and what misses the mark.
A mission statement. This will help you to act with intention in every decision you make in business. It also helps you form a clear vision for the future. What is the reason for your brand’s existence? Once you have figured this out, it can be shared across every channel with customers and become what they know and trust you for.
Your personality and tone. There is no reason why you can’t think of your brand as personable like a human being – in fact, to connect with customers, it helps to identify human qualities within it. The language you use is just as important as visual attributes to represent your brand, so get specific on how you want to communicate. Is the tone of voice you’d like to have slick and professional, or informal and cheerful?

Think about how you can bring that same experience to every channel.

As your brand starts to scale, the touchpoints you have with customers will start to stack up across multiple mediums. The most important thing to keep in mind is keeping your messaging aligned across all of them, which is where your brand guidelines will come in handy.

Each channel will need its own treatment (think varying image dimensions and character limits) but there should be unifying elements, too. How can you bring your brand’s unique identity to your website, your social media channels, your product packaging, and your shipping packaging?

Tip: For ecommerce brands, a great way to translate your brand from online to offline and establish a link for your customers is to use custom packaging that uses your unique logo, colors, icons, or illustrations. If you want to bring your mission statement into it, a custom card is always a great option for telling your story.

Keep it consistent.

Consistency is absolutely key, so don’t send customers mixed messages about your brand’s identity. As you scale up, any visual or written content you associate with your brand and share with your audience should be relayed back to the founding document you’ve created of your brand’s identity.

If you have the time and resources, it’s a good idea to break the master document down to a brand guidelines for each specific channel to ensure any content or communication is as effective as possible.

Track performance metrics to measure the way your brand is resonating.

Once you’ve shared your brand identity with the world, it’s important to monitor feedback from your customers to see whether your communications are hitting the mark.

Keep track of engagement through likes, comments, discussions, surveys, emails, and Google Analytics to see how people are interacting with your brand and if the sentiments coming through are mostly positive or negative.

If you have a team that’s in charge of different channels, ensure there is a reporting system in place (such as a fortnightly or monthly meeting document) where you can review engagement and feedback on your brand, and look for room for improvement.

Wrapping It Up

We hope these ideas for scaling a strong brand identity that scales have helped you! Crafting a strong brand identity means consistently using your unique brand colors, language and other aspects until your brand achieves recognition for what you stand for beyond the name and logo.

6 Tips to Manage Your Amazon Inventory Like a Pro

Posted on February 2, 2021 by Amanda Levine

Managing your Amazon inventory is key to be successful on Amazon. Don’t ignore your stock health and risk your reputation because of poor management.

You may not believe it, but a healthy inventory is one of the cornerstones for a healthy Amazon business.

Improper inventory strategy generates serious impact on your business:

· Product listings go down on search results

· Sales and customer reviews take a bad hit

· You can’t accept orders for back-ordered items

Proper Amazon inventory management attracts shoppers. It also reduces stock costs, spoilage and losses.

An efficient stock handling strategy helps Amazon sellers keep products in stock and sales flowing. It’s also crucial to keep an ample inventory while satisfying customers’ and seasonal demands.

To help you keep a great inventory management, we’ll share 6 strategic tips to handle your Amazon inventory like a pro seller.

1 – Use the Amazon Inventory Management Tools

Small businesses tend to manage and track inventory on spreadsheets. This is time-consuming and prone to error.

You can keep better track of your Amazon inventory through Seller Central. The dashboard has a suite of free stock management tools to automate your inventory.

Amazon Selling Coach

The Amazon Selling Coach reviews sales trends and gets an estimate for the days your current Amazon inventory can cover.

The data is based on actual sales figures, which is perfect to forecast inventory purchases. You can plot out trends to determine required stock levels over different seasons.

Manage Inventory tool

The Manage Inventory tool displays detailed data about your products. Amazon sellers can get a comprehensive report to make sound inventory decisions. It also allows you to:

Add new products
Change pricing and/or quantity
View seller fees per product
View active, inactive, and suppressed listings
Survey FBA shipments at every stage
Track FBA or merchant-fulfilled stock levels

Manage Excess Inventory

This tool provides you with information to help manage your inventory levels. Amazon calculates excess inventory based on:

Economic inputs – Unit cost and recovery rate
Sales data – Demand forecasts and price elasticity

The Estimated Excess quantity calculated by the units for which the cost of holding your inventory would likely be more than the cost of taking an action to reduce excess units.

This value is based on product demand and your costs (fees, unit costs, and cost of capital inputs), and estimates the level of inventory that could give you the highest return on your inventory investment.

If the following conditions are met, Amazon will identify your items in stock as excess inventory:

At least one unit of inventory is more than 90 days old.
The product has over 90 days of supply.
The cost of holding your inventory is more than the cost of taking action to reduce excess units.

Inventory Health Report

Access the Inventory Health Report to review the total unfulfillable and sellable quantities of products. This data is ideal to study sales rates at different seasons, and inventory health.

The report also shows:

· How many items have been sold in the last 30 days

· Weeks of cover based on the previous 30 days of sales

· The lowest competing price for each product listing

Removal Report

The Removal Report displays Amazon’s recommendations for product removals. Here, sellers can choose to have products returned, liquidated or removed. This way, you can avoid being charged with a long-term storage fee.

2 – Understand Your Inventory Turnover and Sell Through Rates

Do you know how fast you sell and replenish your Amazon inventory? That’s your inventory turnover rate. It can be found by dividing the total sales by the average inventory during a given time period.

Inventory Turnover Rate = Total Sales / Average Inventory

You should also determine your sell through rate to optimize your Amazon inventory management.

Sell through rate = (No. of sales / Stock on-hand) x 1000

The sell through rate shows inventory sold compared to inventory purchased. It indicates how quickly you’re selling inventory, and if a specific product sale is paying off.

Knowing your Amazon inventory turnover and sell through rates will point out the areas you need to focus on to optimize your inventory.

· Track how many times you have sold and replenished stock

· Estimate the stock levels you need to keep between inventory shipments

· Avoid over-buying or under-buying when you reorder stock

· Plan inventory purchases and setting discounts

· Analyze pricing and marketing strategies

· Close gaps between manufacturing and the supply chain

· Move through slow-selling items

NOTE: To get your average inventory, add the beginning inventory and the ending inventory, then divide it by 2.

3 – Understand Your Supply Chain Lead Times

Supply chain refers to the inventory movement from initial sourcing to arrival in a warehouse. Lead time is the timespan it takes for stock to arrive once ordered.

Know your supply chain and lead times. This data will allow you to spot the nuances involved in sourcing, receiving and storing your Amazon inventory.

Sellers who understand their supplier lead times can avoid ordering too much stock, and ordering too late. It is also great info to stay on top of manufacturing and delivery schedules.

4 – Use Inventory Forecasting

Inventory management requires precise forecasting to determine when to order more inventory, and how much.

Look at it this way–Sometimes you will need a lot of inventory to meet demand. Some other moments will demand less stock.

Predicting how much inventory is needed is called inventory forecasting. It is broadly based on re-order quantities, sales trends and inventory levels.

Forecasting Amazon inventory is crucial to tackle sales fluctuations. For example, holidays affect inventory because of peaks or drops in customer demand.

Proper forecasting will let you increase goods in high demand during peak sales cycles. You’ll also be able to decrease slow moving products during certain seasons.

5 – Strategic Promotions and Sales

Seasonal discounts and promotions speed up sales, but be careful you don’t drain your inventory. Being out of stock at such times just creates backorders, bad reviews, and low Amazon rankings.

Plan your promotions to avoid setbacks on your Amazon inventory. A good strategy is to set a threshold for a specific set of promoted products. Once you hit that number, stop the promotion to avoid running out of items.

Check Amazon’s Seller Central constantly during a promotion. If you begin to run out of stock, you can stop the promotion at once. Then, you can increase prices to slow down demand.

A Few Extra Tips

Keep Some Safety Stock (if Needed)

If luck strikes, you’ll deal with an unexpected high demand for your stock. So, you may need to store some safety products beforehand.

But, how do you decide if it’s the right thing to do? And how much is ‘the right amount’? Review each listing for the past 12 and decode:

Maximum daily sales
Maximum lead time
Average daily sales volume
Average lead time

Then, just do the math:

Safety Stock = (Max. daily sales x Max. lead time) – (Av. daily sales vol. x Av. lead time)

This will give you a calculated idea of the safety stock you’ll need for each product.

Consider Dropshipping

When you drop-ship, you buy products from a retailer or manufacturer who fulfill the customer orders directly.

This frees you from shipping and keeping an inventory. Instead, you simply list products and tell the supplier when one is sold. Then, the manufacturer takes care of the rest.

The main downside of dropshipping is that you cannot ensure that packing and shipping is handled in a proper way. So, shoppers may get damaged products or no products at all.

Amazon Liquidation Program

If no option above is worth the effort or you think that it will hurt you in the long run, you can choose the Amazon Liquidation Program.

Liquidating inventory can often mean taking a loss. It may just be the best choice, however, if keeping the inventory means losing even more.

Just note that Amazon offers only between 2.5% and 10% of the item’s original listed price. Also, you can’t back out once the product has been accepted.

Final Thoughts

It doesn’t matter if your inventory needs are big or small. Managing your Amazon inventory is key to be successful on Amazon.

Apply the tips in this post as best you can to take control of your Amazon inventory. Don’t ignore your stock health and risk your reputation because of poor management.

Better to understand the problems you face when you let you run out of inventory run out, and how you can prevent this.

How To Fight Back Against Credit Card Chargebacks

Posted on January 28, 2021 by Amanda Levine

The holiday shopping season is winding down for ecommerce merchants across the internet. At the same time, credit card chargeback season is just ramping up. January is typically the worst month for chargebacks and merchants that are unprepared can suffer catastrophic financial losses.

What is a Credit Card Chargeback?

In simple terms, a chargeback is a credit card transaction that is being disputed. A Visa, MasterCard, Discover or American Express cardholder has certain protections against credit card abuses. The card brands typically give the consumer between 60 and 180 days to review their charges. If there is a charge the consumer wants to dispute, they simply call the card issuer and initiate a chargeback. The chargeback is then issued against the corresponding merchant that processed the original transaction.

Chargeback Reason Codes

Each card issuing brand has approximately twenty different chargeback reason codes. Depending on what the consumer states is the reason for the dispute, the customer service agent will then select a chargeback reason Codes that closely matches. The Chargebacks typically fall into one of three categories:

Authorization: If a merchant processes an Authorization without the customer permission
Consumer Disputes: Product not received, not as described, didn’t cancel reoccurring, not as described are the most common
Fraud: Any instance where a credit card was stolen

When a merchant is issued a credit card chargeback, it will contain details on the original transaction (customer name, dollar mount, date of transaction, etc.). Most importantly, it’ll also contain the specific chargeback reason code. The chargeback reason codes are the key to identifying and eliminating the cause of future chargebacks.

What is a Chargeback Ratio?

The chargeback ratio is simply the number of chargebacks divided by the number of approved transactions within a given month. For example, getting five chargebacks on 1,000 transactions in a month equals 0.50% chargeback ratio. If your chargeback ratio is consistently above 0.75%, you bank or processor may deem your business too risky and they will close your merchant account.

Three Main Causes of Credit Card Chargebacks

There are basically three main causes of Chargebacks. The least problematic cause is “operator error,” which is basically a self-inflicted wound by the merchant.

Here is a sample of merchant errors which will result in chargebacks:

Ship out wrong items
Ship to wrong address
Not shipping in a timely manner
No shipment tracking/signature on delivery
Lost, stolen or damaged packages
Poor customer service
Not refunding a returned package
Not clearly disclosing refund and return policies
Issuing a refund but failing to cancel further subscription billing
Not making a customer happy

Any well run operation should have zero chargebacks but a poorly managed business could get hit with 30%+ of each month’s sales volume. Ouch!

Every one of these errors can easily be avoided if the merchant simply does good business. Fulfillment, customer service and billing accuracy are the fundamentals of any ecommerce-based business. Eliminate any issues within your operation and you can easily avoid chargebacks going forward.

The second area to focus on is fraud and stolen credit cards. Stolen credit card numbers are available on the black market for less the $0.05. A thief will spend five cents so they can use it to purchase a $2,000 laptop. Because the ROI is so high, this is the main method thieves use to steal products from your inventory.

To make matters worse, the consumer that had their card stolen will also call their credit card-issuing bank and hit you with the chargeback against the $2,000 charge. The merchant ends up losing merchandise, shipping costs, processing fees and eats a $35 chargeback fee. Unchecked fraud can easily put a merchant out of business!

Fortunately, the actual amount of online fraud is fairly manageable. There are a myriad of fraud detection, prevention and countermeasures available. The simplest tool is Address Verification Service (AVS) and the 3 or 4-digit security code associated with every credit card. This is the barebones level of fraud protection and should be used by every merchant.

Your shopping cart will typically securely connect to the credit card networks via a payment gateway. Payment gateways typically have additional fraud scrubbing features like volume/velocity check, black or whitelisting and the ability to customize how you approve, decline, or flag a transaction for manual review. A merchant should consider turning on or upgrading their gateway if the monthly chargebacks exceed 0.25%.

If you sell high value products, then it will be worth investing in and using a more advanced fraud prevention solution. Third party fraud scrubbing solutions are extremely sophisticated and may have 300+ additional tools to protect your ecommerce business. Things like device fingerprinting, Geo-Fencing, BIN-block, global negative databases are just a few of the many tools available.

The final and most difficult source of chargebacks to contend with is basic consumer fraud. Your customers know they can chargeback and dispute any transaction on their monthly credit card statements. Running short on rent? Need gas money? Spent too much on holiday presents? Regret a purchase choice and can’t make a return? Consumers can inappropriately or incorrectly use a chargeback simply because they often can without recourse.

Since these types of credit card chargebacks are so random, it makes it virtually impossible to predict and counteract. Every single online merchant or business has incurred these types of chargebacks and unfortunately, this is simply the cost of doing business. For most merchants, the number of chargebacks caused by consumer fraud is typically less than 0.25% of the gross monthly sales.

Conclusion

Credit card chargebacks are a direct hit to the bottom line and can kill your profit margin if they are not prevented or addressed, where possible. Preventing chargeback requires a bit of work. Look at the incoming chargeback notifications, determine what is the root cause of the chargeback (Operations, Fraud or Bad Customer), then take the corrective action to prevent the next chargeback from debiting your bank account.

Preparing for the Holiday Ecommerce Rush Starts in the Summer: Five Things to Remember

Posted on August 28, 2020 by Amanda Levine

Any growing ecommerce or retail business knows the holidays are critical to their health and success, as it’s the time of year that typically brings in the most revenue. That’s why it’s important to begin strategizing and planning during the heat of the summer to ensure your brand is ready to go. The National Retail Federation reported that in 2019, by the first week of November, more than half of consumers had already begun their holiday shopping and that people planned on spending more than $1,000, on average, for items including decorations, gifts, and other purchases for themselves and family.

With non-store sales rising year-over-year, the fourth quarter presents a huge opportunity for digital retailers. Additionally, the recent global pandemic has caused consumers to stay home and shop online more. The fourth quarter presents a huge opportunity for businesses to increase their profits. In 2020, with more consumers already familiar with online shopping because of the global pandemic, the opportunity may even be bigger to capture more sales.

But what do retailers need to consider in order to position themselves for success? We have five key areas to focus on when building your holiday ecommerce strategy.

Email marketing

Email marketing is a great way to boost holiday sales. As competition continues to increase, it’s important to take early action to ensure your promotions are at the top of customers’ inboxes and minds.

Build the right list

Well before the holiday ecommerce rush, you should run lead generation campaigns to build subscriber lists. Additionally, nurture your relationship with existing customers, subscribers, and fans throughout the year. Offer one-time discount codes for signing up or other perks to create a refined list to use when it’s time to push out holiday sales and promotions.

Supplement marketing initiatives

Effective email marketing works hand-in-hand with other marketing initiatives. You should always plan to promote Black Friday and Cyber Monday sales, but there are other ways to grab your subscribers’ attention, too.

Gift Guides. Do you have more than one product offering? If so, use the upcoming holiday season to organize your offerings into guides for mom or dad, gifts under $20, or stocking stuffer ideas. Feature your guide on your website or landing page and create click-through links to include in emails to your subscribers.
Contests: Think creatively about how to generate more buzz around your brand. Contests are a great way to encourage your subscribers to refer their friends or recruit new subscribers.
Create urgency. Around the holidays, urgency can be created in a number of ways. For example, low-inventory items can be designated with banners. Countdown clocks are also effective at reminding customers about the last day to purchase in order to guarantee to ship for the holidays.

Make your language stand out

Direct subject lines are the best way to engage your customers. Are you offering a gift guide? Say something like “Gift guide for the fitness enthusiast,” or “Best gifts under $20.” Throughout the holiday season, test out subject lines and tweak them.

Make sure the language is exciting, but keep the body of the email direct and concise. Additionally, check to ensure every link works, especially during the call to action.

Create mobile-friendly emails

With more customers using their smartphones for research and purchases, it’s important to make sure your emails are user-friendly on those devices. You should avoid small text or graphics so everything is easy to read. Use descriptive alt-text on images to accommodate users who have email media turned off on their phones.

It’s a good idea to use “mobile view” to see what your emails will look like when displayed on a phone. Send out test emails to yourself and other team members to make sure things look good.

Content and SEO

SEO takes time. If you’re hoping to rank for your keywords in November and December, you’ll want to get going in the summertime. Start by determining the keywords you want to rank for. Consider what sold best last year during the holidays, which products make the best gifts, and what trends your products fit into.

Once you’ve identified keywords, you can focus on ranking. Update the product descriptions and your website’s metadata to include the keywords you’re targeting. Additionally, it’s a good idea to create blogs and other content that reference keywords, too.

Amazon Listings

If selling on Amazon is part of your general or holiday ecommerce strategy, you’ll want to make sure you up your Amazon marketing game. Make sure you’ve optimized your product description on Amazon so its search engine finds your product. Be sure to add holiday-related keywords like gifts, gift-giving, sales, stocking stuffers, and more. It’s important to keep in mind that you’re writing for Amazon search engines and customers, so keyword order, frequency, and the overall listing copy must flow for readability.

Update your photos with holiday flair. Products with images that fit with the holiday theme will stick in customers’ minds. Consider changing up colors or have photo settings be family or holiday-centric.

Double-check your inventory to ensure you have enough products on hand by reviewing sales reports and prioritizing top sellers. If you’re using Fulfillment by Amazon, check the warehouse deadlines, and be sure your stock is ready to go on time.

Social Media, Influencers and Public Relations

How can they help with holiday ecommerce?

Holidays are a great time to have a little fun with your brand’s social media channels, relationships with influencers, and the media. These three groups work hand-in-hand to generate brand awareness which can lead to increased sales. Be sure to leverage all of them as you prepare for, and head into, Q4.

Social media

Social media is a casual space where you can relax and engage in a more informal way with your audience. That’s why you should get creative as you celebrate the holidays. Make fun graphics, run holiday giveaways, craft content that’s on-brand and festive. For example, if your company sells cookware, opt for a “12 days of recipes” campaign. At the least, wish your followers a happy holiday through messages or a short video from the team.

Influencer marketing

Social media influencers are helpful year-round, but especially at the holidays. First, look for influencers who your customers follow and engage with. Then, find fun ways to collaborate with them. Keep in mind that you must reach out early to key influencers, as many work months in advance to plan their content.

Have a budget, benefit, and product for the influencers you wish to target. This is their business, and they seek to provide value to their followers. Offering a product for them to test, a discount code for their followers and either upfront or commission-based payment are ways to stand out among the other brands seeking collaborative partnerships.

Public relations

Many popular online publications look for holiday content early. As with influencers, it’s important to pitch journalists as soon as possible to get on their coverage calendars. It’s a good idea to pitch your products as part of gift guides and roundups. Make sure to pitch journalists individually, noting the types of guides they’ve published in the past and the articles they’ve covered.

Strengthen Manufacturing Relationships

In the early days of the COVID-19 pandemic, businesses saw their production capabilities shut down for several weeks. Timed with the Chinese New Year, companies that had planned for that annual reduction in production suddenly saw those issues compounded. This magnified the need for diversified supply chains. Be sure to have established relationships with a number of manufacturers, have supply on-hand, and the ability to scale up production when your marketing efforts increase your sales.

Ready, Set, Grow

Now that you know the key to Q4 and holiday ecommerce success starts with early preparation, start planning. You have several key marketing tactics to consider, but, if you need help, consult an expert like our strategic marketing partner, Enventys Partners.