The global supply chain crisis has impacted the furniture industry at every level – but how are consumers likely to react when faced with late deliveries and no-shows? In this article, Monica Eaton-Cardone, COO of Chargebacks911 and Fi911, and CIO of Global Risk Technologies, explains how damaging transaction reversals (or chargebacks) can be, and how they might be avoided …
The world has a serious supply chain problem. It’s been reported on at length throughout the pandemic, with shipping issues and rising transport costs exerting significant pressure on the furniture industry.
The term ‘chain’ is important to remember, because what happens at one part of the chain has knock-on effects further down – and one of these effects is likely to be an increase in chargebacks. If customers aren’t getting the goods they order on time, many will initiate a chargeback, which will end up costing significantly more than a refund and could contribute to your company being charged more for every transaction.
The crisis started over two years ago as the pandemic started to impact major manufacturing centres, such as China. 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 less demand.
This period of decreased demand clogged up the international shipping system, with even the containers used to ship goods across the world being in short supply. The cost of shipping skyrocketed, and the sudden influx of ships overwhelmed the capacity of ports. What’s more, because of decades of lean, JIT logistics practices, there was little in the way of warehoused goods to fulfil demand – meaning that the crisis is still ongoing in many places.
How does this affect chargebacks?
Furniture businesses that rely on shipping physical products to customers will have been affected by the supply chain crisis – domestic shipping has been affected by increased demand and a decreased number of delivery drivers. Inevitably, this means that customers have been getting their products later, or in some cases not at all.
Although many will contact merchants directly to resolve issues, some will simply initiate a chargeback. Technically speaking, these ‘goods not received’ chargebacks are only supposed to be used if merchants refuse to refund customers for goods that are not delivered – but too many consumers consider them a first-line solution to their problems, mainly because in most cases, chargebacks are highly likely to get their money refunded.
However, a surge of chargebacks can be devastating for furniture businesses, as they can be very costly – 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 transaction will cost more.
How can chargebacks be stopped?
The first step is to offer robust, easy-to-use package tracking for all your deliveries. 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 chargeback.
It is also important to make sure it is easy to request a refund for an item that doesn’t arrive. If customers can request refunds easily for the furniture they purchase, they will choose that option over the relatively more complicated process of initiating a chargeback, and although refunds aren’t ideal from a business standpoint, they are preferable to chargebacks.