Retail chargebacks can be a costly and frustrating issue for both retailers and suppliers. These financial penalties are imposed when suppliers fail to meet the agreed standards. However, RFID (Radio Frequency Identification) technology offers a promising solution.

By tagging each item with an RFID tag, suppliers can track their inventory accurately throughout the entire supply chain. For retailers, RFID facilitates fast and efficient validation of received stock, allowing for immediate identification of missing items and pinpointing where errors occurred. By leveraging RFID, both retailers and suppliers can mitigate the risk of chargebacks, improve operational efficiency, and save costs in the long run.

What is a retail chargeback?

Chargebacks in the retail industry refer to the financial penalties retailers impose on suppliers if they fail to deliver according to the agreed standards. When a retailer sources certain items and pays accordingly but eventually receives less than agreed, the retailer will charge back the supplier.

The chargeback doesn’t have to be only for missing items, in fact, retailers can chargeback suppliers based on their agreement. Therefore, chargebacks can be due to flawed processes, misplacing shipments, delays, and any kind of mistake that causes the retailer a loss of money and was agreed upon with the supplier.

The chargeback is a bad occurrence that both retailers and suppliers would prefer to avoid. Retailers use chargebacks to protect themself from losing money due to supplier issues. On the other hand, chargebacks put risk on suppliers to lose future business, reputation damage, financial cost, and even potential debts to retailers.

Most chargebacks range between 1% - 5%, and although this may seem like a small percentage when applied to large shipments, it can add up to millions annually.

How can RFID help improve chargebacks operations?

RFID helps suppliers be more precise

During the manufacturing process, RFID helps track work in progress (WIP) in real-time. This ensures the right amount of items are being produced, in the right regulations and requirements, as well as making sure they are being produced at the right speed. That help manufacturers ensure no mistakes occur during the manufacturing procedure.

When the stock is ready to be shipped, the supplier can utilize the quick count capability of RFID to ensure all items are there and nothing went missing along the way. This can be done with a quick hand reader or with a fixed reader in the form of a gate to automate the items count. Hence RFID can help suppliers prove they shipped out the right amount. RFID not only reduces the probability of chargebacks by retailers but also helps them upgrade their internal process. Suppliers who improve their processes can save money, deliver better customer service and improve their reputation, which will translate into more sales and brand loyalty

RFID can save retailers money

When it comes to chargebacks, RFID helps retailers by allowing them to conduct fast and efficient shipment validations that let them know how much stock they received compared to their expectations.

The RFID tags allow retailers to instantly determine if pieces are missing and where each item is located, resulting in faster and more accurate chargebacks as well as identification of where exactly errors occur.

Moreover, having tracking software that offers the item’s history can give retailers the ability to know how long the item was in each step along the supply chain which offers the ability to improve internal processes and decision-making.

In the case where the supplier ships out the correct number, but the retailer receives the delivery with missing items, they both know something went wrong during delivery. No matter if it is fraud or an innocent loss, this information helps retailers improve their business practices.

In conclusion, using RFID technology presents a valuable opportunity to address retail chargebacks. By implementing RFID tagging in the supply chain, suppliers can improve manufacturing processes, track shipments accurately, and ensure correct item quantities. This proactive approach reduces chargeback probability, improves internal operations, and safeguards reputation and financial stability. RFID enables quick and accurate validation of received stock for retailers, allowing timely discrepancy identification and error rectification. Ultimately, adopting RFID enhances collaboration and efficiency between retailers and suppliers, mitigating chargeback financial impact and promoting cost-effective operations.