Two of the most commented posts I’ve written were my posts on chargebacks. It’s a fascinating discussion because it’s a problem that all retailers have, and it’s a problem that most consumers either don’t know about or don’t care about. Retailers are on their own with this one. A few years ago it looked like it was going to be a major problem for us…until it wasn’t. Despite our volume more than tripling since my first chargeback post, we’ve seen chargebacks reduced to almost zero.
Last week we had a chargeback come through for the first time in a long time (the customer has since rescinded it – they claim their credit card company initiated a chargeback for the wrong purchase). Which got me to thinking – what happened?
We did three distinct things that I think directly resulted in our near-elimination of chargebacks:
- We stopped shipping internationally. A large number of chargebacks came from international customers. When we’d investigate the order there was no AVS (address verification) like there is with suspect US orders. Essentially shipping an international order was always a crap shoot.
- We switched the name on our credit card statement from “Pure Adapt Inc” to “Detailed Image”. We originally used “Pure Adapt Inc” when we had Tastefully Driven and were planning on having multiple Pure Adapt e-commerce sites. Upon shutting down TD, this change led to a reduction of accidental chargebacks. Customers wouldn’t recognize “Pure Adapt Inc” and would immediately call and initiate a chargeback. Many of these we were able to get the customer to rescind, but it was a lot of work.
- We started canceling suspect orders. We still get international orders. They just use a freight forwarding service. Any order that looks shady we play it safe and cancel. Many of our manufacturers have asked us not to ship their products in volume overseas because there are underground re-bottling businesses. As a courtesy to them, and to reduce our headaches, we’ve abided by this and it has worked out great for all involved.
The other potential factor, the one that’s out of our control, is that credit card companies may have tightened up. I had a random $250 charge from my cable company last year. After calling them they couldn’t figure it out. The rep told me to initiate a chargeback. The process wasn’t quite as easy as I thought it was. I’m sure each card is different, but at least Bank of America made me jump through some hoops to get it initiated. Maybe the credit card companies realized that people were taking advantage of this feature and made it a little more difficult to take advantage of. I’m not necessarily sure that this is a factor, but it might be.
Regardless of the exact factors, it’s nice to have one less thing to worry about. All of the other “solutions” – working with a whitelist system, requiring all AVS matches, getting our lawyer involved – would all create a bunch of headaches and take away time that could be better spent growing our business.