Walmart Chargebacks
What is a Chargeback?
A chargeback is a fee charged by Walmart to a supplier for breaking terms of their contract or failing to meet an area of compliance. The point of chargebacks is to encourage suppliers to improve their supply chain and compliance. They also help Walmart get the right product in the right condition at the right time so they can charge the lowest price. Chargebacks can attribute to a large amount for some suppliers and can significantly reduce profits. Thus, it is crucial to have a good understanding of how to identify chargebacks and how to avoid them.
What are Common Forms of Chargebacks at Walmart?
The most common forms of chargebacks suppliers will see from Walmart are related to On-Time In-Full (OTIF) or Packaging and Labeling (also knows as SQEP). To determine the causes of chargebacks, both the OTIF and SQEP dashboards within Retail Link can be utilized. These dashboards will highlight the reasons for failing to meet compliance as well as the associated fine. For OTIF, all items on the PO must be filled completely. Chargebacks will occur if an item is underfilled or overfilled. Then the PO needs to be delivered on time. All OTIF charges are calculated on a monthly basis. SQEP has a similar dashboard that shows different defect categories and sub-defects. This will allow suppliers to drill down to the specific defect that is causing a breach in compliance. Like OTIF, SQEP is evaluated on a monthly basis. The FixIT application can also be used to see specific examples of defects and to communicate to the Walmart warehouse team any resolutions that are in effect. Outside of OTIF and SQEP, there are other general chargebacks can occur. Suppliers can use the list of chargeback and deductions codes to determine why they are being fined.
How do I Avoid Chargebacks?
The first step in avoiding chargebacks is to know the compliance standards. Then suppliers should have a good understanding of what is causing most of the fines. Suppliers should identity solutions, communicate with Walmart where necessary, and implement those solutions. In some cases, chargebacks can be challenged to Walmart if a supplier feels that errors were caused by Walmart’s system or that the issue will bring unintended secondary effects to the supplier. Proper evidence will need to be presented in this scenario. Other times Walmart will proactively waive fines if it was due to system error, extreme weather, or an uncontrollable situation.