You’ve landed that Sephora or Nordstrom partnership. Growth mode activated. Then the chargebacks start showing up: wrong labels, missed shipping windows, inventory shortages. Each one is a direct hit to your margin and your relationship with that retailer.
We’ve spent 25 years handling retail fulfillment for beauty and wellness brands. Capacity team members Marian Ibrahim, Kanika Lamba, and Jennifer Nuñez have seen every chargeback scenario that exists. Here’s what actually prevents them.
Why Chargebacks Happen
Packing errors: Wrong void fill material, missing packing slips, labels in the wrong position, incorrect pallet types.
Late or missing ASNs: The retailer isn’t ready to receive your shipment because the advanced shipping notice didn’t transmit correctly or on time.
Label problems: Barcodes that won’t scan or labels placed where the retailer’s system can’t read them.
Timing issues: Early shipments create storage costs for retailers. Late shipments miss promotional windows entirely.
Inventory discrepancies: Even when the count leaving your warehouse is correct, something can happen in transit or during receiving.
Wrong product delivered: Damage, incorrect SKUs, wrong color/size mix, anything that makes the product unsellable.
These aren’t hypothetical. They’re what we investigate every week.
10 Recommendations That Actually Work
1. Request Updated Routing Guides Annually
Your 3PL handles compliance execution, but routing guides change. Ulta updates theirs. Sephora refines packaging requirements. Target adjusts labeling specs.
“We recommend asking retailers at least once a year,” says Jennifer. “Your 3PL doesn’t have real-time access to the routing guide. The retailer could have made amendments and we’re unknowingly following outdated rules.”
Verify the guide is current. Share it with your operations team and your 3PL. This double-check catches discrepancies before they become chargebacks.
2. Establish an Internal Chargeback Program
When a chargeback hits, tension follows. Was it the brand’s inventory data? The 3PL’s labeling process? A carrier issue?
Create a structured review process:
· Log every chargeback with full details
· Investigate root cause (not blame—actual cause)
· Track patterns: one-time error or systemic issue?
· Implement corrective action: training, process change, or system upgrade
At Capacity, each Client Account Manager reviews chargebacks with their brand partner. We document what happened, why it happened, and what changes prevent recurrence. The goal is operational accuracy, not finger-pointing.
3. Challenge Chargebacks When Warranted
Retailers make receiving errors too. Don’t accept chargebacks without verification.
“If the retailer says we added the wrong label or there’s a damaged carton, we ask for photographic evidence,” says Kanika. “We investigate on our side, and if we find no discrepancy was made by Capacity, we recommend the brand challenge the chargeback.”
Many brands successfully dispute chargebacks when their 3PL provides documentation and images proving compliance.
4. Implement EDI Integration
Manual PO entry and late ASN transmission cause chargebacks. EDI systems handle purchase orders, PO changes, ASNs, and invoices automatically.
For brands with multiple retail partners, EDI is essential. For smaller brands with one retail account, direct X12 document exchange works fine.
“Think of us as your data ninjas,” says Jennifer. “We handle the EDI connections so you can focus on your business.”
The setup investment pays for itself in eliminated chargebacks and time savings.
5. Verify Consistent Case Pack Sizes
Retailers order in case packs because it’s the most efficient way to handle bulk orders. When your manufacturer ships cases with inconsistent unit counts, warehouse staff take the master case count at face value (they can’t open every box to verify).
Result: overages and shortages at the retailer level.
Talk to your manufacturers. Standardize case pack configurations. Document the specs and share them with your 3PL.
6. Maintain Inventory Reserves for Retail
Keep retail inventory commitments separate from your DTC stock. When you run a flash sale on your website and it exceeds projections, you don’t want those extra sales to deplete units promised to Ulta.
Segregate inventory into dedicated buckets: one for eCommerce, one for B2B. This prevents overselling retail commitments and the chargebacks that follow.
7. Communicate Low Stock to Your Buyers
“Make sure you have enough inventory,” says Marian. “Sometimes we have to delay shipping orders because items are out of stock. Give your buyers a heads up when you’re running low on products already promised to a retailer.”
Use an inventory management system (IMS) or ERP platform to track on-hand, on-order, and reserved inventory in real time. Your buyers get instant alerts when it’s time to restock, preventing last-minute shortages.
8. Align Marketing, Sales, and Operations
Marketing announces a promotion. Operations unknowingly committed that same inventory to Macy’s. The sale succeeds online but creates a shortage for your retail partner.
This happens when departments operate in silos. A 15-minute check-in between Marketing, Sales, and Operations prevents these conflicts.
When inventory is properly segregated (see #6), your B2B stock won’t accidentally get released to fill online orders. Communication still matters.
9. Move Inventory Tracking Out of Spreadsheets
Your 3PL should have a warehouse management system (WMS) at minimum. Better: integrated technology partners connected via open API for real-time inventory visibility.
Manual processes increase error rates. Every spreadsheet update, every CSV import, every email confirmation creates opportunity for inventory mismatches.
At Capacity, our IT team and warehouse operations work together. The technology supporting the manufacturer-warehouse-retailer flow is as important as the forklift operators moving pallets.
10. Give Your 3PL Adequate Lead Time
When your manufacturer delivery runs late and you’re short on promised units, your 3PL has less time to process and ship the order correctly.
Jennifer explains the two-part cost: “To get it to the retailer on time, you’re now paying for expedited shipping. The other cost is that some retailers dock a percentage of what they owe you for every extension request on a PO.”
Plan for delays. Build buffer time into your supply chain. Rush orders cost more and increase chargeback risk.
What This Looks Like in Practice
These recommendations work because they address the actual failure points in retail fulfillment. Chargebacks happen at the intersection of incorrect data, process gaps, and time pressure. Fix those three things and chargeback frequency drops.
We’ve handled retail fulfillment for Target, Sephora, and Ulta for decades. The brands that maintain the cleanest compliance records use these exact practices. They treat their 3PL as an operational partner, invest in proper systems, and communicate across their organization.
If you’re dealing with ongoing chargeback issues, we can help you identify where the process is breaking down. Let’s schedule some time to talk. Contact – Capacity LLC