Selling private label products is all about profit margins. At every turn, you are looking for ways to squeeze out better margins—preferably without resorting to exorbitantly high prices. One of the most important strategies for maximizing higher profit margins is to fight against chargebacks. Businesses that face high chargeback rates not only lose revenues, but they also end up shouldering extra fees that can completely negate their profit margins. In extreme cases, banks might even terminate businesses’ merchant accounts if they see major chargeback trends.

What Are Chargebacks?

If your business primarily accepts payments in the form of credit and debit cards, then chargebacks are something you will likely encounter. In short, a chargeback occurs when a cardholder disputes a transaction on their account. The cardholder’s bank then reverses the payment, refunding some or all the funds involved in the transaction. In turn, the bank demands that the retailer refunds the money, hence the loss in revenues.

In the United States, there are several laws in place to protect consumers’ payment reversal rights. In most cases, chargebacks are a protection against fraudulent transactions and identity theft. However, consumers will often also use chargebacks as a means of getting their money back if a retailer is dishonest, misleading, or incommunicative.

How to Prevent Chargebacks

Chargebacks are a huge threat to e-commerce businesses—especially those who sell private label nootropics and can’t abide any substantial cuts into their profit margins. Luckily, chargebacks don’t have to be an unpleasant fact in e-commerce. On the contrary, there are steps your business can take to prevent chargebacks from happening in the future—or at least to reduce their likelihood. Here are three strategies that are essential to avoiding consumer payment reversals:

  1. Superior Customer Service

One of the best things about chargebacks is that they motivate businesses to provide superior customer service at every turn. Having robust order fulfillment policies and fast delivery practices can save you from getting hit by chargebacks on orders that never arrive, take weeks to ship, or arrive in disrepair. Having open and easy refund processes can give customers a way to resolve their dissatisfaction without resorting to a fund reversal, saving your business the fees and merchant account consequences that might accompany a chargeback. Finally, being available to answer questions or provide customer assistance throughout the order process gives your business a better chance of resolving customer complaints before they reach the chargeback stage.

Ultimately, you want to be able to settle customer concerns and disputes as soon as possible. Not only will this commitment to better customer service help you avoid chargebacks, but it will also spur better customer retention and stronger word of mouth.

  1. Honest, Detailed Communication about Products

Chargebacks are more common for e-commerce than they are for brick-and-mortar businesses, and that’s largely because customers don’t get a chance to see, touch, and test out products before they buy. As such, you need to hone your product pages so that they provide clear communication about exactly what customers are buying. Detailed descriptions are essential, as are comprehensive lists of product features. Professional, high-resolution images of the product are also necessary—in different colors if multiple color options are available. Details about sizing are especially important for clothing and apparel.

Above all, be honest: don’t use images that don’t accurately convey what a product looks like, or leave key details out of your description. Otherwise, you’ll get the “product not as described” complaint, and while you can resolve this issue with good customer service, it will bring you a few steps closer to a chargeback.

  1. Fight Fraud

Dissatisfied customers will sometimes trigger chargebacks, but fraud is the biggest culprit for transaction reversals. If someone is using a stolen credit card to make a bunch of online purchases, the victim is the original cardholder, but the retailer can bear the brunt of the incident as well. As such, it’s your job to watch for red flags that might indicate fraudulent purchases—such as extremely large orders, rushed orders, identical addresses across numerous accounts, or accounts where the billing address is in a different country or state than the shipping address. In such cases, you can use extra verification steps to stop fraudulent transactions before they go through.

You also need to watch out for “friendly fraud”—where cardholders purchase something, receive the item, and then make a chargeback request, claiming they never received the item. The best way to fight this type of fraud is with detailed customer recordkeeping—including customer addresses and contact information, proof of delivery, and more. In other words, allow yourself to be skeptical about chargeback requests.

Conclusion

Don’t let the profit margins on your private label weight loss products diminish without taking steps to protect your business. Instead, launch a full-fledged defense against chargebacks. By improving your business practices and being more conscious about fraud, you should be able to cut down on chargebacks and improve your ROI.