Supply Chain Delays and Chargebacks

As the COVID-19 pandemic stretches well into its second year, we are all facing consequences far more complicated that would have been expected at the outset. Among the most impactful for merchants is a set of interconnected disruptions to the global supply chain. These supply chain issues are having serious consequences for merchants that can lead to an increase in the number and rate of chargebacks, if not handled properly. These issues do not seem likely to be resolved anytime soon and the consequences will only become more acute as we approach the holiday season.

What Is Happening With the Global Supply Chain?

The pandemic has created a situation in which the previously hidden vulnerabilities of many of the hallmarks of the 21st century’s global economic systems—such as corporate consolidation, specialization, offshoring, deregulation, a lack of a right to repair, and a globally interdependent trade system with numerous potential bottlenecks—are being exposed. The result is a global supply chain that is in complete disarray.

The problems caused by the pandemic are wreaking havoc on the supply chain in numerous ways. COVID-related interruptions at a Taiwanese semiconductor manufacturing have led to a global shortage of semiconductors, which has, among many other things, limited the ability of shipping and trucking companies to repair and replace their vehicles. Those same shipping and trucking companies have faced COVID-related staffing shortages, leading to long delays in shipping times for goods and even, in some cases, ports full of cargo containers that lack enough dock workers to unload them.

These sorts of problems are replicated across the global economy at every level. Because of COVID, factories can’t manufacture goods at a rate that matches demand, shipping businesses can’t transport them quickly enough, and stores can’t reliably estimate what will happen with their own inventory and shipping. Combined with ongoing political efforts to hamper the effectiveness of the United States Postal Service, it seems inevitable that these problems will continue to wreak havoc for merchant businesses into the holiday season and beyond.

How Do Supply Chain Issues Affect Chargebacks?

Consumer dissatisfaction is a significant source of chargebacks and unmet delivery expectations are a significant source of consumer dissatisfaction. This becomes especially acute during the holidays, when consumers purchase items with the expectation of being able to receive them in time to give them as gifts on a specific date. Even under normal circumstances, the holiday season is a veritable minefield for these sorts of chargebacks due to the combination of high consumer demand; high consumer expectations; and erratic, last-minute shopping habits. With the added complications of the global supply chain issues, a higher than average risk of chargebacks will affect merchants this holiday season. Even Santa’s workshop is affected by supply chain issues. And these problems don’t only affect merchants whose business is primarily based on deliveries and shipping. Retail businesses are also struggling as the supply chain issues make it difficult for them to properly keep their shelves stocked.

The underlying sources of the supply chain issues may cause further complications. The economic uncertainty caused by COVID-19 will almost certainly affect consumer behavior in unpredictable ways, particularly as the last remaining forms of pandemic-related economic assistance from the various levels of government are sunsetting. Similarly, as we reach our second holiday season under pandemic conditions, it is uncertain how many consumers will engage in different forms of shopping, such as in-person, online, mobile, and BOPIS. Also, as gruesome as it may be to contemplate, consumer shopping habits during the holiday season may be affected in unpredictable ways by the emotional and economic toll of the many lives lost during the pandemic.

A lack of preparedness during uncertain times is a recipe for chargebacks. Between the supply chain issues and the ongoing pandemic that has exacerbated them, it would be a mistake for merchants to assume that the normal holiday season patterns and expectations.

How Can Merchants Reduce Chargebacks Caused By Supply Chain Issues?

The most important thing that merchants can do in uncertain times such as these is to carefully manage consumer expectations. Be upfront about the ways that supply chain issues may affect your business. Some consumers may still be unsatisfied but, in general, people appreciate honesty. Communicate with consumers about what their realistic delivery expectations should be. For holiday season marketing, consider suggesting a particular date by which consumers should order if they want to receive their purchases by Christmas.

Customer-service-based chargeback mitigation techniques are especially important in circumstances such as these. Making sure your customer service agents are available and consumers know how to contact them. Train them so that they can help manage consumer expectations regarding delivery delays. Be magnanimous with refunds. A refund is always preferable to a chargeback.

There is very little that merchants can do to control how these supply chain issues affect their ability to deliver products to consumers. A certain level of consumer dissatisfaction resulting from these global, systemic problems is inevitable. But merchants who properly manage consumer expectations and work to engage in customer service designed to alleviate consumer dissatisfaction will be better positioned to keep their chargebacks at a manageable level if supply chain delays affect their business.