The Product Labeling and Packaging Chargeback

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Avoid these 4 Product Labeling and Packaging Mistakes That Can Cause A Chargeback

Regardless of whether or not you’re a General Manager of an established food product sold in large retailers, or you’re an entrepreneur trying to get a new supplement into stores, you may at some point experience a chargeback (queue scary music here).

It’s a dirty word in the warehouse supply-chain packaging and labeling industries, and it can become really expensive, really quickly if you don’t know what mistakes to avoid.

But, before we explain how to avoid these mistakes, you may be asking “what is a chargeback?”

A chargeback is a fine imposed on a supplier when—most of the time—the supplier has failed to meet a distributor or retailers guidelines on anything from the way a shipment was packed, to labels lacking required information (more on what your labels should contain in later posts), to having a damaged shipping pallet or a late delivery.

Let’s say—for this example—that my company makes Kombucha (the delightfully fizzy, slightly fermented tea drink with fantastic health benefits).  In our excitement to get the product on the shelves of retailers, we print our “best enjoyed by” stamp on the top of the bottle cap rather than on the bottle label.

No harm no foul, right?  Wrong.

By failing to adhere to the warehouse store’s guidelines, we’ve just incurred ourselves a nice chargeback fee, which cuts into our profits.  I recently read about a major purse manufacturer that was given a directive by Costco to relabel & ship the exact specified master carton packaging or face a charge of up to $10,000 PER STYLE!!!! Ouch!

While different retailers have different requirements, avoiding these four mistakes of product labeling and packaging will greatly reduce your chances of getting a chargeback:

Mistake 1: Failure to research vendor requirements of the stores you’re trying to get your product(s) into

Take the time to investigate and thoroughly read the vendor requirements of retailers you want to carry your products.  Most retailers have a vendor agreement you can easily find online. If you can’t find one, call the store and ask them to email it to you.

Mistake 2: Failure to consult with your label printing company, prior to printing, to ensure your barcode placement meets specifications.

You’re probably familiar with the saying “haste makes waste.” That’s exactly what just happened here. You’ve got barcodes that aren’t easily scannable and now you’ve got a big problem (and a pricey one) on your hands.

How do you avoid mistake one and two? Be sure to share the application conditions with your printer when choosing a material.  Also, on barcodes, many reputable printers can scan the codes for you and provide a “Pass” class reading of the results.

Mistake 3: Failure to make sure your barcodes scan properly and are scuff proof in the shipping process

Sure, you saved a little money in the short term by going with a cheaper paper and ink for your labels. And perhaps you decided to cut costs by varnishing your labels instead of laminating them.  But, since they couldn’t hold up under the stress of the packaging and shipping process, you just earned yourself a chargeback.

Mistake 4: You decided to be a lone ranger and not use an experienced Label and Packaging Consultant.

“How hard can this stuff be?” you thought. “A few YouTube videos here, some whitepapers there, and I can run this show myself.”

You’re going to watch a LOT of YouTube videos to learn everything required to successfully pull off getting your packaging designed, delivered, and on the shelves ready to sell (and off the shelves quickly we hope.)

If you’re a General Manager or a Product Manager, you’ve got too many other details on your plate to think about all the nuances of these processes.

So here is a quick summary of action items on how to avoid Chargebacks in retailing:

  1. Review your vendor requirements in detail.  And check with your assigned buyer of any packaging specification requirements.  Make sure all personnel are trained thoroughly.
  2. Bring your printer into the discussion at the design stage. Let them know about all details of the application and retailer specifications.
  3. If you don’t have one, be sure to ask your printer if they have barcode scanner verifiers.  You’ll need verified print outs of the scan rate reads.
  4. Remember, even the Lone Ranger brought along Tonto who may know a thing or two about how to get this done right the first time.  Hire a professional!  The risk is just too great.

Question:  What is the strangest chargeback specification you’ve seen in your business?  What were the penalties for noncompliance?  Post in the comments below!

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