Understanding Retail Chargebacks and Deductions: Walmart, Target, Amazon 2025
Complete guide to retail vendor chargebacks: OTIF penalties, ASN compliance fees, deduction codes, dispute windows, and strategies to reduce chargebacks by 40-60%.
The Hidden Cost of Selling to Retailers: Walmart suppliers lose an average of 5.8% of gross revenue to chargebacks and deductions. For a supplier with $10M in annual Walmart sales, that's $580,000 in lost profit. Most of these deductions are disputable - but only if you catch them in time and have the documentation to fight them.
What Are Retail Chargebacks and Deductions?
Chargebacks (also called deductions) are fees that retailers deduct from your invoice payments when you fail to meet their compliance requirements. Instead of paying you $10,000 for an invoice, they pay you $9,500 and keep $500 as a "chargeback" for late delivery, missing ASN, incorrect labels, or other violations.
Common Chargeback Categories:
- →OTIF (On-Time In-Full) Penalties: Delivered late or shipped wrong quantity
- →ASN Compliance Fees: Missing, late, or incorrect 856 Advance Ship Notices
- →Labeling/Barcode Violations: Incorrect UPC, missing GS1-128 labels, wrong carton labels
- →Invoice Discrepancies: Price mismatches, quantity differences vs PO/ASN
- →Routing Errors: Wrong carrier, missed dock appointment, improper loading
- →Product Issues: Damaged goods, expired products, quality defects
Important: Not all deductions are chargebacks. Some are legitimate business deductions like promotional allowances, freight reimbursements, or negotiated discounts. Focus on disputing compliance-related chargebacks where you have proof you met requirements.
Walmart Chargebacks and Deductions (2024-2025)
Walmart OTIF (On-Time In-Full) Program - Updated February 2024
In February 2024, Walmart eased OTIF requirements by reducing benchmarks from 98% to:
- 90% "On-Time" - Orders must arrive within delivery window
- 95% "In-Full" - Must ship complete order quantities
Penalty: Vendors falling below these benchmarks face penalties of 3% of COGS (Cost of Goods Sold) for the shortfall.
Example: If you ship $100,000 worth of goods to Walmart in a month and your OTIF score is 85% (below 90% threshold), Walmart may charge $3,000 (3% of $100,000) in OTIF penalties.
Common Walmart Deduction Codes:
Code 11 - Price Difference
Invoice price doesn't match purchase order price. Very common three-way match failure. Walmart automatically deducts the difference.
Code 21 - Shortage
Walmart received fewer units than invoiced. Often due to ASN quantity mismatch or receiving errors at DC.
Code 22 - Damaged/Defective
Product arrived damaged or defective. Walmart deducts full value. Can often dispute if damage occurred during Walmart's handling.
Code 25 - No Merchandise Received
Walmart claims they never received the shipment you invoiced. Requires Proof of Delivery (POD) to dispute. Missing or late POD = automatic chargeback.
Codes 30-39 - Shipping Errors
Includes missed dock appointments, wrong carriers, routing noncompliance, improper loading. Each violation type has specific code in 30s range.
Code 64 - ASN/Barcode Issues
Missing ASN, incorrect ASN data, or barcode labeling violations. Walmart is strict on GS1-128 label compliance.
Code 65 - PO/Invoice Mismatch
Invoice references wrong PO number, or invoice submitted without corresponding ASN. Always ensure 850→856→810 document chain integrity.
Walmart 2025 Deduction Changes:
Monthly Deductions Schedule: Walmart is moving to a monthly chargeback schedule (previously weekly/bi-weekly), giving suppliers less time to identify errors and file disputes.
Combined Deductions: In-store mishandling and receiving issues may now be combined under single deduction categories, making it harder to identify root cause.
Real-Time Tracking: Walmart is implementing faster chargeback recognition. Suppliers need real-time monitoring to catch and dispute quickly.
Walmart Dispute Window:
You have 60-90 days from the deduction date to dispute Walmart chargebacks. After this window closes, deductions become final. Monitor your Walmart Retail Link account weekly to catch deductions early.
Target Chargebacks and Deductions (2024-2025)
Target Perfect Order Program - NEW May 4, 2025
In February 2025, Target announced the "Perfect Order Program" - similar to Walmart's SQEP (Supplier Quality Excellence Program). This program goes into effect May 4, 2025 for domestic Target suppliers.
The program refers to ASN and barcode issues as "defects" and aims for "operational excellence" through strict compliance enforcement.
Target ASN Availability Penalties - Updated May 2025
To align with industry standards, Target changed ASN availability penalties:
- Old: 3% of COGS per violation
- New (May 2025): $0.75 per carton with $100 minimum fine
Exception: If Target rejects or can't acknowledge the 856 ASN (not in "A" status), there is no minimum charge.
Example: Ship 200 cartons without a proper ASN = $150 charge ($0.75 × 200, meets $100 minimum)
Target OTFR (On-Time Fill Rate) Policy - Updated August 2024:
Target revised OTFR vendor compliance policy on August 4, 2024. While specific penalty amounts aren't publicly disclosed, Target tracks:
- On-Time Delivery: Must arrive within scheduled delivery window
- Fill Rate: Must ship 95%+ of ordered quantities
- Order Accuracy: Correct products, quantities, and packaging
Common Target Deduction Codes:
A037 - ASN Late or Missing
856 ASN not sent before shipment arrival, or sent too late for Target to prepare receiving. New $0.75/carton penalty as of May 2025.
A035 - Barcode/Label Noncompliance
Incorrect GS1-128 labels, missing SSCC barcodes, or wrong carton labeling. Target requires specific CTN (carton) packaging codes in ASN.
A176 - Auto Chargeback
System-generated deduction for various invoice-receipt differences. Covers quantity mismatches, price differences, or UPC errors detected during receiving.
Target Dispute Process:
File disputes through Target's Partner Online portal within 60 days of deduction. Provide documentation: ASN confirmation, BOL (Bill of Lading), POD (Proof of Delivery), and photos if relevant. Target reviews disputes within 30-45 days.
Amazon Vendor Central Chargebacks (2024-2025)
Amazon Vendor Central (1P suppliers) face chargebacks for operational failures. Amazon is known for aggressive chargeback enforcement and short dispute windows.
Common Amazon Chargebacks:
Shortage Chargebacks
Amazon received fewer units than invoiced or ASN indicated. Amazon deducts cost + 10-15% handling fee. Verify ASN quantities match shipped quantities exactly.
Price Difference Chargebacks
Invoice price doesn't match PO price. Amazon deducts difference immediately. Always reference current Amazon PO prices before invoicing.
Late Delivery / OTIF Penalties
Shipments arrive after requested delivery date. Amazon tracks OTIF metrics and may charge penalties or reduce future order volumes for poor OTIF performance.
ASN Compliance Issues
Missing or incorrect 856 ASN causes receiving delays. Amazon may charge handling fees or reject shipments. 810 Invoice must be submitted within 24 hours of shipment.
Damaged/Defective Product
Products arrive damaged or don't meet Amazon quality standards. Amazon deducts full product cost + disposal fees. Packaging must meet Amazon's strict standards.
Amazon Dispute Window: 11 Days
Amazon has the shortest dispute window among major retailers: only 11 days from chargeback date. Monitor your Vendor Central account daily. After 11 days, chargebacks are final and cannot be disputed. Use automated chargeback monitoring tools if processing high volumes.
Strategies to Reduce Chargebacks by 40-60%
1. Perfect Your ASN Process
Problem: Missing or late ASNs are the #1 cause of preventable chargebacks. Target charges $0.75/carton, Walmart rejects shipments.
Solution:
- • Automate 856 ASN generation from your shipping system
- • Send ASN before truck leaves your dock (not when it arrives at retailer)
- • Validate ASN data matches shipment: quantities, UPCs, carton counts
- • Use PlainEDI to preview ASNs before transmission - catch errors before retailers do
- • Monitor 997 acknowledgments to confirm ASNs were received successfully
2. Implement Three-Way Matching Validation
Problem: Invoice-PO-ASN mismatches cause automatic deductions. Walmart Code 11 (price difference) and Code 21 (shortage) are extremely common.
Solution:
- • Before sending 810 Invoice, verify it matches the original 850 PO and 856 ASN
- • Never invoice for more than you shipped (per ASN)
- • Use current PO prices, not your pricing from previous orders
- • Cross-reference UPCs to ensure item numbers match across all documents
- • Implement ERP validation rules that flag mismatches before invoice generation
3. Monitor and Dispute Aggressively
Problem: Suppliers lose $580,000+ annually by not disputing invalid chargebacks. Walmart: 5.8% average deduction loss.
Solution:
- • Check retailer portals weekly for new deductions (Walmart Retail Link, Target Partner Online, Amazon Vendor Central)
- • Create dispute tracker spreadsheet: date, code, amount, dispute deadline, status
- • Dispute within deadlines: Walmart 60-90 days, Target 60 days, Amazon 11 days
- • Keep documentation: ASN confirmations, BOLs, PODs, photos, 997 acknowledgments
- • Focus on high-value deductions first (prioritize disputes over $500)
- • Use deduction recovery services (SupplyPike, Carixa) if volume is high
4. Improve OTIF (On-Time In-Full) Performance
Problem: Walmart's 3% COGS penalty for OTIF failures adds up fast. $100K monthly sales × 3% = $3,000 penalty.
Solution:
- • Build buffer time into production schedules (plan to ship 2-3 days before requested date)
- • Use reliable carriers with on-time performance >95%
- • Communicate delays proactively - retailers may waive penalties if you notify in advance
- • Track OTIF metrics internally before retailers penalize you
- • Ship complete orders - partial shipments count as OTIF failures
5. Perfect Your Labeling and Barcodes
Problem: Incorrect GS1-128 labels, missing SSCC barcodes, or wrong UPCs cause receiving delays and chargebacks.
Solution:
- • Invest in GS1-128 label printers and validation software
- • Train warehouse staff on retailer-specific labeling requirements
- • Implement QA checkpoints before shipments leave dock
- • Keep label templates updated when retailers change requirements
- • Test new product barcodes by scanning them with retail scanners before first shipment
Essential Documentation for Chargeback Disputes
Winning chargeback disputes requires proof you met compliance requirements. Keep these documents for every shipment:
Must-Have Documents:
- ✓856 ASN Confirmation: Proof ASN was sent and accepted (997 acknowledgment)
- ✓Bill of Lading (BOL): Signed by carrier showing shipment details and quantities
- ✓Proof of Delivery (POD): Signed receipt from retailer DC confirming delivery
- ✓850 Purchase Order: Original PO showing requested quantities and prices
- ✓810 Invoice: Copy of invoice matching PO and ASN
- ✓Packing Lists: Internal record of what was packed in each carton
Supporting Evidence:
- ✓Photos: Pictures of correct labels, carton contents, loading
- ✓Carrier Tracking: GPS/tracking data showing on-time delivery
- ✓Weight Tickets: Proof of shipment weight matching expected weight
- ✓Email Communications: Any correspondence about order changes or issues
- ✓Quality Inspection Reports: Proof products met quality standards at shipping
Pro Tip: Store all EDI documents (850, 856, 810, 997) and shipping documents digitally in cloud storage, organized by PO number. When a chargeback hits, you can pull all related documents in minutes rather than hours. Retention period: minimum 2 years.
How PlainEDI Helps Prevent and Dispute Chargebacks
Validate ASNs Before Sending
Upload your 856 ASN to PlainEDI and convert to CSV before sending to retailers. Verify carton counts, quantities, UPCs, and PO references are correct. Catch errors that would cause ASN chargebacks.
Audit Invoices for Three-Way Match
Convert your 810 Invoice, 850 PO, and 856 ASN to CSV. Compare quantities and prices side-by-side in Excel to ensure perfect matching before submitting invoice. Prevents price difference and shortage deductions.
Analyze 820 Payment Remittances
When you receive an 820 payment remittance showing deductions, convert it to CSV to clearly see deduction codes and amounts. Identify which invoices were charged and build your dispute case.
Documentation for Disputes
Convert your sent EDI files to PDF/CSV format for dispute documentation. Show retailers exactly what you sent and when. Having readable EDI data strengthens your dispute case.
Try PlainEDI Free
Upload any EDI file (850, 856, 810, 820, 997) and convert to readable CSV instantly. Catch errors before they become chargebacks. Works with all major retailers.
Convert EDI to CSV →Frequently Asked Questions
What percentage of chargebacks are disputable and winnable?
Industry estimates suggest 30-50% of retail chargebacks are invalid or disputable. With proper documentation (ASN confirmation, POD, BOL), win rates on disputed chargebacks range from 40-70%. However, most suppliers don't dispute because they lack documentation or miss dispute deadlines. Implementing systematic chargeback monitoring and documentation can recover $50,000-$300,000 annually for mid-sized suppliers.
How long should I keep EDI and shipping documents for chargeback disputes?
Minimum 2 years. Most retailer dispute windows are 60-90 days, but some audit-related chargebacks can appear 6-12 months after shipment. Store all EDI files (850, 856, 810, 820, 997), BOLs, PODs, and packing lists in organized cloud storage indexed by PO number and date. This makes dispute documentation retrieval quick.
Should I hire a deduction recovery service?
If you're losing $10,000+ monthly to chargebacks, yes. Services like SupplyPike, Carixa, and iNymbus charge 15-25% of recovered deductions (contingency fee - only pay if they win). They have relationships with retailer buyer teams and dedicated dispute specialists. For smaller suppliers (<$5K/month in deductions), handle disputes internally using systematic documentation processes.
Why does Amazon have such a short 11-day dispute window?
Amazon's 11-day window is intentionally aggressive to encourage suppliers to maintain high operational standards and monitor accounts closely. Amazon processes millions of vendor transactions and wants disputes resolved quickly. Use automated monitoring tools or check Vendor Central daily if you're an Amazon supplier. Missing the 11-day window means losing the chargeback permanently.
Can I negotiate lower chargeback rates with retailers?
Generally no - compliance policies like OTIF and ASN requirements are non-negotiable for major retailers. However, if you have strong performance history and large volume, you may negotiate: (1) extended dispute windows, (2) warning periods before penalties kick in, (3) lower minimum order penalties. Large strategic suppliers have more negotiating leverage than small suppliers. Focus on prevention rather than negotiation.
Related Guides
Understanding EDI 820 Payment Remittance
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What is an 856 ASN and How to Process It
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How to Read Walmart EDI 850 Files
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Target EDI Compliance Requirements
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