N: Non-Receipt of Merchandise

E-commerce businesses work with this headache all the time. Brick-and-mortar stores that run delivery services face the same issue. Once a customer files this dispute, the payment processor reverses the transaction, and merchants are left having to prove that the delivery actually happened. Each chargeback also counts against the business’s dispute ratio, and if that figure climbs too high, it could cause higher processing fees or the loss of merchant account privileges.

Most N code disputes have online orders where packages seem to disappear somewhere between the warehouse and the customer’s front door. They also show up with furniture deliveries, appliance installations, and just about any big buy that needs delivery arrangements. Sometimes customers never get their order because of package theft or a carrier mistake. Other times, they may file a non-receipt claim even after the item has arrived.

The hard part is that customers have a generous window to file these disputes.

How It Works

Banks usually make customers contact merchants directly before filing a formal dispute, and should solve most of these snags before they turn into big problems. Sadly, this requirement doesn’t work nearly as well as it sounds on paper. Customers either skip contacting the merchant at all or make just enough effort to satisfy the bare minimum requirement. Others try to reach a live person but wind up stuck in phone trees or bounced between departments without finding any actual help.

Once the bank decides to move forward with the dispute, merchants get hit with something that’s pretty rough – the money vanishes from your account right away. There’s no heads-up, no grace period, and no opportunity to explain your side first. From that point forward, you’re stuck having to prove that the customer actually received their order or somehow took possession of the merchandise.

A few common scenarios cause these disputes more than others. Packages get delivered to the wrong address, or they’re left on porches where anyone can walk off with them. Delivery drivers sometimes scan items as “delivered” before they’ve actually made the drop-off, which gives you a timing gap that confuses everyone involved. In-store pickup orders create their own problems when customers insist they never got the items that your system plainly shows as picked up. These situations call for very different types of evidence to successfully challenge the chargeback.

How it Affects Chargeback Prevention

Payment processors watch your dispute ratios closely, and too many of these NM disputes could put your account at risk.

Each NM chargeback costs you far more than the original transaction was worth. First, there’s the chargeback fee itself, which runs anywhere from $20 to $100, depending on your processor. Then you have to factor in all the time that your team will spend fighting the dispute. On top of that, you might wind up losing the merchandise if you’ve already shipped it to the customer. All these costs add up fast, and most merchants underestimate just how much money disappears with each dispute.

The encouraging news is that most NM chargebacks are actually pretty easy to stop if you’re willing to improve how you manage deliveries. One of the smartest moves you can make is to start requiring signature confirmation on orders above whatever dollar amount makes sense for your business. You should also hold onto very complete records of every conversation and interaction you have with customers about shipping or delivery problems. Delays will happen no matter what you do, so the best strategy is to contact customers proactively before they have a chance to get frustrated and complain.

Your delivery documentation turns into your strongest weapon for fighting these disputes. Without tracking and delivery confirmation, you’re likely to lose almost every NM chargeback that comes your way. But with signed delivery receipts and delivery photos, you can show that the customer received their order – this strong evidence usually makes the difference between winning and losing the dispute. I see savvy merchants do this all the time – they know that investing a little extra money upfront on delivery confirmation protects them from expensive chargebacks.

Example Scenarios

Let’s say a furniture store sells a beautiful dining set to a customer, and everything looks fine until delivery day comes.

The delivery truck arrives at the customer’s address. But nobody answers the door. Instead of a signature or taking a quick photo of the delivery attempt, the driver just leaves. Two weeks later, that customer filed a chargeback claiming they never received their furniture. The merchant is now stuck with no proof that anyone even tried to make the delivery. Without any records that show where the furniture went, that merchant will lose the dispute.

The same issue happens with appliances all the time. A customer walks into your store, buys an expensive refrigerator, and schedules home delivery for the following week. When the delivery day comes, your third-party delivery company says that they successfully dropped off the appliance. But they didn’t get the customer’s signature on anything. They also skipped the photos or GPS records that could prove the delivery location. When that chargeback lands on your desk, you’re left with nothing more than the driver’s word that the job was completed.

Online merchants run into a similar problem, especially during those busy holiday stretches. You ship an expensive laptop right before the holidays when every carrier is overloaded with packages. The tracking information shows that the laptop left your warehouse, and then everything goes quiet for days. The tracking never updates to show delivery, even though there’s a strong chance that the customer’s neighbor or another person signed for it. Without that final tracking scan that confirms delivery at the right address, you have no defense when that chargeback comes through.

Requirements and Timeframes

Once that chargeback notification lands in your inbox, time turns into your biggest enemy. Most merchants only get 10 business days to pull together their paperwork and send a response, which isn’t much time when you’re scrambling to find receipts and delivery confirmations.

What makes this even harder is that customers have 120 days from their expected delivery date to file one of these disputes – 4 whole months during which you need to keep every last delivery record useful. Merchants aren’t usually safe after the first month – that’s actually when these disputes start cropping up.

They want to see strong documentation if you’re looking to fight a chargeback. Your best proof by a mile is still a delivery signature – a confirmation that matches the address you have on file for that customer. Email threads or text messages between you and the customer can also go a long way toward backing up your story.

The sad part is that a lot of merchants usually sabotage their own cases at this stage. They send photos of receipts that are so blurry you can’t even read the basic info, or they leave out some pieces that matter, like the actual delivery address, in their response. Other times, their tracking data plainly shows delivery to a different ZIP code than the one that the customer gave at checkout. Little points like these don’t seem like much, but they can completely sink what would otherwise be a winning case!