Households Spend Thousands on Fashion Purchases Every Year. But, Some Transactions End in Apparel Chargebacks.
How much does the average household spend on shirts, jackets, and shoes?
A recent US Bureau of Labor Statistics report shows that, in 2022, American households spent an average of $1,599 on apparel. That breaks down to $655 on women’s apparel, $208 on women’s shoes, $406 on men’s apparel, $147 on men’s shoes, and $187 on apparel for children.
To put things in context, apparel purchases make up about 2.7% of the average household’s budget. That’s slightly more than half of what a household spends on entertainment (4.7% of their budget) and about a third of what a household spends on healthcare (8.0% of their budget).
Unlike healthcare spending, however, apparel purchases are largely discretionary, which means that buyers get to be pickier about style, fit, and feel. It also means that apparel shoppers are more likely to develop buyer’s remorse, raising the risk of chargeback fraud for sellers.
In this article, we take a closer look at what apparel chargebacks are, why they happen, and how you as a seller can defend your business against them.
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Common Chargeback Reason Codes Tied to Fashion Industry Chargebacks
Reason codes associated with apparel chargebacks tend to be tied to fraud, or to the merchandise either never arriving or arriving in a condition different from that described at the time of purchase.
An apparel chargeback happens when a customer disputes a purchase with their issuing bank. The transaction is forcibly reversed, and funds are withdrawn from your account.
Each chargeback filed against you will come with a reason code that’s meant to explain the cause of the dispute. Examples of reason codes used by Visa and Mastercard that you’re going to come up against most often in the apparel and fashion space include:
Visa
Mastercard
Valid Reasons to Dispute Apparel Purchases
Customers can dispute apparel purchases if they were charged the incorrect amount, received the wrong goods (or none at all), or encountered third-party fraud. Other reasons, like buyer’s remorse or family fraud, aren’t valid grounds for a dispute.
Of course, apparel chargebacks can happen for valid reasons. For example, any billing, packing, and shipping errors on your part that results in different, missing, or damaged apparel can be legitimately disputed by the cardholder. Some common reasons for valid chargebacks include:
Even if a buyer has a valid chargeback claim, card network rules say that they’re supposed to try to get a refund directly from you before filing a dispute. Unfortunately, many cardholders skip this step under the mistaken belief that it’s easier to skip straight to filing a dispute as a first course of action.
Invalid Reasons to Dispute Apparel Purchases
Issues like buyer’s remorse or family fraud are not considered valid grounds for a dispute.
Remember: there are only a limited number of legitimate reasons for filing apparel chargebacks. Virtually any reason outside of what I just outlined above would probably be an invalid dispute reason. Common examples include:
Family fraud is what’s known as second-party fraud. That’s because cardholders are giving their family members general permission to use their cards to make purchases, even if they’re not authorizing specific apparel purchases. Cardholders are typically responsible for second-party fraud, but not third-party criminal fraud.
According to the 2024 Chargeback Field Report, nearly 70% of surveyed merchants said that friendly fraud was “the greater evil” as compared to return fraud.
Risks Factors for Apparel Chargebacks
The holiday season, international orders, and subscription purchases can heighten chargeback risks, as can catering to fast fashion or advertising through influencers.
Chargebacks can feel like they come out of the blue. If you look carefully, though, you can spot some trends that may tip you off as to potential pending disputes.
While none of these patterns guarantee that a dispute is imminent, they can help you stay alert during events or times when chargebacks are more likely to hit. Pay particular attention when dealing with:
Seasonal Peaks in Demand
The apparel industry is highly seasonal. Purchases are clustered around events like Black Friday and Christmas. The end of the holiday shopping spree can precede buyer’s remorse-fueled chargebacks when that first post-holiday credit card bill arrives.
Similarly, high-cost garments for one-off events like proms, weddings, and holiday parties are also prime targets for disputes.
Cross-Border Sales
Selling apparel internationally opens up new markets… but also new points of risk. As an example, consider the fact that sizing is not universal; a “large” in the United States is different from a “large” in Europe or Asia. This discrepancy can result in chargebacks when an item doesn’t fit as expected.
High international shipping costs and complex customs procedures can also discourage legitimate returns, leading customers to conclude that it’s easier to dispute their purchases than pursue a refund.
Wanting to Get Out of a Subscription
Apparel subscription boxes are a popular business model. But, like many subscription billing services, they tend to be chargeback-prone.
One reason is that the curated, surprise nature of these boxes means that customers usually cede control over the specific styles they receive. If a customer is unhappy with a particular month’s selection, they may file a chargeback rather than go through the proper cancellation or feedback channels.
This risk is heightened when charges are infrequent. Long-term customers who order quarterly or annual shipments may simply forget about the recurring charge and dispute it as unauthorized.
Fast Fashion & Microtrends
Fleeting, social media-fueled microtrends can lead to spikes in demand, followed by subsequent disputes.
An item that is in high demand one week can quickly go out of style in the next. This can lead to a swift onset of buyer’s remorse and a corresponding rise in chargebacks.
Other times, the pressure to produce items quickly and cheaply in order to stay on trend can compromise quality, too. This can result in an increase in legitimate chargebacks from customers who receive items that are damaged, poorly constructed, or made from different materials than advertised.
Influencer Hype
Apparel is one of the most heavily promoted categories by social media influencers. While great for marketing, this can create a gap between expectations and reality.
Before buying, customers see a product peddled in perfect lighting, with professional styling and potential photo editing. But, when the item arrives, it may not look or fit the same way on them.
The gulf between what the cardholder saw on TikTok or Instagram and what they received can lead to feelings of dissatisfaction. Although chargebacks aren’t the remedy here, buyers may file them anyway.
While lax return policies can prevent chargebacks, they can also facilitate return fraud. Apparel merchants are especially vulnerable to return fraud tactics like wardrobing, bracketing, and empty-box returns.
You can address these threats by allowing “try before you buy” returns that explicitly allow used returns (and raise prices to account for restocking costs), setting a maximum number of similar or identical items a buyer can purchase at once, require proof of purchase before accepting in-person returns, and inspecting packages at the customer service counter before issuing a refund.
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Representment Evidence Specific to Apparel Disputes
Merchants wishing to recover lost revenue are assigned the burden of proof. In practice, this means that you’ll need to go through a cumbersome yet time-sensitive representment process to even have a fighting chance of reversing the chargeback.
Here, you’ll be asked to furnish compelling evidence, draft a chargeback rebuttal letter, and compile a representment package. This all has to be done within a punishingly brief timeline (often as short as 5 days for turnaround). Suffice it to say, you face a steep and sharply uphill battle.
The key is being able to quickly compile the right evidence for the case at hand. Below, I’ve outlined a few common claims made against sellers in the fashion space, and what evidence can be used to fight back:
“The Item Didn’t Fit”
- Order confirmation showing the exact size selected by customer
- Screenshot of product page as it appeared at time of purchase, showing size chart
- Customer's click/selection history from checkout process confirming size choice
- Photos of shipped item with size tag clearly visible
- Packaging slip showing size information
- Customer communication where they mentioned or confirmed the size
- Size chart acknowledgment if customer checked a box confirming they reviewed sizing
- Return policy stating all sales final or no size exchanges
“Wrong Color or Material”
- High-resolution product photos from multiple angles as shown on site
- Detailed material/fabric description from product page with timestamp
- Photo of actual item shipped showing it matches listing
- Care label photo confirming fiber content matches description
- Color disclaimer if website included "colors may vary" notice
- Customer device/browser data showing what they saw (if available)
- Manufacturer specifications confirming accuracy of description
- Professional product photography vs. customer photo comparison
“The Item Never Arrived”
- Delivery confirmation with signature (strongest evidence)
- GPS delivery location data from carrier
- Photo proof of delivery at doorstep (if available from carrier)
- Tracking showing delivered status
- Address verification showing correct address used
- Communication with customer about delivery status
- Subsequent orders delivered to same address successfully
- Customer's failure to respond to "where should we redeliver?" inquiries
“The Goods Arrived Damaged or Defective”
- Pre-shipment photos of item being packaged (timestamped)
- Quality control documentation if applicable
- Packaging photos showing proper protective materials used
- Carrier damage claim if filed
- Customer's failure to provide damage photos despite request
- Return policy requiring damage notification within X days
- Shipping insurance claim documentation
- Video of packaging process for high-value items
“I Never Authorized the Transaction”
- IP address match between order and previous legitimate orders
- Device fingerprint match to customer's known devices
- Delivery address match to cardholder's billing/known addresses
- Account login history showing customer accessed account after purchase
- Email confirmations sent to customer's registered email
- Customer service interactions acknowledging the order
- AVS/CVV match at time of purchase
- 3D Secure authentication proof if used
How to Prevent Apparel Chargebacks
Detailed sizing guides (coupled with digital try-on features), “try before you buy” programs, selective return rate-limiting, intelligent packaging procedures, and proactive communication can help apparel merchants prevent chargebacks.
Given these risks, what can you do to ward off bad actors?
While you can’t prevent 100% of disputes, a proactive focus on the customer experience, both pre- and post-purchase, can help you keep the bulk of potential chargebacks at bay. Consider:
Providing Ultra-Detailed Sizing Guides
One common reason for apparel chargebacks is incorrect sizing. To combat this, go beyond generic “XS/S/M/L/XL” charts, and instead provide detailed measurements for each specific garment, including bust, waist, hips, and inseam.
Augment this data with high-resolution photos from multiple angles, videos of models with different body types wearing the clothes, and a digital “try-on” tool that lets customers compare sizes as if they were wearing the item themselves.
Featuring user-submitted photos in reviews can also provide a realistic preview of fit, and can give buyers the confidence they need to make a purchase they won’t regret or dispute.
Implementing “Try Before You Buy” Models
The inability to try things on before checkout is arguably the primary challenge of online apparel shopping.
One solution is a “try before you buy” program, which lets customers receive items, try them on at home, and only pay for what they decide to keep. Although you’ll have to deal with more returns, this model can prevent chargebacks by resolving fit and feel issues before a payment is finalized.
For traditional in-person sales, make your return policy clear and customer-friendly. Since many customers go straight to their bank without contacting the merchant first, incentivizing easy returns can help you prevent costly chargebacks.
Using Data Analytics to Discourage Post-Transaction Fraud
As we discussed earlier, a relaxed return policy can prevent chargebacks, but it can also encourage return fraud. To prevent the latter form of post-transaction fraud, use your sales data to identify customers who have a tendency to initiate returns.
Consider tweaking your policies. For example, you can limit the number of similar items that a high-risk customer can purchase in a single transaction.
Enhance Your Packaging Process
Include a well-designed packing slip with every order that both details the order and provides simple, step-by-step instructions for initiating a return. This can encourage customers to consider returns before resorting to disputes.
For high-value items, document the weight of the package before shipping and take a photo of the contents. Having this evidence on hand can help you fight fraudulent “empty-box” returns or invalid “item not received” chargebacks.
Communicate Proactively Throughout the Order Lifecycle
Clear, consistent, and proactive communication can help you nip chargebacks in the bud.
After checkout, send the customer an automated order confirmation email that includes images, sizes, and colors of the exact items purchased. Then, follow up with timely shipping and delivery notifications.
If an item is back-ordered or a shipment is delayed, inform the customer immediately. As a best practice, offer them a choice to wait or allow them to cancel for a full refund.
Being proactive about defusing potential grievances, well before the customer feels the need to resort to filing a chargeback with their bank, can help you preserve your reputation and maintain trust with your buyers.
Don’t Fight Chargebacks Alone
The chargeback process is difficult to navigate by yourself. Extremely tight deadlines, inflexible rules, and a playing field that is slanted disproportionately against your favor means that challenging chargebacks is hard enough. Needless to say, winning them is even more difficult.
That’s why you need expert advice and guidance. At Chargebacks911®, our industry insiders develop comprehensive, end-to-end solutions that help online and in-person apparel retailers like you identify and prevent criminal fraud and friendly fraud disputes.
Interested in learning more? Reach out to us for a free, no-obligation ROI analysis today.
FAQs
Do merchants ever win chargeback disputes?
Merchants can win chargeback disputes, but the odds are often against them. According to the 2024 Chargeback Field Report, surveyed merchants report winning chargeback disputes, on average, about 45% of the time. That’s only the disputes they engage with, though; looking at chargebacks overall, merchants win fewer than 1 in 5 disputes.
Do banks really investigate chargebacks?
Yes, banks do investigate chargebacks filed by cardholders. However, due to high chargeback volumes and limited resources, banks may lack the ability to conduct thorough investigations, and may instead give the benefit of the doubt to cardholders.
Who loses money on a chargeback?
Merchants lose money on chargebacks because they experience lost revenue, lost inventory, and chargeback fees.
What evidence helps win a chargeback?
Purchase orders, invoices, receipts, order confirmation emails, shipping information, delivery confirmations, pictures of the goods received, and correspondence with the customer can help both merchants and cardholders win disputes.
How late is too late for chargeback?
In most cases, cardholders must file a chargeback within 120 days of the original transaction. Merchants, on the other hand, have at most 20 to 45 days to respond to a chargeback notification. Failing to do so will result in a default victory for the cardholder.
