At What Point Should A Customer Be Charged?

What a terrible, terrible problem for the drop shipper. Unfortunately, there is no good or easy answer for this.

Background – In traditional stocked retail, a customer’s card is charged once the order is about to be put on the truck for shipment. This ensures that the customer isn’t paying for something that isn’t coming or delayed (i.e. unexpected backorders) and is, in my opinion, good appropriate customer service.

This can be difficult for the drop shipper. We almost always find out about a shipment after it has happened and is already out the door. It is very common for me to get shipping confirmations the following morning. So taking payment right before shipping is almost impossible. Paying late would be alright, but you are putting a whole lot of trust in your customer. I have had times where I approved a charge after the item was on its way, only to have the credit card declined. Now there is no way to stop the shipment. You’ve got to hope you can get a hold of the customer and get them to pay up; not a fun situation to be in.

My preferred method is to take payment at the time of the order. While this poses the least risk for you, the retailer, there are some key problems with it. First, customers simply don’t like it. They don’t want to pre-pay for goods and will often be upset if they’ve paid but not gotten their goods. This leads to problem two, if the item is back ordered or otherwise unavailable, you’ll often have to do some back-peddling. “Why did you charge my card if you didn’t have the product?” Again, not a fun conversation to have. Finally, if an item is unavailable, the order will often be canceled. This results in you having to refund the transaction and end up paying your discount rate twice.

So, what is the best scenario? I don’t know. Every situation will be different, but it is important to know what the risks are for which ever method you choose. When do you charge for the order?

Tags: drop ship, business

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